Managing payroll in Singapore is not just about calculating salaries and taxes.
In this article we will discuss about the key elements of payroll processing administration in Singapore which covers topics such as registration with the Inland Revenue Authority of Singapore (IRAS), salary, statutory deductions, leave entitlements, payroll cycles, documentation keeping, termination and final pay and reporting.
On the other hand, we will guide you on the managing payroll in Singapore with the tips of using payroll software solution. It allow us to stay up-tp-date on the Singapore regulations and minimize human error
Following the tips in this guide to ensure businesses can be efficient and accurate in managing their payroll.
You will learn about:
When hiring staff in Singapore, employers must first register with the Inland Revenue Authority of Singapore (IRAS) and the Central Provident Fund (CPF) Board. IRAS is responsible for collect taxes while CPF is a compulsory savings scheme for all Singapore citizens and permanent residents.
Employer’s Registration: All corporations using personnel in Singapore should check in with the Inland Revenue Authority of Singapore (IRAS) for tax functions. This may be completed on line through the IRAS internet site.
Employee Registration: Newly employed employees must be registered with each CPF and the CPF Board to make sure they may be eligible for the relevant benefits. This can be done on-line via the CPF website or by travelling a CPF carrier middle.
The salary structure in Singapore comprises three main components: basic salary, allowances, and overtime.
Basic Salary: This is the foundational amount stipulated in the employment contract, guaranteed regardless of other factors.
Allowances: These are additional payments covering expenses like housing, transportation, and medical care.
Overtime: Compensation for work outside regular hours, typically at a rate of 1.5x to 2x the hourly rate.
Statutory deductions are those deductions that employers must legally make from an employee’s salary or wages, as mandated by government laws and regulations.
Income Tax: Income tax gets deducted at source from the employee’s salary and then forwarded to the Inland Revenue Authority of Singapore (IRAS). The amount of tax deducted depends on the employee’s income and their marital status.
Central Provident Fund (CPF): CPF stands as a mandatory savings scheme for all Singaporean citizens and permanent residents. Employers and employees jointly contribute a portion based on their monthly salary to CPF.
Skills Development Levy (SDL): SDL serves as a modest levy used to fund training programs for employees. The levy calculation involves a percentage of the employee’s monthly salary, with the rate differing by industry.
Foreign Worker Levy (FWL): If you hire foreign workers on work permits or S passes, the FWL becomes applicable. The levy is computed as a percentage of the foreign worker’s monthly salary and varies based on the industry and the employee’s skill level.
As stipulated by the Employment Act, all employers in Singapore are mandatory to give leave entitlement to their employees. The leave entitlements in Singapore are as follows:
Annual Leave: Employees are entitled to annual leave, which is typically calculated as 14 days per year of service. However, the Employment Act stipulates a minimum of seven days of annual leave per year.
Sick Leave: Employees are entitled to sick leave, which is typically calculated as 14 days per year of service.
Maternity and Paternity Leave: Eligible female employees are entitled 16 weeks of maternity leaves . Eligible male employees are entitled a 2 weeks paternity leave.
Benefits and Allowances
In addition to the basic salary, employers in Singapore may also offer their employees a variety of additional benefits. Some of the most commonly offered supplementary benefits in Singapore encompass:
Medical and health insurance: This type of insurance extends coverage for medical expenses, including doctor’s appointments, hospitalization, and prescription medications.
Transportation allowances: This monthly allowance serves to assist employees in meeting the expenses of commuting to and from their workplace.
Bonuses or 13th-month payments: These are discretionary payments that are made to employees in addition to their regular salary. Bonuses are often paid based on performance, while 13th-month payments are typically paid once a year, around the Lunar New Year.
Singapore Payroll Cycles
The most common payroll cycle in Singapore is monthly. However, some businesses may adopt bi-weekly or weekly cycles, especially for part-time or hourly-paid employees.
Monthly payroll: This is the most common payroll cycle in Singapore. Paid on the last day of the month.
Bi-weekly payroll: This is a payroll cycle that is paid every two weeks. Paid on the 1st and 15th of the month.
Weekly payroll: This is a payroll cycle that is paid every week. Typically paid on Fridays.
Businesses in Singapore that employ any full-time or part-time workers are obligated to maintain documentation for all payroll records. Payroll records encompass personal employee details, offer letters, monthly payslips, proof of CPF payments, and leave records. It is imperative to retain all these documents for a minimum duration of seven years.
The following are some of the most important payroll records that should be maintained:
Personal details: This includes the employee’s name, NRIC or FIN, date of birth, contact information, and employment start date.
Offer Letter: The contract outlines the terms of service as well as the basic salary, the benefits, job scope and others
Pay slips: Pay slips are issued to employees every pay period and they should show the employee’s earnings, deductions, and net pay.
Tax deductions: The amount of tax that is deducted from an employee’s pay should be recorded.
CPF contributions: Employers and employees are required to contribute to the Central Provident Fund (CPF), which is a compulsory savings scheme for retirement, housing, healthcare, and other expenses.
Leave records: Employers are required to keep records of employees’ leave entitlements and usage.
Termination and Final Pay
A final pay is given to an employee when the employee is terminated, resigned or retrenched. This includes their last drawn salary, the conversion of any unused annual leave, and any other benefits or bonuses that they are entitled to under their employment contract.
The following are the three items that should be included in the final pay:
Last drawn salary: This is the employee’s salary for the last month of their employment.
Conversion of unused annual leave: If the employee has any unused annual leave, this should be converted into cash and paid to them as part of their final pay. The amount of annual leave that can be converted will depend on the employee’s employment contract.
Any other benefits commissions or bonuses as specified in the contract: It should be paid out as part of their final pay.
Compliance and Reporting
Employers in Singapore are required to report to a number of statutory bodies on a regular basis. The following are the two most important statutory reporting requirements:
Monthly or annual income tax deductions to IRAS: Employers are required to deduct income tax from their employees’ salaries and remit it to IRAS on a monthly or annual basis. The frequency of reporting will depend on the employee’s income.
Monthly CPF contributions: Employers and employees are required to contribute to the CPF, which is a compulsory savings scheme for retirement, housing, healthcare, and other expenses. The CPF contributions are made on a monthly basis.
Technology and Software
Payroll is a complex and time-consuming process and the to use a system that can automate the process. There are a number of benefits that payroll software can help employers to lower human mistakes:
There are a number of payroll software solutions available in Singapore, both locally developed and internationally. These payroll software can optimize efficiency by automating tasks such as:
- Calculating salaries and wages
- Deducting taxes and contributions
- Generating payslips
- Submitting reports to statutory bodies
- Managing leave application
- Tracking employee hours
Outsourcing Payroll Singapore
Many companies in Singapore are choosing to outsource their payroll functions to experts. Time and cost savings are achieved when deciding upon this option since it helps process payroll efficiently and compliantly.
Fastlane Group renowned as a preferred payroll outsourced administrator, we combines vast experience with the latest payroll software solutions. With our professionalism, you will have an effortless experience free of hiccups and seamlessly meet all requirements.
Navigating the complex and ever-changing landscape of payroll processing and administration in Singapore can be daunting for businesses, but with a reliable partner like Fastlane Group, they can stay ahead effortlessly. However, by partnering with a trusted partner like Fastlane Group, businesses can navigate this landscape efficiently and confidently. Talk to our expert or schedule a meeting now.