Singapore Payroll: The Ultimate Guide to Processing, Management & Regulations 2024

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:

  • There is no minimum wage prescribed in Singapore, however, there is a Progressive Wage Model (PWM). The PWM maps out a clear pathway for low-wage workers in the cleaning, security and landscape sectors for their wages to rise.
  • The overtime hours for employees are fixed at 72 hours per month and companies cannot go beyond this prescribed limit unless they apply for an exemption.
  • Employers should pay employees 1.5 times their basic pay within 14 days of the last date of the salary period, for overtime work.
  • Employers should issue itemised payslips to their employees within 7 days after the last day of the month, for a salary period ending that month.
  • Companies are required to maintain detailed records of the employment and salary of foreign and local employees. Records of the latest 2 years should be kept for current employees, while the records of ex-employees need to be kept for one year after the employee leaves.
  • When it comes to incomplete month salary calculation, the salary should be prorated as per the employment contract. An incomplete month’s salary should be calculated as follows:

(Monthly gross rate of pay/ Total number working days in that month) X Total number of days the employee actually worked in that month

  • Companies need to make contributions to the Central Provident Fund (CPF), Foreign Worker Levy (FWL), Skills Development Levy (SDL), and Contributions to Self-Help Groups (SHGs).

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.

Avoid Penalties

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:

  • Late payment interest at 18% per annum or 1.5% per month
  • Fine of up to $5000 and no less than $1,000 per offence and/or up to 6 months imprisonment (For repeat offenders, penalties double)
  • Fine of up to $10,000 and/or up to 7 years imprisonment if employers deduct employee’s share of CPF contributions but fail to pay the contributions to CPF Board.

Penalties for late or non FWL Payments include:

  • The cancellation of existing Work Permits
  • Disallowing the application and renewal of Work Permits
  • 2% late payment penalty per month or $20, whichever is higher
  • Possible legal action from unpaid levy
  • If you, your partners or directors head other companies, these companies may not be allowed to apply for Work Permits

When you outsource to a trusted payroll services provider, you can avoid these penalties and the damage to your company’s reputation.

Employee Experience

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.

Business Expansion

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.

  • The time management system tracks when employees clock in and out of work. From here, the system can automatically pull information such as overtime (OT), lateness, shift allowances, meal allowances, transport allowances etc. into the monthly payroll processing.
  • The leave system is also crucial, since it is linked to other modules and will update the payroll accordingly. For example, if someone is taking unpaid leave, the system will automatically deduct that day’s salary during payroll processing. Another example would be if someone is taking annual leave. Here, if the employee has filed for annual leave, the time management system will capture this and will therefore not show absence, so their salary will not be deducted.
  • The costing module is important for the finance department of a company, as they can use this when they are doing cost forecasts and year-end cost for leave accrual and so on.

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 Regulations in Singapore

1. Am I legally required to pay overtime?

Employers are legally required to pay overtime to employees if they are either:

  1. A non-workman earning up $2,600 SGD
  2. A workman earning up to $4,500 SGD

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:

  • For an absence of work (for monthly-rated employees).
  • For damage or loss of money or goods.
    • Deductions need to be made as a one-time lump sum payment and should not exceed 25% of the employee’s monthly salary.
  • For supplying accommodation that has been accepted by the employee.
  • For supplying amenities and services that has been accepted by the employee AND authorised by the Commissioner for Labour.
    • Salary deductions in Singapore for amenities and services should also not exceed 25% of the employee’s salary for the salary period.
  • For recovering advances, loans, overpaid salary or unearned employment benefits.
    • Salary Advances:
      • Deduction for salary advancements can be deducted in instalments spread over a period of no more than 12 months. Each instalment should not exceed 25% of the employee’s salary for that salary period.
      • Loans:
        • Employers can make deductions for loans in instalments. Each instalment should not exceed 25% of the employee’s salary for the salary period.
      • Overpaid Salary and unearned employment benefits:
        • For overpaid salary and unearned employee benefits, employers are allowed to recover the amount in full.
  • For CPF contributions.
  • For payments to any registered co-operative society, given that there is a written consent from the employee.
  • For other purposes. That if the employee has provided written consent with the option to withdraw consent at any time.

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:

  • Absence from work.
  • Recovery of advances, loans, overpaid salary, or unearned employment benefits.
  • Payments, with the employee’s consent, to registered co-operative societies for subscriptions, entrance fees, loan instalments, interest, and other dues payable.

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:

  • Within 7 days after the end of a salary period.
  • Within 14 days after the end of the salary period for overtime work.

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.  

  • For current employees: Latest two years
  • For ex-employees: Last two years, to be kept for one year after the employee leaves employment

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 outsourcingvisa applicationPEO/EOR Secondmentoutplacementrecruitment and more! Contact us for more information on how we can help leverage your HR function.

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