Are you hiring an employee or an independent contractor in Singapore?

employee or independent contractor singapore

For the most part, the relationship between an employer and an employee is regulated by the contract of employment between them. However, there is a distinction between employees and independent contractors in Singapore.

Employees are individuals who work under a contract of service with a company, performing work in return for salary. On the other hand, independent contractors work under a contract of service with a company for an agreed fee, and the independent contractor’s work isn’t usually subject to the company’s control. This is important because individuals who enter the company as employees are statutorily entitled to certain benefits such as annual leave, medical insurance and employer benefits (i.e. CPF contributions) whereas individuals who join the company as an independent contractor aren’t.

While there are a few sources of law governing employment, the most relevant statute in Singapore is the Employment Act, which applies to every employee (regardless of nationality) who is under a contract of service with an employer, except for persons employed in a managerial or executive position earning more than S$4500 per month (and a few other exceptions).

You might think your startup can get away with only hiring “independent contractors” instead of employees by referring to them as such in their contractual agreements. Unfortunately, in the event of a dispute, the title given to the individual in the contract agreement doesn’t matter.

In Singapore, the law looks into various factors to determine whether the individual is truly an “employee” of the company. Using the contract as a starting point, the courts will look into the substance of the relationship between the company and the individual, particularly the amount of control the company has over the individual. The more the individual is subjected to the control of the company, the more likely he is to be an employee.

In addition, the courts will also assess:

1). Whether the individual’s work forms an integral part of the business.

2). Whether the individual owns and provides his own tools and materials.

3). Whether the individual works predominantly for the company or whether he works for multiple companies.

4). Whether there are specific working hours.

With the proliferation of outsourcing and hiring of consultants in the Singapore startup scene, it is more important than ever to be able to distinguish between the independent contractors and employees of a company. There will be penalties and liabilities involved if a court finds that an “independent contractor” working for your startup was actually an employee.

If you need a lawyer to assist you in drafting an Employment or Independent Contractor Agreement, click here.