Hiring and paying employees in Singapore involves navigating a range of employment laws, payroll processes, and benefits schemes. Known for its business-friendly environment, Singapore offers a robust framework for employers, but compliance with its regulations is crucial. This guide provides an overview of hiring practices, payroll management, and employee benefits in Singapore, tailored for an international business audience.
Overview of the hiring process in Singapore
Recruitment strategies
- Job Portals: Platforms like JobsDB, JobStreet, and LinkedIn dominate the hiring market.
- Recruitment Agencies: Licensed agencies are commonly used for executive or specialised roles.
- Networking Events: Industry events and business forums provide opportunities to connect with talent.
Employment contracts
Employment contracts in Singapore must comply with the Employment Act and include:
- Job title and description
- Salary, bonuses, and allowances
- Working hours and days
- Leave entitlements
- Termination and notice periods
- Other key terms such as probation periods
It’s advisable to provide contracts in English to avoid misunderstandings.
Key employment laws in Singapore
Employment Act
The Employment Act covers most employees except:
- Managers and executives earning more than SGD 4,500 per month.
- Domestic workers, seafarers, and public servants.
Key provisions include:
- Maximum working hours: 44 hours per week.
- Overtime pay: At least 1.5x the hourly rate for non-exempt employees.
- Rest days: One rest day per week for employees covered by Part IV of the Act.
Fair Consideration Framework (FCF)
The FCF mandates that employers advertise roles on MyCareersFuture for at least 14 days before hiring foreign talent.
Work pass requirements
For foreign employees, ensure they have valid work passes:
- Employment Pass (EP): For professionals earning at least SGD 5,000 per month (higher for financial sector roles).
- S Pass: For mid-level skilled workers earning at least SGD 3,150 per month.
- Work Permits: For semi-skilled or unskilled workers.
Payroll elements in Singapore
Payroll setup
Employers must establish a compliant payroll system, which involves:
- Registration with government authorities:
- Register as an employer with the Inland Revenue Authority of Singapore (IRAS).
- Enrol for Central Provident Fund (CPF) contributions.
- Employee tax registration: Employees must have a Tax Identification Number (TIN).
Payroll components
- Gross salary: Includes base pay and additional allowances.
- Mandatory deductions:
- CPF contributions: For Singaporean and Permanent Resident employees. Rates vary by age and income level, with a maximum combined contribution of 37%.
- Skills Development Levy (SDL): SGD 2 for the first SGD 1,000 of an employee’s monthly salary.
- Taxes: Singapore uses a progressive income tax system with rates ranging from 0% to 22%.
Pay schedules
Most employers follow monthly pay cycles, with salaries disbursed at the end of each month. Salaries must be paid in Singapore dollars (SGD) unless agreed otherwise.
Annual returns
Employers must file Form IR8A and relevant appendices by 1 March each year to report employee income to IRAS.
Payroll process in Singapore
Managing payroll in Singapore requires a clear understanding of the regulatory requirements and a systematic approach to ensure compliance. Here are the key steps involved in the payroll process:
1. Register with government authorities
- Inland Revenue Authority of Singapore (IRAS): Employers must register as a business entity to fulfil tax obligations.
- Central Provident Fund (CPF): Enrol with the CPF Board if hiring Singaporean or Permanent Resident employees to manage mandatory contributions.
2. Collect employee details
Ensure you have the following information:
- Personal details: Full name, address, and contact information.
- Work pass information: For foreign employees, ensure valid Employment Pass, S Pass, or Work Permit details.
- Bank account information: For direct salary transfers.
- Tax information: Employee’s Tax Identification Number (TIN) or FIN (Foreign Identification Number) for tax reporting.
3. Calculate gross salary
Determine each employee’s gross monthly pay, which includes:
- Base salary
- Overtime payments
- Bonuses and commissions
- Allowances (e.g., transport, housing)
4. Compute mandatory contributions
- Central Provident Fund (CPF): For Singaporeans and Permanent Residents, calculate CPF contributions based on age and salary. Both employer and employee portions must be included.
- Skills Development Levy (SDL): Deduct SDL for all employees earning up to SGD 4,500 per month.
- Foreign Worker Levy (FWL): For Work Permit and S Pass holders, calculate levies based on their employment sector and skill level.
5. Deduct applicable taxes
- Personal income tax: While employers are not responsible for withholding personal income tax, they must report employee earnings to IRAS annually.
- Absenteeism or unpaid leave deductions: Adjust gross pay for any unpaid leave or penalties in compliance with employment contracts.
6. Prepare itemised payslips
Employers must provide payslips to employees, either electronically or in hard copy. A compliant payslip should include:
- Employee and employer details
- Pay period
- Gross salary
- Deductions (e.g., CPF, SDL)
- Net salary
- Payment date
7. Disburse salaries
- Ensure salaries are paid in Singapore dollars (SGD) unless otherwise agreed.
- Adhere to the agreed pay schedule, typically at the end of each month.
- Use direct bank transfers for efficiency and traceability.
