Running payroll functions in Singapore is a straightforward and transparent process compared to other countries, making it a highly desirable choice for multinational businesses who wish to expand in that region. However, payroll in Singapore involves specific laws and regulations that should be followed while running payroll operations.
Many companies based in Singapore have employees, both residents, and non-residents, and based on the employee’s residency status there are different aspects to pay attention to including contributions to the Central Provident Fund (CPF), maternity pay, and leave and income tax plus the foreign worker’s levy. Managing your payroll, therefore, can become time-intensive and complicated.
This payroll guide for Singapore will help you to understand more about the payroll functions and to ensure that payroll activities are conducted in compliance with Singapore laws and regulations.
Why Singapore?
Singapore is a great business destination for companies seeking to expand their operations abroad. First and foremost, Singapore boasts a highly efficient and transparent business environment. The country’s robust legal framework, minimal corruption, and strong intellectual property protection ensure a level playing field for businesses.
Moreover, Singapore offers a strategic location at the heart of Southeast Asia, serving as a gateway to a burgeoning market of over 650 million people. The nation’s world-class infrastructure, including state-of-the-art airports, seaports, and telecommunications networks, facilitates seamless connectivity and logistics. Additionally, Singapore provides attractive tax incentives, with a competitive corporate tax rate and various tax schemes that foster innovation and entrepreneurship.
Furthermore, the city-state’s multicultural and cosmopolitan society promotes a vibrant ecosystem for networking, collaboration, and talent acquisition. With its stable political climate, skilled workforce, and commitment to innovation, Singapore continues to be a preferred destination for businesses seeking growth opportunities in the Asia-Pacific region.
Payroll Regulatory Framework In Singapore
When conducting business in Singapore it is important to have a clear understanding of the various regulations that govern payroll practices in Singapore. The following provides a short list of some of the important payroll laws in Singapore that we mention in this article. For a more comprehensive list, however, businesses should consult with legal or HR professionals.
- Employment Act: The Employment Act provides the basic terms and conditions of employment for most employees in Singapore, including payment of salary, overtime, and leave entitlements. It sets guidelines for salary calculation, working hours, and employment termination.
- Central Provident Fund (CPF) Act: The CPF Act 1953 mandates that employers and employees contribute a portion of the employee’s salary to the Central Provident Fund. The fund is designed to provide retirement savings, healthcare, and housing benefits for Singaporean employees.
- Income Tax Act: The Income Tax Act governs the taxation of income earned by individuals and businesses in Singapore. Employers are responsible for withholding income tax from employees’ salaries and ensuring timely submission of tax returns to the tax authorities.
- Child Development Co-Savings Act: The Child Development Co-Savings Act establishes provisions for the leave entitlements and benefits related to childcare for employees in Singapore. It includes provisions for maternity leave, paternity leave, and childcare leave.
- Retirement and Re-employment Act: The Retirement and Re-employment Act prohibits employers from dismissing employees solely on the grounds of age once they reach the retirement age of 62. It also ensures that employers offer re-employment opportunities to eligible employees up to the age of 67.
- Employment of Foreign Manpower Act (EFMA): The EFMA regulates the employment of foreign workers in Singapore. It sets forth guidelines and requirements for hiring foreign employees, including work permits, employment passes, and levy obligations.
- Personal Data Protection Act (PDPA): The PDPA governs the collection, use, and disclosure of personal data by organizations in Singapore, including employee data. Employers are required to obtain consent for data collection, ensure data security, and provide individuals with the right to access and correct their personal data.
- Work Injury Compensation Act (WICA): The WICA provides a framework for compensating employees who suffer from work-related injuries or occupational diseases. It establishes the rights and obligations of employers and employees in the event of workplace accidents.
Payroll Process in Singapore
Payroll processing refers to the process performed by companies to pay their employees, mostly on a set date every month.
Payroll processing in Singapore has to be managed properly even if it is simple and transparent, as it involves specific rules and regulations – and should take the status of resident and non-resident workers into account. If not handled properly then it may lead to discrepancies and affect the payroll accounting which will result in inaccurate report data for income tax filing.
Payroll processing in Singapore requires contributions to social security schemes, including the CPF, the Skill Development Levy, and the Foreign Workers Levy, however, there are no monthly withholding obligations for employers in Singapore.
Employers in Singapore usually process payroll considering performance evaluation, paying year-end bonuses, medical leave, statutory claims, etc.
