Ex gratia payments are a common yet often misunderstood aspect of employment compensation. Whether you're an employer looking to provide financial support beyond contractual obligations or an employee wondering about your eligibility, understanding ex gratia payments is essential. This guide will explain what ex gratia payments are, their eligibility criteria, tax implications, and how they differ from severance pay in Singapore.

What is Ex Gratia Payment?

Ex gratia payment refers to a discretionary payment made by an employer to an employee as a goodwill gesture. Unlike contractual salaries, bonuses, or severance packages, ex gratia payments are not legally required and are given at the sole discretion of the employer. The term "ex gratia" originates from Latin, meaning "as a favour" or "out of kindness," highlighting the voluntary nature of such payments.

These payments are commonly seen in scenarios where an employer wants to provide financial support to an employee beyond what is legally mandated. This could be in cases of redundancy, long service appreciation, compassionate grounds, or company goodwill. Since these payments are not legally obligated, they vary in amount and frequency depending on the employer’s policies and financial capacity.

Ex Gratia Eligibility Criteria

Ex gratia payments do not have a fixed set of eligibility criteria since they are discretionary. However, employers often consider certain factors when deciding to grant ex gratia payments:

As there is no statutory requirement, ex gratia payments are fully at the discretion of the employer and do not guarantee future payments or legal obligations.

What is the Difference Between Severance Pay and Ex Gratia Payment?

Severance pay and ex gratia payments are often confused, but they serve different purposes:

Criteria Severance Pay Ex Gratia Payment
Obligation Legally required in some cases (e.g., retrenchment) Completely voluntary
Purpose Compensation for termination of employment Goodwill gesture with no legal binding
Calculation Based on contractual terms or employment laws Amount determined by employer’s discretion
Applicability Usually paid during layoffs, retrenchments, or mutual termination Can be paid for various reasons including redundancy, exceptional work, or financial aid

While severance pay is a form of financial security for retrenched employees, ex gratia payments are seen as a goodwill gesture, sometimes in addition to severance pay.

When Do Employers Offer Ex Gratia Payments?

Employers may provide ex gratia payments in various situations, including:

  1. Redundancy or Retrenchment – While retrenchment benefits may be contractually or legally required, employers sometimes provide additional ex gratia payments to cushion the financial impact.
  2. Long Service Recognition – Employees who have dedicated years of service may receive a one-time ex gratia payment as a token of appreciation.
  3. Performance-Based Rewards – Employers may grant ex gratia payments to employees who have delivered exceptional results but are not covered under regular bonus structures.
  4. Compassionate Grounds – Employees facing financial hardship due to medical emergencies, family crises, or other unforeseen circumstances may receive an ex gratia payment.
  5. Voluntary Retirements or Mutual Agreements – Employees who leave the company on mutual terms may receive ex gratia payments as part of a goodwill departure package.

Is Ex Gratia Payment Compulsory in Singapore?

No, ex gratia payments are not compulsory in Singapore. Unlike statutory salary, annual leave, or CPF contributions, there is no legal requirement for employers to provide ex gratia payments. These payments are purely at the discretion of the employer and depend on company policies, profitability, and management decisions.

How Many Ex Gratia Payments Can an Employee Receive?

There is no fixed limit to how many times an employee can receive ex gratia payments. Since these payments are voluntary, employers can provide them multiple times based on their discretion. Some employees may receive ex gratia payments annually as part of a performance reward, while others may receive it only once due to redundancy or retirement.

The amount of ex gratia payment also varies widely depending on factors such as:

As there are no legal restrictions on the frequency of ex gratia payments, they are solely determined by company policies and employer discretion.

Is Ex Gratia Payment Taxable in Singapore?

No, ex gratia payments are generally not taxable in Singapore. According to the Inland Revenue Authority of Singapore (IRAS), any payments made as compensation for loss of employment, such as during retrenchment or the end of an employment term, are generally not taxable. These are considered capital receipts and are not earned income.

Check the specific tax implications of any payments made in the IRAS official page of tax treatment.

Is Ex Gratia Payment Subject to CPF Contributions?

In most cases, ex gratia payments are not subject to CPF contributions in Singapore. According to the CPF Board, only wages, bonuses, and certain allowances are included in CPF calculations. Since ex gratia payments are voluntary and not contractually mandated, they typically do not attract CPF contributions.

However, there may be exceptions where the ex gratia payment is structured as part of an employee’s remuneration package. Employers and employees should verify with the CPF Board or seek legal advice for clarity on their specific case.