8. File statutory contributions
- CPF contributions: Submit monthly CPF contributions through the CPF e-Submit platform by the 14th of the following month.
- SDL payments: Automatically included with CPF submission.
- Foreign Worker Levy: Submit payments through the CPF Board or authorised banking channels.
9. Submit annual tax returns
- File Form IR8A and Appendices (where applicable) for each employee by 1 March annually.
- Report additional benefits, such as housing or stock options, through the IRAS platform.
10. Maintain records
- Keep payroll records for a minimum of two years for current employees and one year for former employees.
- Records should include payslips, contracts, tax forms, and proof of CPF contributions.
Employee benefits in Singapore
Statutory benefits
- Leave entitlements:
- Annual leave: Minimum of 7 days for the first year, increasing with tenure.
- Sick leave: Up to 14 days (with a medical certificate) and 60 days including hospitalisation.
- Maternity leave: 16 weeks for eligible employees under the Child Development Co-Savings Act.
- Paternity leave: 2 weeks for fathers meeting eligibility criteria.
- Central Provident Fund (CPF):
- A mandatory savings scheme covering retirement, housing, and healthcare.
- Both employers and employees contribute, with rates determined by the employee’s age and income.
- Work Injury Compensation Act (WICA):
- Employers are liable for work-related medical expenses and compensation.
- Health insurance: Employers must provide medical insurance for Work Permit and S Pass holders.
Non-statutory benefits
To attract and retain top talent, many employers offer:
- Performance bonuses: Commonly one to three months’ salary.
- Flexible benefits: Allowances for wellness, transport, and childcare.
- Professional development: Training budgets or subsidies.
Termination and severance
Notice periods
Notice periods vary by contract but typically range from 1 to 4 weeks, depending on tenure.
Severance pay
There is no statutory requirement for severance pay, but it is common for employers to offer 1-3 weeks’ salary per year of service for retrenchments.
Final payment
All outstanding salaries and benefits must be paid within 7 days of the last working day.
Compliance challenges and solutions
- Managing CPF contributions: Automate CPF payments through a compliant payroll system to avoid errors.
- Staying updated on employment law: Regularly review updates to the Employment Act and Work Pass policies.
- Cross-border complexities: Use local payroll providers or Employer of Record (EOR) services to ensure compliance.
Conclusion
Hiring and paying employees in Singapore requires a clear understanding of its employment laws, payroll regulations, and benefit schemes.
By adhering to these rules and leveraging technology or local expertise, international businesses can build a compliant and competitive workforce in one of Asia’s most vibrant economies.
FAQ
Non-compliance with payroll laws, such as failure to contribute to the CPF or late submission of mandatory payments, can result in fines, interest penalties, or prosecution. For example:
1. CPF non-payment: Employers may face a fine of up to SGD 5,000 per offence or imprisonment.
2. Tax violations: Late submission of tax returns can incur penalties of up to 200% of the unpaid tax plus fines.
Salaries in Singapore must be paid in Singapore dollars (SGD) unless there is a prior agreement between the employer and the employee. However, any CPF contributions and levies must be calculated based on the salary’s equivalent in SGD.
Probation periods in Singapore usually range from 3 to 6 months, depending on the industry and role. The exact duration and conditions should be clearly stated in the employment contract.
No, 13th-month bonuses (known as Annual Wage Supplements, or AWS) are not legally required in Singapore. However, they are common practice and often included as part of an employee’s total remuneration package.
If payday coincides with a public holiday, salaries must be paid on the working day immediately before the public holiday. This ensures employees receive their pay on time.
Taxation depends on the employee’s residency status:
1. Resident taxpayers: Those residing in Singapore for at least 183 days in a calendar year are taxed at progressive rates from 0% to 22%.
2. Non-resident taxpayers: Income is taxed at a flat rate of 15% or the progressive resident rates, whichever results in higher tax liability.
There are no mandatory software requirements, but employers are encouraged to use compliant payroll systems that integrate with the CPF e-Submission and IRAS platforms. Many businesses use software that automates CPF contributions, SDL payments, and tax filing.
Part-time employees in Singapore are covered by the Employment Act if they work less than 35 hours per week. Employers must:
1. Pro-rate their benefits, such as annual leave and sick leave, based on hours worked.
2. Include their wages in CPF and SDL contributions if applicable.
Employees covered by the Employment Act are entitled to paid public holidays. If an employee is required to work on a public holiday, they must receive:
1. A replacement day off, or
2. Additional pay equivalent to 1 day’s salary.
No, employers are not required to provide payslips to freelancers or independent contractors, as they are not considered employees under the Employment Act. However, maintaining clear payment records is advisable for both parties.
Employers cannot reduce an employee’s salary without their written consent. Any changes to the employment terms, including salary adjustments, must be agreed upon and documented.
Employers are not legally required to provide health insurance for local employees unless specified in the employment contract. However, they must ensure CPF contributions are made, which includes contributions to MediSave, a healthcare savings scheme.