Payroll process workflow includes:
- Payroll setup;
- Raw data collection and cleaning;
- Payroll processing;
- Payroll payment/payslip;
- Statutory submission;
- Annual report for individual income tax;
- Employee payroll data maintenance;
- Year-end payments like bonuses, etc.
To make payroll management successful, companies should have accurate payroll processing, good maintenance, and timely disbursement. This would help in motivating employees and keeps staff optimistic other than ensuring compliance.
Minimum Wage in Singapore
Singapore is one of the most attractive countries in the world for expats and foreign workers, making the country’s economy so dynamic. And unlike many highly developed countries, Singapore does not have any minimum wage/salary requirement for all workers in Singapore, whether local or foreign. Few key points to be noted:
- The Employment Act does not regulate the minimum salary every employee must be paid.
- In other words, there is no minimum salary requirement and it is subject to negotiation between the employer and the employee.
- Workers in Singapore (whether local or foreigner) are paid based on their skills, capabilities, and competencies which in result helps companies to motivate their staff and retain valuable workers.
- In accordance with the Employment Act, the salary must be paid at least once a month within 7 days after the end of the salary period.
- Overtime pay, if applicable, must be paid within 14 days of the stipulated salary period.
- There is no requirement for bonus payment under the Employment Act of Singapore.
Individual Income Tax in Singapore
Singapore follows a progressive income tax system and its straightforward legal and financial system attracts many businesses worldwide.
Any income that accrues in or is derived from Singapore is taxable. Resident Individuals are eligible for certain personal allowances and are subject to tax rates which start from 0% to 22% on income above SGD 20,000. Whereas, non-resident individuals are not entitled to any personal allowances and are subject to a flat rate of 22%.
Employers in Singapore are not under any obligation to withhold taxes on employee’s pay each month, therefore, employees are responsible to file their own taxes and pay directly to the local tax authority ‘’Inland Revenue Department (IRD)’’.
However, employers are required on a mandatory basis to prepare annual wage reports Form IR8A and Appendix 8A, Appendix 8B, or Form IR8S (where applicable) for all employees who are employed in Singapore by 1 March each year.
| Chargeable Income | Income Tax Rate (%) | Gross Tax Payable (S$) | Total Income Tax in this Income Bracket (S$) |
| First $20,000 Next $10,000 | 0 2 | 0 200 | 200 |
| First $30,000 Next $10,000 | – 3.50 | 200 350 | 550 |
| First $40,000 Next $40,000 | – 7 | 550 2,800 | 3,350 |
| First $80,000 Next $40,000 | – 11.50 | 3,350 4,600 | 7,950 |
| First $120,000 Next $40,000 | – 15 | 7,950 6,000 | 13,950 |
| First $160,000 Next $40,000 | – 18 | 13,950 7,200 | 21,150 |
| First $200,000 Next $40,000 | – 19 | 21,150 7,600 | 28,750 |
| First $240,000 Next $40,000 | – 19.50 | 28,750 7,800 | 36,550 |
| First $280,000 Next $40,000 | – 20 | 36,550 8,000 | 44,550 |
| First $320,000 In excess of $320,000 | – 22 | 44,550 | – |
Social Security (Employer and Employee) in Singapore
Statutory Benefits refer to all the advantages that the government of a country provides to its residents with an intention to promote population welfare through various schemes or insurances.
Likewise, in Singapore, the social security system has three aspects:
- Retirement;
- Healthcare;
- Social welfare where CPF (Central Provident Fund) plays the key role in Singapore’s comprehensive social security system.
CPF is the mandatory social security benefits that are contributed by both employees and employers through deductions in their salaries and fulfills the retirement, housing, and healthcare needs.
Under the law, it is the obligation of the employer to remit any mandatory CPF contributions to the CPF Board. Social security or Central Provident Fund (CPF) contributions are mandatory for Singapore citizens and Singapore permanent residents (“SPRs”) who are employed in Singapore. Under this scheme, employers and employees make contributions at the prevailing contribution rates as per their wages and age group of the employee.
The contribution rates for different age groups and SPR status are as shown in the table below:
On the other side, employers are also obliged to contribute (on behalf of their employees) to the Skills Development Fund (SDF) at a levy rate of 0.25 percent up to the first $4,500 SGD of gross monthly remuneration. There’s also a grant to employers from the SDF in respect to provide or send employees for training.