Conclusion

Ex gratia payments in Singapore serve as a discretionary goodwill gesture by employers to provide financial support beyond contractual obligations. These payments are voluntary, not legally required, and are given based on various factors such as redundancy, long service, performance, or compassionate grounds.

While ex gratia payments are taxable, they are usually not subject to CPF contributions unless deemed part of an employee’s remuneration package. Employees should not expect ex gratia payments as an entitlement, and employers should ensure clarity in their policies when offering such payments.

For businesses and HR professionals, understanding ex gratia payments helps in managing employee expectations and ensuring fair and transparent compensation practices.

As Singapore faces an ageing population, more retirees are choosing to stay in the workforce beyond their retirement age. Some seek financial stability, while others find fulfilment in contributing to society. For employers, hiring retirees brings unique advantages, from knowledge retention to workforce diversity. This guide explores employment opportunities for retirees, employer responsibilities, and how businesses can support senior workers effectively.

What is the retirement age in Singapore?

The retirement age in Singapore is set at 63 years old, as stipulated by the Ministry of Manpower (MOM). However, this is not the age at which employees must stop working. Instead, it ensures that employees cannot be dismissed on the grounds of age before they reach this milestone.

Beyond the retirement age, the re-employment age is 68 years old. This means that employers must offer re-employment opportunities to eligible employees who have reached retirement age but are willing and able to continue working.

For more details, refer to MOM’s official page: Retirement Age in Singapore.

What employers do if the employees reach the minimum retirement age?

Employers are required to comply with re-employment laws to support senior workers. According to MOM’s guidelines:

For a more in-depth understanding, refer to MOM Re-employment Guidelines.

Why retirees in Singapore returning to work?

There are several reasons why retirees are choosing to remain in or return to the workforce:

CPF Retirement Sums (2024-2027)

Retirees planning their finances should be aware of the following CPF Retirement Sums:

Year

Basic Retirement Sum (BRS) Full Retirement Sum (FRS)

Enhanced Retirement Sum (ERS)

2024

$102,900 $205,800 $308,700

2025

$106,500 $213,000 $426,000
2026 $110,200 $220,400

$440,800

2027 $114,100 $228,200

$456,400

Best jobs for retirees in Singapore

Retirees can explore various job opportunities that align with their skills, preferences, and physical capacity. Some of the most suitable jobs include:

How can employers support retirees?

To encourage the employment of senior workers, the Singapore government provides several grants and incentives for employers:

Why jobs for retirees are a win-win for employers and seniors

Hiring retirees benefits both employers and the seniors themselves:

Benefits for Employers

Benefits for Retirees

Leveraging HRMS for retiree employment

With digital transformation shaping the workplace, Human Resource Management Systems (HRMS) can play a crucial role in managing a retiree-friendly workforce. Features of HRMS that can benefit retiree employment include:

By integrating HRMS solutions, employers can streamline administrative processes and create a sustainable employment model for retirees.

How can you use Gutsy HR software to support your retirees?

As we move towards a more adaptive work environment, using advanced technology will be key to staying ahead in Singapore’s dynamic business landscape. Gutsy HR Software offers a robust solution to optimise your operations. Here’s how Gutsy can help you manage retirees:

Payroll

Streamline your payroll processing with Gutsy Singapore-compliant payroll system. Automate salary calculations, CPF contributions, tax filings, and payslip generation to ensure accurate and timely payments. 

Shift Planning

Simplify workforce scheduling with smart shift planning software. Optimise rosters, manage leave requests, and ensure smooth operations with real-time shift updates and automated notifications.

Attendance Tracking

Accurately monitor employee attendance with automated tracking tools. Use biometric, mobile, or web-based check-ins to enhance workforce accountability and streamline payroll calculations. 

Employee Management

Centralise your HR operations with a comprehensive employee management system. Track employee leave records, performance, and compliance while enhancing engagement and productivity. 

By leveraging Gutsy HR Software, you can streamline HR management and ensure smooth operations in compliance with Singapore’s employment laws.

Employee insurance is a crucial aspect of workforce management in Singapore. It not only ensures compliance with legal requirements but also enhances employee satisfaction, retention, and overall business productivity. With various types of insurance available, understanding the nuances of coverage, costs, and legal obligations is essential for employers looking to create a competitive benefits package.

What is employee insurance?

Employee insurance refers to various forms of insurance coverage provided by employers to protect employees from financial risks related to health, accidents, disabilities, and other work-related incidents. In Singapore, employee insurance is a crucial component of workforce management, ensuring the well-being of employees while helping companies meet their legal and ethical responsibilities.

