As an employer in Singapore, navigating retrenchment and workforce adjustments isn’t just about numbers—it’s about responsibility. One term that surfaces during these discussions is Employment Assistance Payment (EAP). While not always mandatory, EAP plays a significant role in helping affected employees transition with dignity.

In this guide, we’ll walk you through everything you need to know about EAP in Singapore—from legal requirements to practical tips for implementation. Whether you're planning workforce restructuring or simply future-proofing your HR policies, this article will provide insights that help you stay compliant, empathetic, and efficient.

What is Employment Assistance Payment (EAP)?

Employment Assistance Payment (EAP) is a one-time financial payment made by employers to retrenched employees. It is meant to cushion the impact of job loss and assist in the transition period while the individual seeks new employment.

While the Employment Act in Singapore does not mandate EAP under every circumstance, it is generally expected under certain retrenchment conditions—especially for long-serving employees.

Why Employment Assistance Payment Matters

EAP is not just a line item in a retrenchment budget—it reflects an organisation’s values. Here’s why offering EAP is essential:

1. Supports Employee Well-being

Losing a job is emotionally and financially distressing. EAP serves as a gesture of goodwill and practical help, showing that your company cares about its people—even when parting ways.

2. Preserves Employer Branding

How you treat exiting employees speaks volumes. Offering EAP helps position your company as fair, responsible, and employee-centric—crucial for attracting future talent.

3. Demonstrates Compliance with MOM Guidelines

While not always mandatory, EAP aligns with guidelines from Singapore’s Ministry of Manpower (MOM), trade unions, and industry best practices. It also mitigates reputational and legal risks.

When is EAP Required?

According to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, EAP should be offered in the following cases:

For Employees Retrenched After Serving 2 Years or More

If the retrenched employee has been with the company for at least two years, employers are strongly encouraged to provide EAP. This applies even if retrenchment is due to financial difficulties, restructuring, or redundancy.

Not Mandatory for Employees with Less Than 2 Years’ Service

For employees with less than 2 years of service, EAP is optional. However, companies may choose to provide a token ex-gratia payment.

Unionised Companies May Have Specific Agreements

If your organisation is unionised, Collective Agreements (CAs) may specify the amount or method of calculating EAP. Always refer to the CA or consult your union representative.

How Much is EAP in Singapore?

The EAP is a one-time payment equivalent to 3.5 months’ salary, subject to a minimum of $6,250 and a maximum of $14,750.

Note:

• For employees who have been re-employed for at least 30 months since age 63, a lower EAP amount of 2 months of salary could be considered, subject to a minimum of $4,000 and a maximum of $8,500.
• In addition to the EAP, employers are encouraged to provide assistance to help employees find alternative employment.

How to calculate EAP?

Scenario 1: Employee Not Re-employed After Age 63

Employee Details:

• Age: 64
• Monthly salary: $4,000
• Not re-employed after turning 63

Calculation:

• EAP = 3.5 months × $4,000 = $14,000
• Minimum: $6,250
• Maximum: $14,750

Final EAP Payable: $14,000 (within the allowed range)

Scenario 2: Employee Re-employed for 30+ Months

Employee Details:

• Age: 66
• Monthly salary: $3,000
• Re-employed for 32 months since age 63

Calculation:

• EAP = 2 months × $3,000 = $6,000
• Minimum: $4,000
• Maximum: $8,500

Final EAP Payable: $6,000 (within the allowed range)

How to Communicate EAP to Employees

A retrenchment exercise, no matter how professionally managed, is a delicate affair. Communication is key. Here's how to handle it with empathy and clarity.

1. Private Meeting with the Employee

Hold a one-on-one meeting with HR and the direct supervisor. Use respectful language and avoid legal jargon.

2. Written Retrenchment Notice

This should clearly state:

• Last working day
• Reason for retrenchment
• EAP amount and computation method
• Any other benefits (e.g., notice period pay, unused leave encashment)

3. Offer Career Support

If possible, provide:

• Outplacement services
• Resume help
• Job referrals

This amplifies the goodwill generated by EAP and helps maintain positive employee relations.

Is EAP Taxable in Singapore?

According to IRAS (Inland Revenue Authority of Singapore), EAP is generally taxable unless it qualifies as a genuine severance payment due to retrenchment. The final decision depends on the nature and reason behind the payment.

To determine if EAP is taxable:

• If it's part of a retrenchment package (e.g., due to redundancy), it may be non-taxable.
• If it's a contractual obligation (e.g., stipulated in an employment agreement), it is taxable.

Always consult a tax professional or refer to the IRAS guidelines for case-specific advice.

What Other Payments Must Be Made During Retrenchment?

In addition to EAP, employers should settle the following:

For easy processing and compliance, tools like Gutsy’s payroll solution can automate final pay and EAP disbursements.

Best Practices When Implementing EAP

Implementing EAP is about more than just numbers. Follow these practices to ensure your approach is fair, empathetic, and compliant.

Document Your Retrenchment Policy

Have a written retrenchment and EAP policy, including eligibility, computation method, and exceptions.

Use a Consistent Formula

The EAP calculation depends on the employee reaching the minimum retirement age of 63 and how the company decides to re-employ or not.

Maintain Transparency

Explain how the EAP amount is derived and provide a breakdown in the final settlement letter.

Consider Customisation

While standardisation helps with fairness, you may need flexibility for high-performing or long-tenured staff.

Can You Refuse to Offer EAP?

While it is not mandatory by law, failing to offer EAP—especially to long-serving employees—can lead to backlash:

• Reputational damage on social media and employer review sites
• Disputes with trade unions or legal claims
• Negative morale among remaining employees

Unless you're facing insolvency or exceptional circumstances, it is best practice to offer EAP when retrenching staff who have served for more than 2 years.

How Gutsy Can Help

Navigating retrenchments is never easy, but Gutsy makes it simpler and more compliant.

With Gutsy’s HR and payroll platform, you can:

• Automatically calculate EAP, final salary, and leave encashments
• Generate payslips and tax forms for departing employees
• Stay compliant with MOM and IRAS regulations
• Maintain a clear audit trail for every transaction

Learn more about Gutsy’s Payroll Software

Final Thoughts

Retrenchments are one of the toughest decisions a company can make. But how you handle them—especially in offering Employment Assistance Payment—reflects your values and commitment to responsible employment.

EAP isn’t just a financial transaction. It’s about respect, fairness, and care. By understanding when and how to offer EAP, you not only stay compliant with Singapore’s employment norms—you also earn lasting trust and goodwill.

Need help managing retrenchments, payouts, and compliance?
Book a free consultation with Gutsy and let’s help you do the right thing the right way.

Frequently Asked Questions (FAQ)

Is Employment Assistance Payment mandatory in Singapore?
Not by law, but it is strongly encouraged for employees with at least 2 years of service, based on tripartite guidelines.

Is EAP subject to CPF?
No, EAP is not subject to CPF contributions, as it is considered a retrenchment benefit.

Is EAP taxable?
It depends. Genuine severance payments may be non-taxable. Consult IRAS or a tax expert for specific guidance.

How can I automate EAP payouts?
Use a trusted payroll software like Gutsy to manage calculations, compliance, and reporting.