The essential guide to payroll in Singapore

Whether you’re considering setting up payroll operations in Singapore, or you’re joining an established team there, you’ll need to be across the basics of payroll compliance. Here’s what you need to know.

Geographically speaking, Singapore is in one of the best locations on the planet. Its central position has helped it build a stellar reputation as one of the world’s most formidable business regions. Singapore has become one of the world’s busiest business hubs and from a business perspective, it’s seen as a gateway to the rest of Asia.

Many businesses are drawn to Singapore’s tax system and its straight-forward legal and financial systems. And thanks to the sheer amount of opportunity, high quality of life and its proximity to many desirable travel destinations, Singapore attracts a competitive level of talent which in turn leads to many successful business ventures in the region.

Overview of Payroll requirements

Tax

• A Singaporean employer is not under any obligation to withhold taxes from an employee’s salary each month, meaning employees are responsible for paying their own taxes. However, employers must provide the employee remuneration return to employees.
• Personal income tax in Singapore ranges from 0% – 22%, with the highest tax bracket coming into effect for incomes above SGD 320,000. This only applies to Singaporean residents.
• Singapore’s “Not Ordinarily Resident” scheme allows certain individuals tax relief if they do not work the full year in the country. To be eligible, an individual must first meet non-Singapore tax resident requirements for 3 years before becoming a Singapore tax resident. They must also be an employee of a Singapore-incorporated company, earn at least SGD 160,000 and spend more than 90 days of the year outside of Singapore for business purposes.
• Eligible individuals can also enjoy tax relief or even a total exemption through the Area Representative Scheme, which apportions time spent working in Singapore to the amount of tax paid.

Leave

• Paid annual leave is available to employees who have been working at their organisation for a minimum of 3 months.
• The number of days of leave an employee is entitled to per year is commensurate with the amount of service they have given to their organisation. This ranges from 7 days for 1 year of service, up to 14 days for an employee who has worked for the same organisation for 8 or more years.
• An employee may take paid leave if they have been working at their organisation for between 3 and 12 months, however, it will be pro-rated.
• Employees in Singapore are entitled to take paid sick and/or hospitalisation leave after they have worked at their organisation for a minimum of 6 months. If you’re a new employee, paid sick leave is pro-rated according to your length of service. You must have worked for at least 3 months to be entitled to paid outpatient sick leave or paid hospitalisation leave.
• The maximum amount of leave an individual may take in one year is 60 days, which is capped at 14 days of sick leave and 46 days of hospitalisation leave.
• Sick leave includes days where an individual is not hospitalised, yet they must be deemed unfit for work by a registered medical or dental practitioner.
• Hospital leave is to be used by individuals who are admitted to hospital either as an in-patient or day patient. This leave must not be used for cosmetic procedures.
• Employees who have worked at their organisation for between 3 and 6 months are entitled to pro-rated paid sick or hospitalisation leave. Employees who have worked for less than 3 months will not be eligible for paid leave.
• Women are entitled to 16 weeks of government-paid maternity leave provided that they meet the eligibility criteria. Most importantly, this includes having worked at the same organisation for at least 3 months before their child’s birth, both mother and child being Singaporean citizens, and the mother being legally married to the father of their child.
• Two weeks of government-paid paternity leave is available to fathers who have been married to the mother of their child from conception to birth. The child must be a Singaporean citizen and the father must have worked for their employer for at least 3 months before the birth of their child.
• To learn more on leave eligibility, please review the Ministry of Manpower website.

Social Security

• Singapore’s social security scheme is called the Central Provident Fund.
• The Fund is made up of compulsory contributions made by employees, to assist with their housing, healthcare and other expenses upon retirement.
• The Fund is for Singaporeans and permanent residents of Singapore.
• The amount each employee must make to the Fund is dependent upon the individual’s monthly salary.
• Several other social funds also exist to assist communities who are less privileged. These funds include Chinese Development Assistance Council, Mosque Building and Mendaki Fund, Eurasian Community Fund and Singapore Indian Development Association.

Reporting and compliance

• Itemised payslips that include details of salary, allowances, overtime and any deductions made must be provided to the employee. The payslip should also show the salary period and date of payment. Payslips may be produced in hard or soft copy.
• By 1^st March each year, organisations who employ 6 or more workers will need to submit Form IR8A on behalf of their employees to report their remuneration for the previous year.
• Employers in Singapore must keep at least two years’ worth of salary records for each employee. These records must also be kept for up to one year after the employee has left the organisation.

Quirks of payroll in Singapore to take note of

• Singapore is one of just a few countries in the world that does not have a minimum wage requirement.
• An employee may only work up to 72 hours of overtime per month.

Of course, these are just the basics of payroll compliance in Singapore. As with any country’s payroll, there are a lot more complexities you’ll need to be across.

To ensure you’re fully compliant, team up with a seasoned payroll partner like Ascender. We have local experts in Singapore who can guide you through the process and ensure you’re up-to-date with changing legislation. Get in touch to find out more.