Common types of employee insurance in Singapore include:

Key benefits of employee insurance

Providing employee insurance benefits both the employer and the workforce in several ways:

1. Attracting and Retaining Talent

Competitive insurance coverage enhances a company’s attractiveness to prospective employees, helping to secure and retain top talent.

2. Ensuring Employee Well-being

A comprehensive insurance plan safeguards employees from unexpected medical expenses and financial stress, improving their overall well-being and productivity.

3. Boosting Employee Morale and Engagement

Employees feel more valued and secure when they know their employer prioritises their health and safety, leading to greater job satisfaction.

4. Compliance with Legal Requirements

Certain types of insurance are legally mandated in Singapore, and failure to comply can lead to penalties.

5. Reducing Financial Liabilities for Employers

By insuring employees, businesses can reduce the financial burden of workplace injuries, medical expenses, and compensation claims.

Is employee insurance compulsory in Singapore companies?

Employee insurance requirements in Singapore depend on the type of employment and specific industry regulations. The following categories outline what is mandatory:

While basic insurance coverage is legally required, many employers provide enhanced insurance benefits as part of their employee value proposition (EVP).

Work Injury Compensation Act (WICA) vs. Employee Insurance

What is WICA?

The Work Injury Compensation Act (WICA) provides a streamlined system for employees to claim compensation for work-related injuries or diseases without requiring legal action.

Under WICA, employees can claim compensation for:

WICA vs. Employee Insurance

AspectWICAEmployee Insurance
Coverage ScopeWork-related injuries and diseasesCovers a broader range of situations, including non-work-related medical conditions
Compulsory?Yes, for manual workers and non-manual employees earning ≤S$2,600/monthVaries depending on company policies and workforce needs
BenefitsLump sum compensation and medical expense coverageHospitalisation, outpatient care, disability benefits, and life coverage
Claim ProcessGoverned by MOM, streamlined processDepends on the insurance provider’s terms

Employers should ensure they meet WICA obligations while supplementing coverage with additional employee insurance for comprehensive protection.

Designing a comprehensive employee insurance package

When designing an employee insurance package, companies should consider the following factors:

1. Assessing Employee Needs

Different industries and workforce demographics require tailored insurance solutions. Consider factors such as:

2. Choosing the Right Coverage

An ideal employee insurance package includes:

3. Comparing Insurance Providers

Employers should evaluate multiple insurance providers to compare coverage, exclusions, and cost-effectiveness before making a decision.

4. Communicating Benefits Clearly

Many employees are unaware of the full benefits available to them. Regular communication and educational sessions can ensure employees maximise their insurance plans.

Balancing cost and coverage in employee insurance

Providing employee insurance is a financial investment, so businesses must balance cost and coverage effectively.

  1. Group Insurance Plans: Purchasing group policies often provides better coverage at lower premiums.
  2. Flexible Benefits Programs: Allow employees to customise their coverage based on individual needs.
  3. Preventive Healthcare Initiatives: Investing in wellness programs reduces long-term insurance costs by promoting healthier lifestyles.
  4. Annual Policy Reviews: Reviewing insurance needs annually ensures businesses are not overpaying for unnecessary coverage.

Does employee insurance taxable in Singapore?

Employee insurance premiums in Singapore may be taxable or non-taxable depending on their nature.

Tax Treatment of Insurance Premiums

According to Inland Revenue Authority of Singapore (IRAS):

Employers should review IRAS insurance tax treatment guidelines carefully to ensure compliance with tax regulations.

Implement effective employee insurance for your employees well-being!

Employee insurance is a vital component of workforce management in Singapore. While certain types of insurance, such as Work Injury Compensation Insurance (WICI), are mandatory, businesses can enhance employee well-being and retention through comprehensive coverage. Striking a balance between cost and protection ensures both employer compliance and a satisfied workforce.

Family Care Leave in Singapore: A Comprehensive Guide

Balancing work and family responsibilities is a significant challenge for many working individuals in Singapore. The government and many employers recognize this and have implemented various family care leave schemes to support working parents. This article provides a comprehensive overview of family care leave guides in Singapore, addressing common questions and clarifying the details of these crucial employee benefits.

Types of Family Care Leave in Singapore

Singapore offers several types of paid leave to support working families. These include:

Explore more about mandated parental leave entitlements on the MOM official website.

