Singapore Employment Act mandates that as an employer in Singapore, you must pay the salary of your employees a minimum once a month and within 7 days once the salary period ends based on the terms and conditions of the employment contract.
Payroll management can be tricky and complex however there are professional, experienced and reliable payroll services in Singapore that can effectively address all your issues related to payroll management including CPF contributions, leave claims, taxes, employee benefits etc. and ensure regulatory compliance of timely salary payments to your employees.
How is salary defined?
Remuneration is commonly known as salary that is paid for work performed as per employment contract and includes allowances except provident fund contribution paid by the employer, travelling allowances, on the job expenses, retirement benefits etc.
What should be the frequency of disbursement of salary?
The Employment Act defines that employers pay the salary every month as a minimum.
For regular work, the salary must be paid within 7 days after the end of the salary period and for overtime, the date of salary payment may be extended up to 14 days maximum.
How can the salary be paid?
Payslips for individual employees must be generated before paying the salary and can be paid on working days at the place of work or any other place mutually agreed between the employer and the employee. Salary can be directly deposited in bank accounts.
What items are mandatory in a payslip?
Every payslip must have a mention of the following items
- Full name of employer.
- Basic salary.
- Date of payment or dates if payment is made more than once.
- Allowances paid for salary period, such as all fixed allowances, e.g. transport. All ad-hoc allowances, e.g. one-off uniform allowance.
- Start and end date of the salary period.
- Total overtime hours worked and payments made.
- Full name of the employee.
- The basic rate of pay.
- Total number of hours or days worked or pieces produced.
- Any other additional payment for each salary period, such as Bonuses, Rest day pay, Public holiday pay.
- Overtime payment dates.
- Net salary paid in total
- Deductions made for each salary period including the mandatory deductions e.g. provident fund contribution and any other deductions e.g. leave of absence.
How long the records of payslips must be retained?
All the payslip records must be retained and maintained for at least two years for all current employees and either in hard or soft forms. Two years’ ex-employee payslips must be retained for a year after the employee leaves the organisation.
What are the mandatory payroll contributions in Singapore?
The Singapore Employment Act stipulates some mandatory contributions to be made by the employers to the employees and are
1. Central Provident Fund (CPF)
In Singapore, both employers and employees must make mandatory contributions in a social security savings scheme known as CPF.
An employer must make CPF contributions at the monthly rates specified in the CPF Act and recover individual employee’s share of the contribution by deducting the same from their salaries.
CPF contributions must be made at the end of every month and failing to pay by the 14th of the next month may attract penalties including late payment interest charges and in cases hefty fines up to SGD 5,000 and even imprisonment or both.
The CPF contribution rate applicable for your employee is determined by the nature of citizenship like Singapore Citizen or Singapore Permanent Resident (SPR) and its status, salary band and total monthly wages. The allocation rates differ from contribution rates and depend on age group and employee type.
CPF contributions are compulsory for the following payments
- Basic salary per month
- Incentives, Allowances and Commissions
- Bonuses paid annually
- NSmen make-up pay
- Payments for overtime
CPF contributions are not payable for gifts and reimbursements.
There are different caps applicable for Ordinary Wage and Additional Wages and CPF contribution is calculated accordingly. The maximum contribution for ordinary wages is calculated at SGD 6,000 at present.
The maximum of additional wage’s contribution towards CPF contribution equals to ordinary wage contribution of SGD 72000 minus SGD 102,000 annually.
Details of CPF contribution and allocation rates applicable for employers can be obtained from this link.
2. Ethnic Fund
An ethnic fund contribution must be made by the employer based on the ethnicity of the employee every month and deposited to the respective welfare funds along with the employee’s contribution.
3. Skill Development Levy
Irrespective of being a full-time, part-time, casual, or foreign employee, employers need to make mandatory contributions towards a skill development levy and its calculation varies depending on the salary of the employee. The first SGD 4,500 of monthly salary attracts a 0.25% levy with SGD 2 as a minimum.
4. Foreign Workers Levy
Employers are required to pay levies if they hire
Employing foreign workers with work permits or S passes attract foreign workers levy based on the qualifications of employees and the sector-specific business activities of the employers.
What deductions are not allowed in the foreign workers’ salary?
Singapore Employment of Foreign Manpower Act stipulates that expenses incurred on foreign employees for the following reasons are not deductible from the salary of foreign workers
- Recruiting costs
- Medical expenses
- Medical insurance premiums paid
- Work pass renewal costs
- Costs of repatriation
- Payment made towards levies
- Security bond payment
- Mandatory training expenses
What salary payments are not compulsory in Singapore?
The salary payment of the 13th month Annual Wage Supplement (AWS), bonuses and variable pay is not compulsory unless specifically mentioned either in the employment contract or the collective agreement reached with the employee union.
Is outsourcing Payroll Services beneficial in Singapore?
Payroll management is a non-core business activity and involves many complexities and hidden costs in Singapore. There are multiple benefits of outsourcing payroll services in Singapore as it offers huge savings on cost, time and valuable resources and ensures real-time payroll management, payroll reporting, tax support and regulatory compliance.
