Salary in Lieu of Notice in Singapore

In this article

• 1. What is Salary in Lieu Of Notice?
• 2. When Can Employment End Without Notice?
• 3. Can An Employee Really Just Resign Without Notice?
• 4. What If the Contract Doesn’t Mention a Notice Period?
• 5. Does It Include Bonuses and Allowances, Or Just Basic Pay?
• 6. Does CPF Apply to It?
• 7. Who Handles All This on The Company Side?
• 8. Salary In Lieu Of Notice FAQs

If you’ve ever left a job – or managed an employee’s departure – without the full notice period being served, you’ve probably come across the term “salary in lieu of notice.” It may sound complicated, but the principle is straightforward. Here’s what employees and employers should know.

What is Salary in Lieu Of Notice?

If an employer or employee ends an employment contract without serving the full notice period, they generally pay the other party an amount equivalent to the salary for the unserved period.

It works both ways: an employer can pay an employee to leave earlier, and an employee can pay their employer to leave earlier. Both parties can also agree in writing to waive the notice period.

Also read: Off in Lieu Meaning: A Detailed HR Guide

When Can Employment End Without Notice?

This can happen in several situations:

• Employer stops paying on time — If your salary is more than 7 days late, you’re allowed to leave without serving notice. That said, it’s worth checking in with your employer first to understand why the payment is late before making a call.
• Repeated unexplained absence — An employer may terminate employment without notice if an employee is absent for more than 2 consecutive working days without approval and a valid reason, or without informing or attempting to inform the employer of the reason.
• Changes to employment terms — An employer cannot change an employee’s terms of employment without their consent. If both parties cannot reach an agreement, either may end the contract by serving the required notice or paying salary in lieu of notice.
• Misconduct — If an inquiry establishes that an employee has committed misconduct, the employer may terminate their employment without notice or payment in lieu of notice.

Can An Employee Really Resign Without Serving Notice?

Yes. An employee may leave without notice if their employer fails to pay their salary within seven days of the due date. In other cases, an employee who wants to leave early generally needs to pay salary in lieu of the unserved notice period, unless both parties agree to waive it.

How to calculate Salary in Lieu of Notice?

The standard formula used in Singapore is: (Monthly gross rate of pay ÷ number of working days in that month) × number of unserved notice days

For example: Alan earns S$5,000 a month. February 2027 has 21 working days, and he resigns with 9 days’ notice unserved. His payment adds up to: (S$5,000 ÷ 21) × 9 = S$2,142.86

The amount of salary in lieu of notice depends on how much of the notice period remains. Here’s how to calculate it for a full month or part of a month:

Either way, the goal is the same; pay the person exactly what they’d have earned if they’d stayed throughout their notice period.

What If the Contract Doesn’t Mention a Notice Period?

Then the default periods based on length of service kick in:

Does It Include Bonuses and Allowances, Or Just Basic Pay?

Generally, yes. It’s meant to cover whatever the employee would normally have earned, so basic salary, commissions, bonuses, and regular allowances stated in the contract are usually all factored in for salary in lieu of notice.

Can both sides just skip the notice period entirely?

Yes, if both parties agree to waive it off. But this needs to be documented in formal writing, not just a verbal understanding. Employees can also use their accrued annual leave to shorten the notice period; this requires the employer’s sign-off, and it won’t get you any extra pay on top.

Is it taxable?

Yes, IRAS treats salary in lieu of notice as taxable income, same as regular wages paid.

Does CPF Apply to It?

No, CPF contributions aren’t payable on salary in lieu of notice itself. However, CPF still applies as usual on the regular wages earned up until the employee’s actual last day of work. And if an employer offsets an employee’s owed compensation against their final wages, CPF is still due on those wages before the offset is applied.

When should the payment actually come through?

The final salary, including any amount in lieu of notice, should be paid on the last day of work, or within 3 working days from the termination date. If it’s the employee who owes the payment (because they’re the one seeking to leave early), this is usually settled within 7 days.

What if someone just refuses to pay?

This happens, and it can turn into a dispute pretty quickly. Either the employer or the employee can take the matter to the Tripartite Alliance for Dispute Management (TADM) or the Ministry of Manpower (MOM) to recover what’s owed.

Who Handles All This on The Company Side?

In most organisations, it falls on HR to sort out. A few things they’re usually responsible for:

• Checking the contract and working out the correct notice period or payment
• Coordinating with payroll to make sure the amount and timing are right
• Communicating clearly with the employee about what they’re being paid and when
• Documenting everything properly; the termination letter should spell out that it’s a payment in lieu of notice, how much, and what else is included
• Keeping the process consistent across the company to avoid disputes or claims of unfair treatment down the line

At the end of the day, salary in lieu of notice helps address the financial impact when a notice period is not served in full. Calculating the amount correctly, paying it on time and recording the arrangement in writing can help both parties avoid misunderstandings.

Salary In Lieu Of Notice FAQs