Guide to Hiring in Singapore

Labour Law – Basics

What are the basic requirements for employers in Singapore?

What to note for existing employees?

• Benefits in Kind –
  • All gains and profits derived by an employee due to his employment are taxable. Benefits are “gains and profits” and are taxable unless exempted or given an administrative concession.

• Share Options –
  • Gains and profits arising from Employee Share Options (ESOP) and other forms of Employee Share Ownership (ESOW) are subject to tax.

• • • • Employee Share Option (ESOP) plans give employees the right to purchase shares in the company at a specific predetermined price within a time frame. An employee who is granted share options by an employer will be taxed on any gains or profits arising from the exercise of the share option.
      • Other Forms of Employee Share Ownership (ESOW) plans allow an employee of a company to own or purchase shares in the company or in its parent company. They include share awards and other similar forms of employee share purchase plans (excluding phantom shares and share appreciation rights). An employee who is granted ESOW by the employer is subject to tax on any gains or profits when the ESOW plan vests on the employee.

What to remember when hiring new employees?

• Save and load your employees’ details, as well as easily amend them for your monthly CPF submissions via CPF EZPay.
• For non-residents, employers are responsible to apply for the Employment Pass. See here for more information on the Employment Pass.

What are the different discrimination laws in Singapore?

The Ministry of Manpower will take legal and punitive measures towards workplace discrimination. MOM refers to the TAFEP in the promotion of fair and responsible workplace practices.

What are the working hours in Singapore?

For common work arrangements, the normal contractual hours of work are as follows:

• • Up to 8 hours a day of 44 hours a week, if employees are required to work more than 5 days a week.
  • Up to 9 hours a day or 44 hours a week, if employees are required to work 5 days of less a week.

What is the legal probation period in Singapore?

No provision in Singapore specifies a probation period, however, standard practice is to have a 3-6 month probation period.

What are the minimum wage requirements in Singapore? How do salaries work in Singapore?

• Singapore does not have a minimum wage. Employee salary is subject to negotiation and agreement between employer and employee or trade union. Whether wages should increase or decrease is best determined by market demand.
  • Salary refers to remuneration, including allowance, paid for work done under a contract of service.

• Employees must be paid at least once a month and within 7 calendar days after the end of the salary period. There are exceptions for overtime, resignation without notice and other situations. Employers should pay employees based on their qualifications, skills, and competencies. However, Singapore adopts the Progressive Wage Model (PWM), which prescribes minimum wages for certain sectors.

• For overtime work, employees must be paid within 14 calendar days after the end of the salary period.
  • Overtime work is classified by all work in excess of the normal hours of work (excluding breaks). You can claim overtime if you are:
    • A non-workman earning up to S$2,600.
    • A workman earning up to S$4,500.
  • Overtime pay = Hourly basic rate of pay x 1.5 x number of hours worked overtime
  • As an employee, you are not allowed to work more than 12 hours a day.
  • If an employer requires employees to work more than 12 hours a day must apply for an overtime exemption.
  • An employee can only work up to 72 overtime hours in a month.
  • Work on rest day or public holidays is not counted in the 72-hour overtime limit.
  • Payment must be made within 14 calendar days after the last day of the salary period.

• The final salary payment could vary depending on several factors:

• No unauthorized deductions shall be made by employer from employee’s salary with exception on below:
  • By court order, or other valid authority
  • If your employer is declared an agent for the recovery of income tax, property tax or goods and services tax (GST) payable by you.

• Employer can deduct salary only for the following reasons:
  • Absence from work
  • Damage or loss of money or goods
  • Supplying of accommodation or amenities or services
  • Recovery of advances
  • Loans or overpaid salary
  • CPF contribution
    • The Central Provident Fund (CPF) is a comprehensive social security system that enables working Singapore Citizens and Permanent Residents to set aside funds for retirement, home ownership, healthcare, family protection and asset enhancement according to the below accounts:

• • Payment to any registered co-operative society
  • Any deduction with written consent

• Employer cannot deduct more than 50% of your total salary payable in any one salary period with exceptions to absence from work, recovery of advances, loans, overpaid salary, or payments with your consent, registered co-operative societies for subscriptions, entrance fees, loan instalments, interest and other dues payable.
• When the contract of service is terminated, the total authorized deduction may exceed 50% of employee’s final salary payment.
• Employer can only reduce foreign worker salaries, or increase or make new deductions to salaries, if:
  • They get employee written consent.
  • They inform MOM of the change in employee’s salary using WP Online (for Work Permit holders) or submit the request to MOM through EP online one month before the salary is reduced (for EP or S Pass holders).

Termination of Employment – Tax, Severance Payment & Long Service Payment

• Both employer and employee have the power to terminate a contract of service. The termination can take place due to:
  • Employee resignation
  • Employer dismissal
  • Contract expiration (such as when a project or contract period has been completed)
  • Both parties must follow the terms and conditions for termination as stated in the contract of service.

• Tax:
  • When a non-Singapore Citizen employee ceases employment in Singapore or plans to leave Singapore for more than three months, the employer is responsible to ensure that he/she pays all taxes. Applies to all work pass holders including Personalised Employment Pass (PEP) holders.
  • Filed IR21 at least one month before the employee ceases employment in Singapore and withhold any monies due to the employee at this time.
  • There will be a Late Filing Fee penalty if the employer files Form IR21 late or fail to file. The employer may even be summoned to Court.
  • Once IR21 has been processed, a tax bill will be sent to the employee. He/she will need to pay the difference if the amount withheld by the employer is insufficient to pay his/her taxes.
  • Please obtain a Letter of Undertaking (LOU)from the employee stating that he will not leave Singapore permanently. With the LOU, you are not required to file the Form IR21 for the employee.

• Severance Payment & Long Service Payment:
  • Employees who serve the company for at least 2 years are eligible for retrenchment benefits. Those with less than 2 years’ service could be granted an ex-gratia payment out of goodwill.
  • The amount of retrenchment benefit will depend on the employment contract or collective agreement (for unionised companies). If there is no provision, it will have to be negotiated between the employees (or their union) and the employer.
  • The prevailing norm in Singapore is to pay a retrenchment benefit of between 2 weeks to 1 month salary per year of service, depending on the company’s financials.
  • If the retrenchment comes shortly after a salary cut, the salary before the cut should be used to determine the amount of compensation.
  • Both employee and employer don’t have to pay CPF contributions for retrenchment benefits.

What is the retirement age in Singapore?

In Singapore, the Retirement and Re-employment Act (RRA) states that the minimum retirement age is 63 years old. However, as of 1 July 2022, employers must offer re-employment to eligible employees who have turned 63 to continue their employment until they turn 68. The re-employment age was increased from 67 to 68 as of 1 July 2022.

Employment dispute channels

Tripartite Alliance for Dispute Management (TADM)

Is employment insurance compulsory in Singapore?

• Work injury compensation insurance for manual workers is required regardless of salary and non-manual workers earning SG$2,100 or less a month.
• Medical insurance is not compulsory for Employment Pass (EP) holders. However, it is compulsory for Work Permit and S Pass holders.