Childcare Leave vs. Family Care Leave

Childcare leave is specifically for working parents who need to take care of their children. While family care leave is a broader term encompassing different family care needs (e.g., paternity, maternity, adoption, etc.).

Eligibility Criteria for Family Care Leave

Generally, employees need at least 3 months of service before the birth or adoption of a child. However, recent changes have expanded eligibility to include those on short-term contracts, recently laid off, or newly employed before the birth or adoption.

Required Supporting Documents

The required documents for applying for family care leave vary depending on the leave type and employer's policies. Childcare leave often requires a written application, proof of the child's age and relationship, and supporting documents (e.g., medical certificates). In contrast, employer-provided family care leave may have minimal or no documentation requirements.

Family Care Leave: Employer Policies and Practices

While some family care leaves are mandated by law, others are offered at the employer's discretion. Several companies offer additional family care leave days beyond the statutory requirements, showing a commitment to work-life balance. Essentially, the number of days and eligibility criteria vary widely between companies. For example, some employers offer 2-3 days of family care leave, while others provide more extensive support for employees caring for family members with serious health conditions.

Carrying Forward Unused Leave

Unused childcare leave (including extended childcare leave) cannot be carried forward to the next year. Similarly, paternity leave and shared parental leave must be used within the specified timeframe.

Family Care Leave for Part-Time Employees

Part-time employees are eligible for various types of family care leave, with entitlements adjusted proportionally to their working hours. This includes childcare leave, extended childcare leave, paternity leave, shared parental leave, and maternity leave.

Family Care Leave During Probation

Eligibility for family care leave during a probationary period depends on the type of leave and the employer's policies. But some companies may allow you to take family care leave during your probationary period since you've worked for your employer for at least 3 months and meet the other eligibility criteria.

Employer Refusal to Grant Leave

If your employer refuses to grant you family care leave, understand your company's policy, appeal internally, and consider seeking assistance from the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) or the Ministry of Manpower (MOM).

Penalties for Employer Non-Compliance

Employers who don't comply with family care leave regulations face legal, financial, and reputational consequences, including potential fines, loss of government reimbursements, and damage to their employer brand.

Conclusion

Singapore's family care leave policies are designed to support working parents and caregivers, promoting work-life balance. While specific regulations and employer policies vary, understanding your rights and entitlements is crucial for effectively utilizing these benefits.

Losing your job can be a stressful experience. In Singapore, while there's no legal mandate for severance pay, it's a common practice to offer financial support during a transition period. This article clarifies the intricacies of severance pay in Singapore, answering frequently asked questions.

What is Severance Pay and When Am I Eligible?

Severance pay, also called retrenchment or termination pay, is compensation given to employees when their employment ends under specific circumstances. In Singapore, eligibility generally requires at least 2 years of continuous service with the company. Those with less than two years might receive an ex-gratia payment (a goodwill gesture), but this isn't legally required.

Severance pay is usually provided in cases of:

How Much Severance Pay Am I Entitled To?

The amount of severance pay isn't fixed by law. Instead, it's typically calculated based on:

The common practice is to pay between 2 weeks to 1 month's salary per year of service. For instance, an employee with five years' service might receive between 10 weeks and 5 months' salary.

Example Calculation

Let's say you're a Marketing Manager earning $5,000 per month, with 5 years and 6 months of service. Your severance pay could range from:

Tax and CPF Implications

Severance pay in Singapore is generally not taxable if it compensates for the loss of employment, but payments in lieu of notice, gratuities, and other package components may be taxable as they relate to past services or aren't directly tied to job loss. Also, CPF contributions aren't payable on severance pay.

Find out about what is and what is not taxable in terms of payment on the IRAS official page.

Is Severance Pay Mandatory in Singapore?

No, severance pay isn't legally mandated in Singapore. However, it's a widely accepted practice, encouraged by the Ministry of Manpower (MOM) as part of responsible retrenchment practices. Employers are expected to adhere to severance pay terms outlined in employment contracts or collective agreements.

Can My Employer Refuse to Give Me Severance Pay?

While not legally mandatory, an employer refusing severance pay might face scrutiny, particularly if it violates a contractual agreement or responsible retrenchment guidelines. Employers can refuse if:

What Should I Do if I Don't Receive My Severance Pay?

If you believe you're owed severance pay, take these steps:

  1. Consult a lawyer: An employment lawyer can advise you on your rights.
  2. Calculate your entitlement: Determine the amount you believe you're owed.
  3. Negotiate: Try to resolve the issue with your employer.
  4. Document everything: Keep records of all communication.
  5. File a claim: If negotiation fails, consider filing a claim with the Ministry of Manpower (MOM) or contacting the Tripartite Alliance for Dispute Management (TADM).

