Singapore is not only the most developed economy but also the most formidable region as it has a central position in the market and one of the busiest business hubs in the world. It is very essential for any investor looking for setting up an entity in Singapore to understand all the local legislation and policies governing Payroll in Singapore.
Due to a high degree of skills and knowledge and a freely developed economy. Singapore is one of the most representative markets for developing and retaining talented employees. The rules for payroll and taxation in Singapore are very specific and totally depend upon the candidates employed are foreigners or Locals, and therefore, any foreign company’s primary concern is to comply with tax and payroll regulations in Singapore so that the employees are paid as per the law. One of the most preferred and the easiest way is to use a local payroll service provider which can simplify the whole payroll process ensuring full compliance with labor laws in Malaysia.
Compliance regulation for Payroll in Singapore
Let us understand the basics of the Payroll requirements in Singapore:
Minimum Wages and Working Hours in Singapore
Working hours: The working hours are as per the hours agreed to by the employer and employer in the service contract. Below are working hours for common work arrangements
· For 5 days or less per week- contractual hours of work are 9 hours per day or 44 hours per week;
· More than 5 days’ week: contractual hours of work are 8 hours per day or 44 hours per week.
Pay cycles: Salaries in Singapore are generally paid once in a month. However, there can be situations such as dismissal/resignation where remuneration is paid in a different manner.
Minimum wages: Unlike many other highly developed countries, Singapore is one of the few countries in the world that does not have a minimum wage requirement for expats and local workers. This makes the country one of the most attractive countries globally.
Overtime:
Work done above the normal working hours counts as overtime work. Overtime can be claimed as below:
· A non-workman earning up to $2,600
· A workman earning up to $4,500
Employees must be paid at least 1.5 times the hourly basic rate of pay and payment should be done within 14 days after the last day of the salary period.
Social security contributions
There are three mandatory statutory contributions in Singapore
Ø Central Provident Fund (CPF): CPF is Singapore’s national pension scheme. Only Singapore citizens and Permanent residents are required to pay the contributions. Expats are not required to make social security contributions. Percentage contribution by Employers is 17% and by employees is 20%. Rates are applicable to employees aged 55 years and below.
Ø Supplementary Retirement Scheme (SRS): SRS is a voluntary scheme which is made to encourage employees and the self-employed to help save for their retirement and over and above their CPF savings. The contributed maximum amount is subject to an income cap of SGD 102,000 with rates as below:
· Singapore citizens: 15%
· Permanent Residents: 35%
Personal Income tax
Income tax rates are as follows:
| Taxable Income | Percentage of Income Tax |
| Below 20000 | Nil |
| Till 30000 | 2% |
| 30001-40000 | 3.5% |
| 40001-80000 | 7% |
| 80001-120000 | 11.5% |
| 120001-160000 | 15% |
| 160001-200000 | 18% |
| 200001-240000 | 19% |
| 240001-280000 | 19.5% |
| 280001-320000 | 20% |
| On above 3,20,000 | 22% |
Public Holidays in Singapore
· New Year’s Day
· Chinese New Year
· Good Friday
· Labur Day
· Hari Raya Puasa
· Vesak day
· Hari Raya Haji
· National Day
· Deepavali
· Christmas Day
Leaves in Singapore
· Annual leave: Employees are entitled 7 days of paid annual leave with a period of one year of service.
· Sick leave: Employees are entitled for the paid leave if they have worked for a minimum of 3 months and the days depend upon the length of the service. Employees who have worked for a minimum of 6 months are entitled for 14 days of paid sick leaves.
· Maternity leave: Mothers are entitled 16 weeks of paid maternity leave if they meet the following requirements:
- If the child is a Singapore citizen.
- For employees: Served employer for a continuous period of at least 3 months before the childbirth.
- For self-employed: Worked for at least 3 continuous months and have lost income during the maternity leave period.
- At least 1 weeks’ notice given to the employer before going on maternity leave, and informed them as soon as possible of your delivery. Otherwise, an employee is entitled only to half the payment during maternity leave, unless there is valid reason for not giving the notice.
Challenges for processing payroll in Singapore
Employers need to pay attention to the below areas while processing employees payroll.
· Changes in Regulations: Payroll Management when there are regulatory changes require strict internal procedures and up to date knowledge of the system. It is very essential to ensure full compliance to changing local regulations when managing payroll.
· Employee data accuracy: Wrong employee data or changes to the data that are not updated instantly to the system can result in heavy penalties for companies.
· Manual error: Miscalculations and improper calculation methods can be a result of human elements used for processing the payroll resulting in expensive penalties.
· Wage payment delays –Correct calculations and paying employees’ salary on time is very important for any business to succeed in Singapore.
· Record Maintenance: It is mandatory that all employment forms including the IR8A and Annex 8A, IR8S or Annex 8B needs to be systematically consolidated and submitted to the competent authorities by March 1 of each year in Singapore
· Confidentiality for employee data: There is a huge risk that confidential employee information might be leaked to outside parties and therefore it is of great importance that the employees’ data is kept safe.
Conclusion
A successful payroll management is not only associated with the accurate payment processing but also requires fine maintenance and timely disbursement. Other than ensuring compliance, this also lifts staff morale and keeps employees motivated. Companies need to be very careful while handling the employees’ payroll and ensure full compliance with the local labor laws as it keeps employees happy and motivated.
With a growing business and the employee count it becomes even more complex to handle and process the payroll since it requires a lot of time and effort. Therefore, outsourcing the payroll management service to an expert partner like NNRoad can be more cost-effective and less stressful as all the compliance issues will be taken care of by us so that you can dedicate your valuable time to business generating activities.
