Employee Dismissals In Singapore: Can An Employee Be Fired After A Performance Improvement Plan (PIP)?
For employees: If your employer places you on a PIP with no genuine intention of helping you improve, this may breach Singapore employment law. You could have grounds to claim wrongful dismissal.
For employers: Before terminating an employee through a PIP, you must ensure it's conducted in good faith. Pre-determined termination decisions can expose you to legal liability. Proper documentation and genuine investment opportunities are mandatory.
Landmark decision: Prashant Mudgal v SAP Asia Pte Ltd [2026] SGHC 2015
The High Court of Singapore recently delivered a groundbreaking decision on employment relationships, fundamentally changing how employee terminations in Singapore are handled, particularly regarding Performance Improvement Plans (“PIPs”).
Key legal development: Implied term of Mutual Trust and Confidence
In Prashant Mudgal v SAP Asia Pte Ltd [2026] SGHC 2015 (“Prashant Mudgal”), the High Court definitively affirmed the existence of the implied term of mutual trust and confidence, in the context of a PIP.
Prashant Mudgal – What happened?
In Prashant Mudgal, Prashant was a former employee of SAP Asia, and last held the position of “Head of Services Sales” prior to his termination. A series of incidents had strained Prashant’s relationship with his direct superiors, and Prashant was purportedly placed on a PIP that ended on 5 May 2019. SAP Asia then served Prashant a notice of termination on 21 November 2019.
Prashant commenced proceedings in the High Court, claiming damages of SGD 4.9 million on the basis that, inter alia, SAP Asia had breached the (i) implied term of mutual trust and confidence; and (ii) implied term not to engage in a termination process that is arbitrary, capricious, perverse and/ or in bad faith.
The High Court dismissed the existence of the latter implied term, having regard to the “golden thread” underlying the common law on contracts – freedom of contract, where parties should be free to both enter into and exit contracts – and noted that such implied term would limit an employer’s express contractual termination rights.
However, the High Court decisively ruled that an implied term of mutual trust and confidence existed in all employment agreements.
SAP Asia was found to be in breach of the implied term of mutual trust and confidence.
Why does the implied term of mutual trust and confidence exist?
The High Court extensively considered Singapore case law, noting in particular the definitive pronouncement of the existence of the implied term under Singapore law in Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd [2013] 2 SLR 577, subsequent obiter remarks in Dong Wei v Shell Eastern Trading (Pte) Ltd [2021] SGHC 123 (“Dong Wei”), and post-Dong Wei cases where such implied term was considered and referenced. Overall, Justice Gill found that he was in “good and abundant company” in taking the stance that such implied term exists in Singapore.
The High Court also held that the implied term was justified on principle, noting fairness and policy as key considerations, highlighting that employment contracts had features the that set them apart from ordinary commercial contracts, as employment is a longer-term, continuing relationship between parties in which a substantial commitment is made, where the relationship involves trust and confidence, and where there exists a power imbalance between employer and employee. These relationship features make employees “especially vulnerable” vis-à-vis their employers.
What is the implied term of mutual trust and confidence?
The High Court affirmed the formulation of the implied term in Malik v Bank of Credit and Commerce International SA (in compulsory liquidation) [1998] AC 20 (“Malik”): that an employer shall not “without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee”.
The High Court noted the high threshold to be crossed to breach such implied term, where it would take “quite extreme behaviour” on the employer’s part to satisfy the Malik test.
The assessment of the employer’s conduct must also be conducted objectively – even if an employee subjectively perceives his employer’s conduct to have damaged his trust and confidence in his employer, it may not be treated as being calculated and likely to destroy or seriously damage such relationship.
Crucially, such implied term also must not contradict express terms of the contract – parties are free to modify or exclude such implied term in their contract by express words.
How was SAP Asia found to have breached the implied term of mutual trust and confidence?
The High Court stated that the duty to not behave in an intolerable or wholly unacceptable way was an “obvious facet” of the implied term of mutual trust and confidence.
The High Court found that SAP Asia had breached such duty in conducting a pre-judged PIP, where Prashant was not given a genuine opportunity to improve and rectify his behavioural deficiencies.
Key to such finding were (i) internal correspondence that made it clear that Prashant’s superiors already had an “endgame” of terminating the claimant at the same time the PIP was conducted; and (ii) shoddy documentation of the PIP and the failure to inform Prashant of its outcome.
However, the High Court declined to make a finding of a breach of the duty not to reprimand without merit in a humiliating circumstance and left the question open as to whether the duty to conduct fair investigations falls within the scope of such implied term.
Guidance for employee terminations
For employers that intend to implement PIPs, Prashant Mudgal provides useful guidance:
Employers must have a genuine intention to allow an employee to improve, with a view to their continued employment or at least contemplating their continued employment as a possible outcome.
Proper documentation should be made of the PIP, and the employee should be informed of its outcome.
If employers have already decided on termination, the more appropriate path to take could be contractual termination.
Employers should also ensure that contractual termination does not fall afoul of the Ministry of Manpower’s Tripartite Guidelines on Wrongful Dismissal (link), such as where dismissal is made without notice for a wrongful or false reason.
If you are an employer looking to understand the revisions you should make to your exit procedures, or an employee concerned about a termination, or you would otherwise like to understand how this Singapore court decision may affect your employment or your organisation, please get in touch.