Pay-slip in Singapore
The Ministry of Manpower announced the mandatory ruling of issuing a written statement of pay under the Employment Act 2016 in Singapore. The legislation was introduced where employers must provide the itemized payslip to all employees whether formatted in soft copy or hard copy.
- Payslips are supposed to be given together with payment to employees.
- If not given together, then within three working days of the payday.
- For leavers, must give payslip together with outstanding salary.
The law requires full payslips to describe a comprehensive breakdown of an employee’s salary, which means, it must include details of employment such as date of payment, basic salary amount, allowances, bonuses and deductions made, and net monthly salary. Below list shows the items to be described in payslip:
| Payslip Item description |
| Full name of employer. |
| Full name of the employee. |
| Date of payment (or dates, if the payslips consolidate multiple payments). |
| Basic salary
For hourly, daily, or piece-rated workers, indicate all of the following:
|
| Start and end date of the salary period. |
| Allowances paid for salary period, such as:
|
| Any other additional payment for each salary period, such as:
|
| Deductions made for each salary period, such as:
|
| Overtime hours worked. |
| Overtime pay. |
| Start and end date of the overtime payment period (if different from item 5 start and end date of salary period). |
| Net salary paid in total. |
Best Practices For Payroll In Singapore
To effectively avoid payroll mistakes in Singapore, businesses should implement the following comprehensive practices. First and foremost, it is crucial to maintain accurate and up-to-date employee records. This includes meticulously recording personal details, employment contracts, and salary information. Regularly review and update these records to reflect any changes such as promotions, salary adjustments, or employment status updates. By keeping meticulous records, businesses can minimize errors and discrepancies.
Secondly, staying compliant with payroll regulations is essential. Labor laws, tax requirements, and reporting obligations in Singapore are subject to periodic updates and amendments. Therefore, businesses should stay up-to-date with the latest developments and changes. It is advisable to seek professional advice from legal or HR experts to ensure compliance. Additionally, engaging with relevant authorities can provide valuable guidance on payroll-related matters, ensuring that businesses adhere to the latest regulations.
Thirdly, investing in reliable payroll software or considering outsourcing payroll can significantly contribute to error reduction and efficiency improvement. Payroll software solutions automate calculations, tax compliance, and generate reports accurately and promptly. They can handle complex salary structures, tax calculations, and statutory contributions. Alternatively, outsourcing payroll to trusted service providers allows businesses to leverage specialized expertise, ensuring accurate and timely payroll processing. By adopting these technological solutions, businesses can streamline payroll operations and minimize the risk of errors.
Moreover, conducting regular audits and reconciliations is crucial for error detection and rectification. Regularly reviewing payroll data, cross-checking with supporting documents, and performing reconciliations can help identify any discrepancies or anomalies. Promptly addressing these issues ensures timely rectification and prevents further complications. Additionally, conducting periodic internal or external audits of payroll processes and records can provide an objective assessment of compliance and accuracy, helping businesses identify areas for improvement and implement necessary corrective measures.
Lastly, maintaining open lines of communication with employees is vital in preventing payroll-related issues. Businesses should establish channels for employees to raise payroll queries or concerns. Promptly addressing these queries and providing transparent and accurate responses fosters trust and confidence among employees. Regularly communicating changes in payroll policies, salary adjustments, or benefits ensures that employees are well-informed and minimizes misunderstandings or disputes.
By implementing these detailed practices, businesses can significantly reduce the risk of payroll mistakes in Singapore. Accurate and compliant payroll processes not only prevent legal complications and penalties but also contribute to a positive work environment and foster trust and confidence among employees.
How We Can Help You with Payroll in Singapore
To run successful payroll management, it is very important for companies to handle with accuracy, good maintenance, detailed employment records, and timely disbursement in compliance with local regulations.
The payroll processing cannot be performed hastily as the consequences can be grave due to employee dissatisfaction and can even result in penalties for the employer. It is also true that as your business grows and with the rising employee population, handling payroll becomes complex. Therefore, payroll processing requires more time and effort.
To avoid such issues, you may find outsourcing to a payroll service provider more cost-effective and less stressful than trying to manage this function in-house.
NNRoad’s core expertise offers end-to-end payroll management solutions to foreign small and medium-sized enterprises worldwide. Regardless of your company size or requirements – be it full corporate payroll services or limited processing services, we can efficiently and securely manage your payroll saving you time and huge costs. We can support your company with full employer of record and payroll services in Singapore.
