As an employer, you should be aware of the various payroll-related matters to be compliant with the local regulations. Below are some key things to take note of.
A. WHAT CONSTITUTES SALARY
Salary comprises of a basic pay and allowances given in relation to work done under a contract of service. In Singapore, there is no minimum wage, thus an employee’s salary is subject to the negotiation and agreement between the employer and the employee.
B. STATUTORY CONTRIBUTIONS
Apart from paying the employees’ salaries, the employer would also have to fulfil other statutory payments mentioned below:
- Central Provident Fund (CPF) contribution
- Ethnic fund contribution
- Skills Development Levy (SDL)
- Foreign Worker Levy (FWL)
1) CENTRAL PROVIDENT FUND (CPF) CONTRIBUTION
Register as an employer with CPF
As soon as the company intends to hire the first employee, the company should apply to e-submit its CPF contribution details using CPF e-Submit@web. CPF e-Submit@web is a free web-based application that helps to compute the CPF contributions based on employees’ details that entered. To access the online application here, you will need your SingPass and your company’s Unique Entity Number (UEN).
CPF contributions payable
Employers must make CPF contributions for all employees who are Singaporeans or Singapore Permanent Residents, including part-time staff and students.
CPF contributions are payable for the following wage payments:
- Basic monthly salary
- Annual bonuses
- Cash incentives
- Overtime pay
- NSmen make-up pay
CPF contributions are not payable for the following wage payments:
- Termination benefits
- Gifts in kind
CPF contribution rates
The employer needs to correctly classify the total wages of an employee into Ordinary Wages (OW) and Additional Wages (AW), as there are different ceilings for OW and AW, which will affect the CPF contribution amount.
OW are wages due or granted wholly and exclusively in respect of an employee’s employment in that month and are payable before the due date for payment of CPF contributions for that month, for example, monthly salary.
The OW ceiling is currently capped at $6,000. This means that the CPF contribution would be computed based on an OW of up to $6,000.
AW are wages which are not granted wholly and exclusively for the month or wages made at intervals of more than a month. Examples include annual bonus, leave pay and incentives.
The AW ceiling is capped on an annual basis, equivalent to $102,000 - OW subject to CPF for the year. This means that if the OW is $6,000, then the AW ceiling would be $102,000 - 12 x $6,000 = $30,000.
After determining the OW and the AW, the CPF payable can be computed as per the tables found here.
CPF payment due date
The employer is required to make payment for the employer’s and employee’s share of CPF contribution within 14 days from the end of every month.
2) ETHNIC FUND
Based on the ethnic group that the employee belongs to, an amount is deducted from the employee’s salary to donate to the relevant welfare group. Payment to these welfare groups are made through CPF.
3) SKILLS DEVELOPMENT LEVY (SDL)
Under the SDL Act, employers are required to pay a monthly SDL for all employees rendering services in Singapore, including foreign employees. The SDL payable is at 0.25% of the monthly salary, with a minimum payment of $2 and up to a maximum of $11.25.
4) FOREIGN WORKER LEVY (FWL)
Employers who hire work permit or S-pass holders would have to pay a foreign worker levy for each worker. The levy payable depends on the worker’s qualifications and the dependency ceiling or quota.
C. PAYING EMPLOYEES
The employer has to pay its employees who are covered under the Employment Act* at least once a month, but can choose to pay at a shorter interval if the employer wishes to. Salaries must be paid within 7 days after the end of the salary period and within 14 days after the end of the salary period for overtime work. The employer can choose to pay its employees by cash, cheque or bank transfer.
*All employees are covered by the Employment Act, unless they are one of the following:
- Manager or executive with monthly basic salary of more than $4,500
- Domestic worker
- Statutory board employee or civil servant
D. PAYROLL REPORTING
Itemised payslips as required by Ministry of Manpower (MOM)
From 1 April 2016, MOM has required that all employers issue itemised pay slips to employees covered under the Employment Act. This means that the payslip should include the following items, where applicable:
- Employer’s full name
- Employee’s full name
- Payment date(s)
- Basic monthly salary
- Rate of pay
- Start and end date of salary period
- Allowances paid for salary period
- Deductions made for salary period, such as employee’s CPF contribution
- Overtime hours worked and pay
- Start and end date of overtime payment period, if different from salary period
- Net salary paid in total
The itemised payslips should be given together with the salary payment, or within three working days, either in the form of hardcopy or softcopy. A sample provided by MOM can be found here.
Reporting employees’ income to IRAS
For the year ended 2016 and later, employers with 10 or more employees or who have received the “Notice to File Employment Income of Employees Electronically” are required to participate in the Auto-Inclusion Scheme. Employers who have less than 10 employees may also opt to join the Auto-Inclusion Scheme to file electronically.
Employers who are not under the Auto-Inclusion Scheme would have to provide the following forms to IRAS by 1 March each year.
|Form||To be completed for|
|Form IR8A||All employees|
|Appendix 8A||Employees who have received benefits-in-kind|
|Appendix 8B||Employees who derived gains or profits from Employee Stock Option (ESOP) Plans or other forms of Employee Share Ownership (ESOW) Plans.|
|Form IR8S||For employees who the employer has made excess CPF contributions on the employees' wages and/or have claimed or will claim refund on excess CPF contributions|
E. IN-HOUSE VS OUTSOURCE
Payroll processing and compliance with regulations may become more complicated as a business grows. Companies may have to hire specialised personnel to handle payroll matters or outsource to external service providers, depending on which is more cost-effective. Usually, small to medium companies outsource, while large companies can afford to to hire in-house resources.