Looking to expand or incorporate your business in Singapore? Rated as the number 1 competitive country by the World Economic Forum, Singapore is the preferred country for business expansion. 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 relates to Singapore payroll.
Key Areas Unique to Singapore Payroll
Payroll processing is the process companies employ 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 key areas 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. Employers can apply for an exemption if they require employees to work more than 72 hours overtime in a month.
- 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 on 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. Incomplete month 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), 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 expanding 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 Business 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:
- 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:
- Existing Work Permits will be cancelled
- Application and renewal of Work Permits will be disallowed
- 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.
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.
Entrusting Links International with all your Asia Payroll or HR outsourcing services is a smart way to retain your focus on what you do best.
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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.