Effective payroll compliance is essential for businesses operating in Singapore, ensuring smooth operations, regulatory adherence, and a trusted reputation among employees. Below is an overview of the crucial elements employers must address to achieve payroll compliance in Singapore.
Basic Employment Law Requirements
Employers in Singapore must adhere to the Employment Act (EA), which outlines the fundamental rights and responsibilities of employers and employees.
- Employment Contracts – Employees must have clearly documented employment contracts stating job responsibilities, compensation details, work hours, leave entitlements, benefits, and notice periods.
- Work Hours – Regular work hours are typically limited to 44 hours per week. Employees eligible for overtime pay (earning up to SGD 2,600 monthly) must receive appropriate compensation for additional hours worked.
- Leave Provisions – Employees are entitled to statutory leave benefits, including annual leave, medical leave, maternity and paternity leave, childcare leave, and other applicable leave categories.
Employers must diligently maintain accurate records, including attendance, payroll, and leave documentation, subject to periodic audits by Singapore’s Ministry of Manpower (MOM).
Taxation Obligations For Employers
Whilst Singapore does not operate on a pay-as-you-earn withholding tax system for employment income, employers have several key responsibilities concerning taxation compliance.
- Annual Income Reporting: Employers must submit annual income reports (Form IR8A and related documents) detailing employee remuneration by 1st March each year, via the Inland Revenue Authority of Singapore’s (IRAS) Auto-Inclusion Scheme (AIS).
- Foreign Employee Tax Clearance: Employers must manage tax clearance processes carefully for foreign employees who resign, complete their contracts, or permanently depart from Singapore.
- Cancellation Of Working Visas: Employers must ensure that they advise the MOM when foreign employers end their tenure with them, so that the Employment Pass or S Pass can be cancelled.
Central Provident Fund (CPF) Obligations
The CPF scheme is a mandatory social security savings system designed for retirement, healthcare, and housing support for Singapore citizens and permanent residents. Employers are not required to contribute CPF payments for foreign workers holding employment visas such as an Employment Pass, S Pass or One Pass.
- Employer Contributions – Employers contribute monthly to CPF at rates of up to 17% of the employee’s monthly wages, subject to statutory caps.
- Employee Contributions – Employers must deduct and remit employee contributions (up to 20%) directly from monthly wages to the CPF Board.
- Record-Keeping – Detailed and accurate CPF contribution records must be maintained, and contributions must be remitted promptly to avoid penalties and interest.
Payroll-Related Levies Overview
Singapore employers must be aware of the following key levies which are payable each month:
Skills Development Levy (SDL)
The SDL is a mandatory levy payable by all employers in Singapore. Its main purpose is to finance training and development initiatives for Singapore’s workforce. It is calculated as 0.25% of gross income but capped at S$11.25 per employee per month.
Foreign Worker Levy (FWL)
The FWL is a monthly levy imposed by the Singapore government on employers who hire foreign employees on Work Permits or S Passes. It is designed to regulate foreign labour intake and encourage employers to hire and train local Singaporeans.
Your FWL rate is based on the employee type (EP, PEP, OnePass or S Pass), industry sector, seniority of the employee and the proportion of employees in your business who are foreigners versus locals (Singapore citizens of Singapore permanent residents).
The current rate of the levy is S$650 per month.
Key Takeaways
Payroll compliance is vital for maintaining operational integrity, regulatory compliance and fostering employee confidence. Business employing staff in Singapore must:
- Ensure that all employees have signed an employment agreement which meets the requirements of the Employment Act.
- Maintain payroll accuracy through reliable record-keeping and timely reporting including the provision of monthly payslips which show gross salary, CPF contributions and leave balances.
- Remit all levies and contributions by the due date each month.
- Advise the MOM of any changes to foreign employees including their salary package and termination date.