Hiring and Paying Remote Workers by using PEO/EOR services in Singapore

Expanding your talent pool internationally can give your business a significant advantage – and its comes with the rise of hiring remote workers. Recruiting talent either as employees or contractors unlocks access to skilled professionals across the globe. Singapore, boasting a robust economy and a highly qualified workforce, is a prime location for hiring in the Asia-Pacific region.

To hire remote workers in Singapore, it’s vital to understand the local employment laws and tax regulations. Additionally, you’ll need to establish an efficient payroll system to ensure timely and accurate payments in Singaporean dollars. However, navigating global recruitment can be smooth sailing with the right guidance.

This guide provides practical advice to help you manage the intricacies of hiring and paying employees in Singapore.

How Can Businesses Pay Workers in Singapore?

Businesses worldwide have several options for paying workers in Singapore: establishing a legal entity in the country, partnering with a global employment organisation, or engaging Singaporean workers as contractors.

Setting Up a Legal Entity in Singapore

Establishing a legal entity in Singapore is a relatively straightforward process. You’ll need to contact the Accounting and Corporate Regulatory Authority (ACRA) responsible for company registration. Be aware that ACRA imposes specific compliance standards that must be met before you can begin hiring remote workers in Singapore.

Working with an Employer of Record Partner

If establishing a local entity in Singapore seems like a time-consuming or expensive endeavour, partnering with an employer of record provider can be a wise alternative. PEO / EOR service providers can help bypass certain barriers of entry, including the need to set up a business entity and provide additional benefits such as managing employee payroll.

Engaging Singaporean Workers as Contractors

Classifying and paying Singaporean workers as contractors can be a more streamlined process compared to employing them directly. This eliminates your responsibility for social security contributions, employee benefits, and tax withholding. Simply pay them in Singaporean dollars (SGD or S$) for the hours worked based on their invoice. However, be aware of the legal ramifications of misclassifying employees as contractors to avoid these obligations. Doing so can result in significant legal trouble and other serious repercussions.

Currency Considerations for Worker Payments

Singapore’s official currency is the Singapore dollar (SGD or S$). Businesses operating outside of Singapore typically use digital wallets to send these payments. Many of these digital wallets conveniently offer automatic currency conversion for a smooth and efficient transaction process.

Understanding Singapore’s Tax System for Remote Workers

Singapore boasts a competitive tax system for both businesses and individuals. It operates on a territorial basis, meaning only income generated in Singapore is taxed. This can be a significant advantage for remote workers in Singapore.

For employees classified as employees, the Inland Revenue Authority of Singapore (IRAS) determines their tax obligations. Employers typically don’t withhold income tax, making the employee responsible for filing their own tax return.

Singapore’s Personal Income Tax Brackets for 2023:

  • 0% on the first S$20,000
  • 2% on the next S$10,000
  • 3.5% on the next S$10,000
  • 7% on the next S$40,000
  • 11.5% on the next S$40,000
  • 15% on the next S$40,000
  • 18% on the next S$40,000
  • 19% on the next S$40,000
  • 19.5% on the next S$40,000
  • 20% on the next S$40,000
  • 22% on any amount exceeding S$320,000

(Source: IRAS)

Taxable Components of a Worker’s Salary in Singapore

When determining the taxable income for a worker in Singapore, several components must be considered:

  • Base Salary: The core component of an employee’s compensation.
  • Bonuses: Performance-based or annual bonuses.
  • Allowances: Housing, transportation, and other stipends provided by the employer.
  • Benefits in Kind: Non-cash benefits like company cars, accommodation, and other perks.
  • Stock Options: Gains from exercising stock options can be taxable.
  • Overseas Income: Only if the income is received in or remitted to Singapore.

Per Diem Payments and Taxes

Per diem allowances for living expenses during business trips are also considered taxable income in Singapore.

Additional Considerations for Hiring Remote Workers in Singapore

While understanding tax implications is crucial, there are other essential aspects to consider when hiring remote workers in Singapore:

Allowances vs. Reimbursements

Singapore distinguishes between allowances and reimbursements. Per diem allowances provided upfront for business trips are a fixed amount based on standard rates and are taxable. Conversely, per diem reimbursements issued after a trip based on actual expenses are generally not taxable. Understanding this distinction is vital for accurate tax calculations for workers with travel requirements.

Payroll Deductions

Employers in Singapore are required to make various payroll deductions, including contributions to the Central Provident Fund (CPF), a mandatory pension scheme, and universal health coverage. It’s important to track employee activities and payments to ensure accurate deductions.

Minimum Wage and Progressive Wage Model (PWM)

Singapore doesn’t have a mandated minimum wage. However, the PWM incentivizes wage increases based on skill development and performance. Consider the PWM framework when determining salary structures for your workers in Singapore.

