Regulations of payroll in Singapore are relatively transparent compared to their neighboring countries. However, managing payroll can be difficult especially for small to mid-size companies that do the payroll in-house with limited manpower.
Below are some of the regulations of payroll in Singapore that business owners should know.
The Employment Act states a maximum working time of eight hours a day, 44 hours a week, and no more than six consecutive hours without a break. Employees cannot work more than 12 hours a day, inclusive of overtime.
Employers require to pay overtime to employees if they are either:
- A non-workman earning up to SGD 2,600
- A workman earning up to SGD 4,500
For overtime payment, employers must pay within 14 days after the last day of the salary period. Overtime payment is at 150% of the usual hourly rate. Employees must not work more than 72 hours of overtime in a month. However, for employees earning more than SGD 2,000 per month, these overtime rules do not apply. Employer and employee can make an agreement on overtime rates.
Singapore law only allows salary deductions for the following reasons:
- For an absence of work (for monthly-rated employees).
- For damage or loss of money or goods.
- Deductions need to be made as a one-time lump sum payment and should not exceed 25% of the monthly salary.
- For supplying accommodation that has been accepted by the employee.
- For supplying amenities and services that have been accepted by the employee and authorized by the Commissioner for Labor.
- Salary deductions in Singapore for amenities and services should also not exceed 25% of the monthly salary.
- For recovering advances, loans, overpaid salary, or unearned employment benefits.
- Salary Advances:
- Deduction for salary advancements can be deducted in installments spread over a period of no more than 12 months. Each installment should not exceed 25% of the monthly salary.
- Employers can make deductions for loans in installments. Each installment should not exceed 25% of the monthly salary.
- Overpaid Salary and unearned employment benefits:
- Overpaid salary and unearned employee benefits, employers can recover the amount in full.
- CPF contributions.
- For payments to any registered co-operative society, given that there is written consent from the employee.
- For other purposes. This is only if the employee has provided written consent with the option to withdraw consent at any time.
An employer cannot make a salary deduction that exceeds 50% of the employee’s total salary payable in any one salary period aside from deductions made for:
- Absence from work.
- Recovery of advances, loans, overpaid salary, or unearned employment benefits.
- Payments, with your consent, to registered co-operative societies for subscriptions, entrance fees, loan installments, interest, and other dues payable.
However, employers have the authority to make salary deductions exceeding 50% of the employee’s final salary payment once the contract of service is terminated.
The Tax Year runs from 1st January to 31st December.
In Singapore, there is no income tax withholding at source via payroll throughout the tax year. It is the employee’s responsibility to file their annual tax declaration and pay directly to the Inland Revenue Department (IRD).
All employers are required by law [S68(2) of the Income Tax Act] to prepare Form IR8A and Appendix 8A, Appendix 8B or Form IR8S (where applicable) for all employees who are employed in Singapore by 1 March each year. Employers who have 7 or more employees for the entire year ending 31 December, or who have received the “Notice to File Employment Income of Employees Electronically” must submit their employees’ income information to IRAS electronically by 1 March.
Even though there is no income tax withholding at source, companies must withhold salary and seek tax clearance by filing Form IR21 for at least one month for its foreign employees under the following circumstances:
- Ceases to work in Singapore;
- On overseas posting;
- They leave Singapore for any period exceeding three months
The company may be liable to a fine up to SGD 1,000 if it fails to provide the one month notice with valid reason(s).
An employee will be taxed on all incomes (base salary, commission, bonus, etc.) earned in Singapore and subject to the deduction of tax reliefs. The personal income tax rate is progressive and the highest marginal tax rate is 22%.
Employees covered by the Employment Act must receive a salary at least once a month. It is also possible to pay in shorter intervals if you so choose.
Salary payment must be:
- Within 7 days after the end of a salary period
- Within 14 days after the end of the salary period for overtime work
As of 1 April 2016, all employers must issue itemized payslips to employees covered by the Employment Act. Hard or soft copies are acceptable and should include details such as the date of payment, basic salary, and allowances, overtime pay, salary period, as well as deductions made. Failure to do so will result in a fine.
If an employee works for an incomplete month, he is only entitled to the pro-rated portion of his salary for that part of the month he worked.
Employers must keep two years of such records for all employees. However, for ex-employees, employers must keep the records for one year after they leave employment.
All of these regulations seem complicated and take a lot of time to comply with. Worry no more! With HRMLabs payroll management feature, even small to mid-size companies can use our system to calculate their payroll and deductions such as CPF automatically! Our system enables companies to itemized their payslip based on their needs but still comply with government regulations. Payslip also can be digital payslip so it will decrease paper consumption. In conclusion, HRMLabs will help companies to save time and cost.