If you are an employer seeking to start or expand a business in Singapore or a foreign national looking for a job in this city, you have to get as much information as you can on Singapore payroll laws and regulations. This practice will help you minimize the risks of unintentional oversights that might cost you your business or your law-regulated rights.
There is a lot of ground to cover regarding Singapore payroll regulations, so let’s not waste precious time.
Singapore has done everything in its power to create a safe and efficient place for international companies to do their business in this great city. Currently there are over 7,000 international companies present and doing business in Singapore. The process of business registration is simple and smooth and can be done on the website of Singapore’s Accounting & Corporate Regulatory Authority (ACRA).
In most cases, you won’t need the Government’s approval to start a business as a foreigner. Singapore also allows 100% foreign ownership, unless you are trying to start a bank or any other financial institution. In this case you will have to obtain special licenses and approval, all of which is done under the supervision of the Monetary Authority of Singapore.
You can use any bank account to make payments to your employers and Singapore’s authorities. Your office address is a minimal requirement by law if you plan to register a:
- Incorporated company
- Branch office (In this case there is another requirement. You will have to appoint at least two local agents which will act on your organization’s behalf).
- Representative office
Salary refers to any of the following:
- Basic pay
It doesn’t include expenses for:
- Medical and similar benefits
Payroll in Singapore is regulated by law. The salary is an agreed payment between an employee and the employer. Formally, it is regulated through a contract of service, or employment contract. It may come as a surprise, but you should know that there is no minimum wage law in Singapore. The salary is something that can be negotiated by both parties.
If you are a foreign employee or a company in Singapore looking to hire foreigners, the most important thing is to check the Work Pass (Employment Pass, S Pass and Work Permit). In order to qualify for the job, these individuals have to meet the minimum salary criteria for their Work Passes. This is the only scenario when some kind of minimal wage regulation is applied.
The government of Singapore took interest in cleaning, security and landscape companies and they are required to pay at least a basic monthly wage of $1,000. This is regulated through a mandatory licensing requirement. For instance, the first companies who had the Progressive Wage Model applied were the ones in the cleaning industry sector.
Payment Frequency Regulations
As an employer, you have to pay your workers at least once a month. This payment has to be made within a week from the end of the salary period. This period is a bit longer for overtime work, and in this case you will have a 14 day window to pay your workers for their overtime hours.
However, there are a few exceptions you should be aware of:
- After Dismissal of an employee or the termination of a contract, you have to pay the employee within 3 days from the date of dismissal/termination.
- After the resignation of the employee who has served the notice period, you have to make the payment on the last day of employment.
- After the resignation of the employee who didn’t serve the notice period, you will have to make a payment within 7 days from the last day of his official employment.
Salary and Method of Payment
You are at liberty to pay your employees at the place of work or at any other place, as long as you have established a mutual agreement with your employees. The only must here is to make the payment on a working day and during work hours. Payments can be made into any of the employee’s personal or joint bank accounts.
Itemized Payslips are Required
The following applies to employees covered under the Employment Act (EA). Regulations of payroll in Singapore state that every employer has to give itemized payslips to all hires. Payslips have to be given along with the salary or in the next 3 days following the date of the payment.
Even after the termination of the contract or dismissal, the employer has to provide payslips along with the outstanding salary. The hand slips can be handwritten, printed or in electronic form. They have to include:
- Both the name of the employee and employer
- Accurate date of payment
- Basic salary
- Start and end date of the period the salary has been calculated for
- Allowances, if there are any
- Overtime hours/Overtime pay
- Start and end date of the period during which an employee has worked overtime
- Accurate Net Salary
All employers have to keep record of payslips:
- For current employees, they must be kept for the latest two years.
- After the employee leaves, the employment records for the last two years have to be kept and maintained for another year.
Employers also have to keep records of employees which include:
- Name, Address, Gender and NRIC / Work Pass number (along with expiry date).
- Exact date when employment has started (for ex-employees a date of leaving employment too).
- Work hours, Number and Duration of Breaks.
- Dates of public holidays and when employee took the leave.
Instances for Authorized Salary Deductions
Employers can deduct salary if:
- Employee took absence from work without valid reasons and without notifying the employer.
- Employee is accountable for damage and loss of goods, money or any other company property (This type of deduction is a type of one-time deduction and it may not exceed 25% of the monthly salary).
- Employee ordered meals on special request.
- If employee takes advances, loans and overpaid salary. These deductions can be spread over a 12 month period at maximum, and each of them may not exceed 25% of the monthly salary.
- If a miscalculation happens or any other type of error resulting in overpaid salary, the overpaid amount can be deducted in one go from an employee.
Any cap on deduction regulated by law is not applicable in case of contract termination. In this case, the employer can and is allowed to deduct all outstanding amounts of cash owed by the ex-employee.
Variable Components of Salary
Any incentive schemes, bonuses and annual wage supplement (AWS or thirteenth month salary) are not compulsory, unless specified in the contract. AWS can also be negotiated if the income was below expected.
Failure to Pay Salary is an Offence
EA constitutes a failure to pay a salary as an offence. Any employer who fails to do so will be held liable to pay a fine of $3,000-$15,000 and/or to serve 6 months in prison. If the previous offender makes a subsequent offence, the fine and imprisonment time are doubled.
Work Hours and Overtime
Rest day can be any day, as long as time between two rest days does not exceed 12 days. If the employer requests work to be done during the rest day, the worker will get one day’s salary if he/she works for half of the normal duration of work hours and two day’s salary if he/she works for more than half of the normal workday duration. The earnings are cut in half if such a request is made by an employee.
Employees are not required to work more than 44 hours a week or 6 consecutive hours without a break, if covered under the EA. The break is also regulated and it cannot be shorter than 45 minutes. Overtime cannot exceed 72 hours in one month. You should know that this excludes work hours during rest days and public holidays.
The overtime payable rate for non-workman is capped at $17.70 per hour and is only applicable if non-workmen earn a basic monthly salary of $2,500 or less. The overtime payable rate for workmen is not capped, but such practice can be done only if workmen earn a basic monthly salary of $4,500 or less.