Overtime Pay

Overtime pay in Singapore is calculated by multiplying the number of overtime hours by the hourly basic pay rate and then by 1.5 (time and a half).

Local Labour Laws: The Employment Act

The Employment Act is the cornerstone of Singapore’s labour laws. It outlines employee rights, work roles, and employer obligations. Familiarizing yourself with this act will ensure you’re compliant with local regulations.

Understanding the Employment Act for Worker Compliance

The Employment Act (EA) in Singapore plays a crucial role in ensuring fair treatment for employees. Here’s a breakdown of its key aspects relevant to hiring workers:

Who is Covered by the Employment Act?

The EA applies to most employees in Singapore regardless of their employment type:

  • Temporary workers
  • Contract workers
  • Part-time workers
  • Full-time workers

However, it’s important to note that the EA excludes domestic workers, civil servants, and seafarers. Their employment terms are governed by their specific contracts.

Work Roles and Exemptions

The EA clearly defines work roles. Managers and executives with significant leadership and supervisory responsibilities, such as devising strategies and making key decisions, are exempt from the Act’s provisions regarding working hours, rest days, and specific leave entitlements. This exemption also extends to highly qualified professionals like lawyers, accountants, dentists, and doctors.

The EA classifies “workmen” as those who primarily perform manual labour even with some supervisory duties. This category also includes individuals operating commercial vehicles. Here are some specific examples of workmen covered by the EA:

  • Artisans
  • Cleaners
  • Laborers
  • Apprentices
  • Train, bus, and van drivers
  • Train and bus inspectors
  • Construction workers
  • Metal and machinery workers
  • Machine operators and assemblers

Employee Rights under the Employment Act

The EA guarantees various rights for covered employees, including:

  • Meal breaks
  • Overtime pays (calculated at 1.5 times the basic hourly rate)
  • Rest days (typically Sundays or alternative agreed-upon days)
  • Paid sick leave
  • Annual leave
  • Public holiday entitlements

Employer Obligations under the Employment Act

Employers must comply with the following:

  • Providing Key Employment Terms (KETs) to employees in writing. KETs outline essential employment details like salary, working hours, and leave entitlements.
  • Maintaining accurate records of employee working hours and attendance.
  • Paying employees accurately and on time.
  • Informing employees about their paid leave and holiday allowances.
  • Issuing itemized payslips to employees.
  • Meeting Central Provident Fund (CPF) contribution requirements. CPF is a mandatory pension scheme in Singapore.

The Singapore government conducts regular inspections (physical and digital) to ensure businesses comply with the Employment Act002E

Paying Workers in Singapore: Contractors vs. Employees

Paying Contractors

Hiring contractors in Singapore offers flexibility and simplifies the payment process. Here’s a breakdown:

  • No Regular Wages or Benefits: Unlike employees, contractors don’t require regular salary or benefits packages.
  • Payment Upon Invoice: Once they submit an invoice for completed work over a specific period, you can pay them.
  • Beware of Misclassification: Ensure proper classification to avoid legal repercussions and back payments for benefits or wages.

Payment Methods for Contractors:

  • Wire Transfer: Fast but expensive due to high fees.
  • Check: Secure but slow delivery.
  • Money Order: Trackable but limited by low maximum amounts.
  • Digital Payment: Convenient but susceptible to security breaches and technical issues.
  • Bank Transfer: Secure option but may incur high exchange rates.

Transitioning Contractors to Employees:

If your needs change, consider partnering with a global employment organisation (GEO) like Links to streamline the conversion process.

Paying Employees

There are two primary options for paying employees in Singapore:

  • Setting Up a Local Entity: This method grants full control over the employment process, but it requires adhering to local labour laws and regulations. Additionally, there’s a risk of your company being considered a permanent establishment, leading to potential tax liabilities.
  • Partnering with an Employer of Record (EOR): An employer of record like Links acts as the legal employer, handling payroll taxes and employee benefits. This option simplifies compliance and minimizes permanent establishment risks.

By understanding the legalities, tax implications, and various payment methods, you’re well-equipped to begin building your team in Singapore. This highly skilled talent pool can give your business a significant edge.

Ready to take the next step? Get a Quote & Hire Top Talent in Singapore Within 48 Hours! Links’ PEO / EOR services streamline your hiring and ensures compliance. When you’re prepared to tap into Singapore’s exceptional workforce, Links can help. We simplify the complexities of hiring in Singapore. As your Employer of Record (EOR), we handle payroll, immigration and taxes, allowing you to focus on finding the perfect talent and growing your business.

Why Clients Choose to Work with Links?

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Contact Links today to discuss your hiring needs and unlock the potential of a global workforce!

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