Whether you own a multi-national company, or a small business, setting up your business in Singapore will ensure you have the perfect launchpad for venturing into other Asian economies. Singapore is known for its attractive tax system, ease of doing business, and comprehensive intellectual property protection.
One of the key factors you need to be well-versed in before you get started on your venture is Singapore payroll.
How to Manage Payroll in Singapore
Payroll processing is the process companies undertake to pay their employees each month on a set date. In Singapore, payroll processing involves a specific set of rules and regulations that you need to be mindful of.
Here are some key facts that are unique to Singapore payroll:
(Monthly gross rate of pay/ Total number working days in that month) X Total number of days the employee actually worked in that month
Successful payroll management is all about timely disbursement, accurate processing, regulatory compliance, and good maintenance. When you are entering Singapore for the first time or expand your business, Singapore payroll management can be complex and challenging. There are many reasons why outsourcing your Singapore payroll is the best way to ensure the process is hassle-free and devoid of costly errors.
Why the Best-in-Class Businesses Are Choosing to Use Singapore Payroll Services
An increasing number of businesses in Singapore are choosing to outsource their payroll to avoid complications and ensure compliance. Here are the 4 main reasons to use Singapore payroll services:
Avoid Costly Human Errors
The human element in payroll processing can lead to improper calculation methods and expensive mistakes. If your new team is not aware of how to calculate payroll in Singapore, the errors or delays can have serious consequences. For instance, in 2020, errors were found in salary records of 3,000 civil servants, that impacted their benefits including medical wages. One of the errors involved the use of the wrong formula to calculate medical leave wages for workers on service injury leave. Due to these computing errors, the total compensation the Civil Service paid to workers amounted to $10 million.
These errors can be avoided with experienced payroll processing companies that have the right specialists in their team who are well versed with Singapore payroll management. With their sole focus being on payroll processing, a top-rated HR and payroll company leverages cutting-edge technology to eliminate expensive mistakes.
Employers need to ensure they make CPF and FWL contributions. Failure to make or late payments are subject to penalties that can cost your business dearly. Penalties for late or non-CPF Payments include:
Penalties for late or non FWL Payments include:
When you outsource to a trusted payroll services provider, you can avoid these penalties and the damage to your company’s reputation.
Keeping your workforce engaged and motivated is vital for enhancing productivity and efficiency. One of the ways to achieve this is with efficient payroll management that enables you to pay employees and make CPF contributions on time. Payroll specialists have the necessary expertise to compute your payroll on time so that there are no hassles of delayed payments.
When your goal is to expand your business into Singapore or Asia, relying on the local expertise for end-to-end payroll services pays rich dividends. As your headcount increases and the business operations become more complex, managing the payroll also becomes more challenging. There is also a wide range of regulatory, tax and labour related regulations that your business needs to comply with. Overseas companies looking to expand into Singapore can test the waters by engaging in efficient and flexible PEO services.
As your Singapore business grows, payroll can require more time, effort and manpower to handle. This can take away your focus on your core business, impacting your efficiency and the bottom line.
How to Process Payroll in Singapore
Identifying a system and selecting relevant modules
The first step of arranging payroll solution is to identify a good, reliable system that can process the payroll. This is particularly important given the confidentiality of payroll figures.
Different modules are applicable for different industries. For example, in the manufacturing industry, employees have different work shifts and different shift patterns. Therefore, we recommend the company to choose all modules, i.e. time management, payroll, costing and leave.
Configuring the modules
One thing to remember is that, before all these modules kick into automation mode, it is very important to make sure that they are correctly configured.
Firstly, employers must identify their employees’ residence status before starting the payroll processing. In order for foreigners to work in Singapore, they must have a valid work pass. As specialists in visa processing in Singapore, Links is able to apply for work passes on behalf of the company and its employees.
For employees who are Singapore citizens or permanent residents (PRs), employers will need to contribute their CPF to the CPF Board each month and at the same time they can submit the other funds to the CPF Board as well.
When processing payroll, the employer will also need to identify if their employee’s allowance or payment is taxable or non-taxable, as this will determine the tax figure that is submitted at the end of the year. Common allowances include OT, leave encashment, housing allowance, meal allowance, shift allowance, long-service award, expenses reimbursements and so on.
After the total figures have been calculated, most companies in Singapore will pay their employees’ salaries via bank transfer and thereafter issue an itemised pay slip once the payroll has been cleared.
There are, of course, sometimes ad hoc payments during the month as well, such as foreigner tax clearance, reservist submission, maternity/paternity/childcare submission, and so on.
Foreigner tax clearance is applicable when foreigners or permanent residents leave to go back to their own country permanently. As an employer, you will need to withhold their salary until the tax is cleared by the IRAS.
After the end of the calendar year, income tax will need to be filed to the IRAS, including the monthly income paid through payroll, as well as any other benefits in kind received indirectly from the company. The deadline for submission is by 1 March each year.
Outsourcing your payroll saves time and helps you focus
Having read all this, it goes without saying that processing payroll isn’t as easy as many may think! With Links International’s HR payroll service, we can help you to handle all of the above through our complete HR solutions, so that you can focus on strategic activities that will help your business to grow.
FAQ About Payroll in Singapore
1. Am I legally required to pay overtime?
Employers are legally required to pay overtime to employees if they are either:
Overtime payments need to be made within 14 days after the last day of the salary period. The pay for overtime work in Singapore must be at least 1.5 times the hourly rate of the employer’s pay.
2. What am I allowed to deduct from an employee’s salary (e.g., CPF)?
Salary deduction in Singapore is only allowed under the following reasons:
An employer cannot make a salary deduction that exceeds 50% of the employee’s total salary payable in any one salary period aside from deductions made for:
However, employers are authorised to make salary deductions exceeding 50% of the employee’s final salary payment once the contract of service is terminated.
3. How often should I pay employees?
Employees covered by the Employment Act must be paid a salary at least once a month. It is also possible to pay in shorter intervals if you so choose.
Salaries must be paid:
4. What kind of records does the government require employers to keep?
As of 1 April 2016, all employers are required to keep detailed employment records of employees covered by the Employment Act as well as salary records.
Records can be in soft or hard copy, including handwritten ones.
5. Do employers have to give employees payslips?(What information is required on them)?
All employers are required by the Employment Act to issue itemised payslips to their employees. Payslips can be in either soft or hard copy (including handwritten ones).
Payslips in Singapore are issued together with the payment to employees. If employers are unable to provide them together, they need to be given within three working days of payment. In the case of termination or dismissal, employers must give the payslip together with any outstanding salary.
Employers may choose to consolidate payslips if payments are made more than once a month. Consolidated payslips must contain details of all payments made since the last issued payslip
Need help with processing payroll? Contact us today and our team of payroll experts with over 20 years of experience will be happy to assist you!
Links International is an industry leader in innovative HR outsourcing with services such as payroll outsourcing, visa application, PEO/EOR Secondment, outplacement, recruitment and more! Contact us for more information on how we can help leverage your HR function.