Severance Pay for Foreigners

Severance pay rules are largely the same for foreigners and locals. However, foreigners face additional administrative procedures, including tax clearance from the Inland Revenue Authority of Singapore (IRAS) before receiving payment and work pass cancellation processes.

Minimum Employment Period

A minimum of two years of continuous service is generally required for severance pay eligibility.

Can I Negotiate My Severance Package?

Yes, you can negotiate. However, legal counsel is advisable to ensure a fair outcome. Consider your length of service, contributions, and the company's financial situation when negotiating.

Scenario Severance Pay Taxable? CPF Contribution?
Retrenchment after 5 years service 2-4 weeks salary per year No No
Termination for misconduct Usually none N/A N/A
Voluntary Resignation Usually none N/A N/A

Understanding Singapore's Senior Employment Credit (SEC) Scheme

Singapore's Senior Employment Credit (SEC) scheme is a government initiative designed to encourage employers to hire and retain older workers. This article provides a comprehensive guide to the SEC, addressing common questions and clarifying its intricacies.

What is the Senior Employment Credit (SEC) Scheme?

The SEC is a key component of Singapore's Senior Worker Support Package. It aims to ease the financial burden on businesses due to increased retirement (63 to 64) and re-employment (68 to 69) ages, along with higher CPF contribution rates for senior workers. This scheme provides wage offsets to employers who hire and retain Singaporean employees aged 60 and above, who earn up to $4,000 per month.

Key Components of the SEC Scheme:

How is each Senior Employment Credit (SEC) payout computed?

The SEC payout scheme varies depending on the employee's age and monthly wage, with more support provided for those earning up to $3,000 per month.

Wage Offsets (2023):

Age Group Up to $3,000 >$3,000 to <$4,000
Aged between 60 and 64 3% of wage $360 – (0.09 x wage)
Aged between 65 and 67 5% of wage $600 – (0.15 x wage)
Aged 68 and above 8% of wage $960 – (0.24 x wage)

Specific Examples:

SEC Payouts for 2024 and 2025:

Age Group Up to $3,000 >$3,000 to <$4,000
Aged 60-64 2% of wage $240 – (0.06*wage)
Aged 65-67 4% of wage $480 – (0.12*wage)
Aged 68 and above 7% of wage $840 – (0.21*wage)

Specific Examples:

Who is Eligible for the Senior Employment Credit?

To qualify for the SEC, both the employer and the employee must meet specific criteria:

Employee Eligibility:

Employer Eligibility:

Further informations can be found at IRAS official page of Senior Employment Credit (SEC).

Age Requirements for Employees

The age requirement for SEC eligibility is currently 60 years and above (2023-2025). Previously (2021-2022), the age was 55 and above.

Do Employers Need to Apply Separately for the SEC?

Employers do not need to submit a separate application for the SEC (Special Employment Credit). The Inland Revenue Authority of Singapore (IRAS) automatically processes the SEC based on the employer's existing Income Tax and GST notification preferences. This streamlined approach ensures that eligible employers receive the SEC without the need for additional paperwork or requests. However, employers should ensure their tax records and notification preferences are up to date to avoid any delays or errors in receiving the credit.

Senior Employment Credit vs. Other Employment Support Schemes

The SEC differs from other schemes such as the Enabling Employment Credit (EEC) and CPF Transition Offset (CTO). Here's a comparison:

Scheme Objective Eligibility Benefits
SEC Support employers hiring senior workers Singaporean workers aged 60+, earning up to $4,000 Wage offsets (2-7%) based on age and wage
EEC Support employment of persons with disabilities Persons with disabilities aged 13 and above, monthly earnings below $4,000 Wage offsets (up to 20%, capped at $400)
CTO Offset increased CPF contribution rates for senior workers Local employees aged 55-70 50% of annual increase in employer CPF contribution rates

How Long Will the Senior Employment Credit Scheme Be Available?

The SEC scheme is currently extended until 2025.


**Note**: For wages paid between 1 Jan 2024 and 31 Dec 2025, employers will receive up to 7% of the wages paid to these eligible workers, depending on their age and wage.

Can Part-Time Senior Employees Qualify?

Yes, part-time senior employees can qualify if they meet all other eligibility criteria (Singaporean citizen, aged 60+, earning up to $4,000, timely CPF contributions).

Request a demo