Managing employee payroll functions in Singapore is pretty upfront and transparent as compared to other Asian countries. That is why it is highly desirable for multinational companies to develop in Singapore. However, payroll in Singapore involves rulings and particular laws that must be regulated while managing payroll procedures.
Many businesses in Singapore have both residents and non-residents as employees. Based on the employee’s residency status, there are countless facets to look into, including the changing tax regulations and CPF requirements. Running payroll operations in Singapore, therefore, can become complex and time-intensive.
To assist in the good management and governance of payroll operations, Singapore hosts a wide range of third-party payroll service providers that ensures your payroll process runs in continuity. Getting a dedicated payroll service for your business ensures invaluable support and sustenance.
This payroll guide for Singapore will help you understand how payroll management works in Singapore. How payroll operations are conducted in compliance with payroll laws and regulations, and how can third-party payroll services help you out? Let’s find out!
A Quick Look at the Payroll Process in Singapore
The payroll process refers to the process of paying salaries to employees—mostly on a particular date every month.
Although the payroll management process is pretty transparent and simple in Singapore, it needs to be handled properly, as it involves certain rules and regulations. If not managed properly, it can lead to disruptions in business operations and can affect payroll accounting.
Payroll processing in Singapore requires contributions to schemes like the CPF, Foreign Workers Levy, and the Skilled Development Levy. However, until now, there are no specific monthly withholding compulsions for employers in Singapore.
Employers in Singapore usually manage payroll operations considering medical leaves, performance evaluations, statutory claims, end-of-the-year bonuses, etc.
Below is a typical workflow of the payroll process in Singapore:
- Payroll setup
- Data cleaning and collection
- Payroll processing
- Payslip distribution
- Statutory compliance
- Yearly report for income tax filing
- Maintenance of employee payroll data
- End of the year payments like bonuses, incentives, etc.
Minimum Wage
Unlike many developed countries, Singapore’s employment laws impose no minimum wage requirements for workers, whether residents or foreigners. There are a few key points to note here:
- The Employment Act does not regulate the minimum wage requirement, and employers and employees can negotiate the salary on their terms.
- Employees in Singapore are paid based on their competencies, skills, and abilities. This helps companies to retain valuable workers and motivate staff.
- According to the Employment Act, companies must pay salaries to employees once a month—within seven days after the salary period ends.
- Companies must make overtime payments within 14 days of the specified salary period.
- The Employment Act states no requirements for end-of-the-year bonus payments.
How Individual Income Tax Works in Singapore
Any income that is generated from Singapore is taxable. Residents have to pay taxes at rates that start from 0% to 22% on wages above SGD 20,000. Meanwhile, non-resident workers are not eligible for any personal allowances and are subject to income tax rates of flat 22%.
In Singapore, employers cannot withhold taxes for their employees. Therefore, workers are responsible to pay their own taxes directly to IRD (Inland Revenue Department).
However, employers are responsible to prepare annual salary reports on a mandatory basis.
Social Security in Singapore
In Singapore, social security setup looks after three aspects:
- Healthcare
- Retirement
- Social welfare system where CPF (Central Provident Fund) plays a key role.
CPF is a compulsory system of social security benefits. Both employees and employers contribute to the CPF through deductions in their salaries. This is done to formulate funds for their healthcare, housing, and retirement.
As per the law, employers are obliged to remit any mandatory CPF contributions to the CPF board. All Singapore citizens and Singapore permanent residents are required to contribute to the CPF. This scheme allows employees and employers to make contributions according to their salaries and age groups.
Ruling on Pay Slip in Singapore
The Ministry of Manpower (MOM) has announced that all employers must issue a written statement of pay under the 2016 Employment Act in Singapore. This legislation requires employers to provide itemized payslips to their workers either in hard copy or soft copy.
The authorities demand payslips to describe a complete breakdown of an employee’s wage. Meaning the slip which you provide to your employee must include basic salary amount, allowances, deductions, bonuses, date of payment, and net monthly salary.
Why Should You Outsource Your Payroll Processing Operation?
A few decades ago, the payroll process just required issuing a payment to employees. But with the advancement of the business environment in Singapore, accounting tasks such as payroll processing have become more complex.
An in-house payroll processing setup can cost you a lot of time, resources, and well-trained staff. Whereas, outsourcing payroll processing to confided-in payroll service providers can help tidy up the payroll operation. Plus, it would save you a lot of effort and you would be able to give more time to other HR matters.
How Can Payroll Service Providers Assist You?
Typical payroll service in Singapore can assist you with the following tasks:
- Complete payroll management, including salary calculations based on Singapore statutory requirements and company policies.
- On-time delivery of payments to the company’s employees by cheques or online transfers.
- Accurate calculation and submission of CPF report.
- Preparation of comprehensive monthly payroll reports for review and approval.
- Preparation of year-end IR8A forms.
- Issuing e-slips to employees.
Bottom Line
To run payroll operations successfully, businesses need to manage everything with good maintenance, accuracy, and timely disbursement, while keeping local regulations in check.
The payroll processing cannot be done hastily, as inaccuracy can lead to penalties for employers and result in employee dissatisfaction. To avoid possible issues, you may find outsourcing to a payroll management service less hectic and more cost-effective than trying to tackle this activity in-house.
Mi2U Business Support provides payroll services to hundreds of clients across a wide range of businesses. Our payroll specialists are well-equipped and trained to process even the most complicated payroll account. Hire Mi2U Business Support today and sort out your payroll with efficiency.
