Singapore is a critical gateway into Asia for majority of Multinational companies and is considered one of the easiest places to do business according to the World Bank. In 2019, Singapore was ranked #2 by the World Bank in overall ease of doing business. With a population of over 5 million, Singapore boasts a very large expat population and an overall committed workforce with only 2.2% unemployment as reported in June 2019.
Understanding the key aspects to employment and payroll is key to ensuring a successful operation in Singapore.
The Employment Act, enforced by the MOM or Ministry of Manpower, is the guiding force behind employment practices in Singapore. Effective 2016, all employers must issue key employment terms (KETs) in writing to employees covered by the Employment Act. The KETs include 17 key items including duration of employment, working arrangements, overtime rate, leave…etc.
Employees are not allowed to work more than 12 hours a day, only in very exceptional cases. If an employer requires employees to work more than 12 hours a day (up to a maximum of 14 hours and 72 hours in a month), they must apply for an overtime exemption. Employers must provide 1 rest day a week.
Employees under the Employment Act are eligible for various leave entitlements such as:
- Adoption Leave – Eligible adoptive mothers are entitled to 12 weeks of paid adoption leave.
- Annual Leave – If an employee has worked for an employer at least 3 months they are entitled to annual leave depending on years of service (example: 1 year of service = 7 days of leave).
- Public Holidays – there are 10 public holidays
- Childcare Leave – Eligible working parents of Singapore citizen children are entitled to 6 days of paid childcare leave per year.
- Maternity Leave – Working mothers are entitled to either 16 weeks of Government-Paid Maternity Leave or 12 weeks of maternity leave, depending on whether child is a Singapore citizen and other criteria.
- Paternity Leave – Effective 1 January 2017, eligible working fathers, including those who are self-employed, are entitled to 2 weeks of paid paternity leave funded by the Government.
- Shared Parental Leave – Working fathers can apply to share up to 4 weeks of their wife’s 16 weeks of Government-Paid Maternity Leave.
- Sick Leave – Eligible employees are entitled to paid outpatient sick leave and paid hospitalization leave if they have worked for at least 3 months with the same employer.
Payment of Salary:
Salaries must be paid at least once a month and be paid out within 7 days of the end of the salary period. Effective 2016, employers must issue itemized pay slips to all employees.
Singapore to does not have an official mandatory minimum wage with the exception for Cleaner Jobs and Security Guards.
In regards to final salary payments in the case of termination or resignation different requirements apply on the timing of final payment. For example, if an employee resigns with notice period they need to be paid on the last day of employment.
Central Provident Fund (CPF)
The main payroll deduction from Employee Gross Pay is CPF (Central Provident Fund) contributions. The Central Provident Fund (CPF) is a mandatory social security savings scheme funded by contributions from employers and employees and serves as the key pillar of Singapore’s Social security system.
The employer contributes to CPF on behalf of the employee. These contributions go into 3 accounts:
- Ordinary Account – for retirement and housing needs
- Special Account – for retirement needs
- MediSave Account – for healthcare needs
Withdrawal from CPF can begin at age 55 and payout eligibility begins at age 65.
Income tax is not deducted through payroll. Instead it is paid by Employees independently at year end. Income tax rates depend on an individual’s tax residency status (Singapore Citizen, Singapore Permanent Resident, non-Resident). The rates range from 0% to 22% for high income earners.
Skills Development Levy (SDL)
The Skills Development Levy (SDL) is a mandatory levy that employers have to pay for all employees. The SDL collected are channeled to the Skills Development Fund (SDF), which is used to support workforce upgrading programs and to provide training grants to employees when employees need to be sent to training under the National Continuing Education Training system.