Most Singapore startup founders aren’t deliberately flouting employment law. They’re operating on assumptions that haven’t been tested, building HR processes that feel right, and only learning the rules exist when something goes wrong. By then, the cost of fixing it is far higher than getting it right the first time.
I’ve seen talented founders derailed by employment law issues that were entirely preventable. Not because they were reckless, but because the rules around employment in Singapore aren’t intuitive if you haven’t worked in them before. They’re not taught in business school. They’re not the kind of thing you pick up from a chat with other founders. And they’re enforced by the Ministry of Manpower (MOM) with enough teeth that getting them wrong creates genuine liability.
Here are the mistakes I see most often, and what you need to do to avoid them.
Mistake 1: Not Understanding Who the Employment Act Covers
This one trips up founders repeatedly. They think the Employment Act covers “junior employees” but not senior people. Or they think it only applies to people earning under a certain threshold. Both wrong, and the cost of being wrong is real.
Here’s the actual rule: the Employment Act covers most employees earning up to SGD 4,500 per month on its core provisions (working hours, overtime, rest days, public holidays). But there’s a catch that matters more than you’d think. Regardless of salary, the Act covers all employees on the key protections that actually create legal exposure: wrongful dismissal, annual leave entitlements, sick leave, maternity benefits, and retrenchment liability.
Your senior manager earning SGD 8,000 per month might fall outside the salary threshold for working hours protections, but they’re absolutely covered on wrongful dismissal. You can’t fire them without proper process. You can’t deny them annual leave. And if you retrench them, you have obligations around benefit and notice. This is the part that surprises people.
What to do: check your employment contracts against the Employment Act’s definitions. If you’ve drafted contracts that don’t reference these protections, or worse, try to contract out of them, they won’t hold up if challenged.
Mistake 2: Poorly Drafted Employment Contracts
A contract that’s never been reviewed by someone who knows Singapore employment law is a liability waiting to be activated. I’ve seen too many founder-written or offshore-drafted employment contracts that work fine until they don’t, and then they create more problems than they solve.
Common problem areas: no clear termination clause, inconsistent notice periods between what’s in the contract and what MOM expects, intellectual property clauses that sound good but don’t hold up under Singapore law, probation terms that directly contradict the Employment Act.
Probation is a frequent one. Singapore law allows a probation period, but it’s capped at 6 months (or 9 months for roles requiring specific professional qualifications). You can’t put someone on indefinite probation to buy time. During probation, you still can’t dismiss someone for grounds that could be construed as discriminatory or retaliatory. And if you’re going to dismiss someone during probation, your documented performance management still needs to be reasonable.
What to do: get your employment contracts reviewed by someone who knows Singapore law. This isn’t expensive relative to the exposure. A template from the internet or drafted by someone in another jurisdiction will cost you far more later if something goes wrong.
Mistake 3: Misclassifying Contractors
This one creates cascading problems. You’ve got someone who’s been with your company for 18 months, they work exclusively for you, they use your equipment, they follow your schedule, they report to your manager, and you’ve classified them as a contractor because you were trying to be flexible on compensation and didn’t want to commit to a permanent role.
Under Singapore law, that person is probably an employee regardless of what the contract says. The test looks at the reality of the working relationship, not just what’s written down. If someone is economically dependent on you, working under your direction and control, they’re an employee.
What happens when MOM audits and finds misclassification? Retrospective CPF liability (the employer’s contribution portion, backdated), accrued leave entitlements, Employment Act protections, and retrenchment liability if you then terminate them. The financial exposure is real.
What to do: be honest about your employment relationships. If someone’s a genuine contractor (working for multiple clients, using their own equipment, setting their own hours), you can contract them. If they’re not, make them an employee. The flexibility gain isn’t worth the liability.
Mistake 4: Getting Dismissal Wrong
Singapore has clear rules on what constitutes wrongful dismissal, and founders often don’t know them until they’re looking at an MOM complaint or a legal letter. You can dismiss someone, but you can’t dismiss them arbitrarily, and due process matters even during probation.
Many founders operate on the assumption that probation means “we can let them go for any reason.” That’s not quite right. You can dismiss during probation more easily than after it, but if your grounds could be construed as discriminatory (firing someone based on religion, gender, race, or disability), retaliatory (firing someone for raising a safety concern or making a protected complaint), or based on poor grounds documented after the fact, you’re creating exposure. MOM takes these cases seriously.
And termination for poor performance or culture fit only works if you’ve documented a performance issue and given the person a reasonable opportunity to improve. A chat over lunch isn’t documentation. Feedback in a performance review at the end of the year isn’t due process if it’s the first time you’ve raised it as a problem.
What to do: if you need to let someone go, do it deliberately. Document the reason, document previous feedback, have a conversation, give them notice or pay in lieu. If it’s a conduct issue, follow a disciplinary process. If you can’t demonstrate that you’ve done this, you’re vulnerable.
Mistake 5: No Proper Performance Improvement or Disciplinary Process
A verbal warning over lunch isn’t a disciplinary process. A critical comment in a team meeting isn’t feedback that will hold up if someone later claims they weren’t told their performance was an issue.
If you’re going to dismiss someone for performance or conduct, you need to show that you’ve given them fair notice, a chance to respond, and an opportunity to improve. This doesn’t have to be formal, but it does have to be documented. Even small companies need basic processes here because MOM’s test is whether the employee had a fair chance to know what was wrong and to fix it.
What to do: have a simple process. Identify the issue in writing. Give feedback to the employee. Set clear expectations for improvement. If improvement doesn’t happen, document that too. Only then is dismissal a clean decision. If you can’t show this process, you can’t show just cause, and that’s when you’re vulnerable to a wrongful dismissal claim.
Mistake 6: CPF Non-Compliance on Bonuses and Variable Pay
This one’s technical but costly. Many founders don’t realise CPF is payable on variable components like commissions, bonuses, and performance incentives as well as base salary. And there are specific timing rules depending on when and how the payment is made.
If you’ve been paying bonuses or commissions without calculating and remitting CPF, you’ve got a CPF compliance issue. MOM can come back and ask for the backdated contributions.
What to do: talk to your payroll provider or an accountant who knows Singapore employment law. Understand which components attract CPF, when they’re due, and make sure you’re complying. This is table-stakes if you’re paying variable compensation.
The Good News
Most of these are entirely fixable. Getting a compliance review done before something goes wrong is far cheaper than sorting it out after. You don’t need to litigate or negotiate with MOM; you just need to get the fundamentals right now.
If you’re scaling, this is the right time to get it sorted. If you’re not sure whether your employment contracts and processes would stand up to scrutiny, it’s worth finding out before you have to. I’m happy to have a conversation about where you stand and what would help.
