Singapore Payroll Management

Central Provident Fund Contributions

The CPF enables working Singaporeans to set aside funds for retirement. CPF contributions are payable to Singapore Citizens and Permanent Residents, and the employer is required to pay the employer’s and employee’s share of CPF contributions monthly for all applicable employees. The CPF contribution is determined according to the rates set out in the CPF Act and are based on the employee’s actual salary earned for that month. The employer may deduct the employee’s share from his salary.

The CPF Act defines salary/wages as remuneration in money due or granted to an employee with respect to his employment. This includes:

• overtime pay;
• allowances;
• cash awards;
• commissions; and
• bonuses.

Wages are classified into 3 categories, namely Ordinary Wages (OW) and Additional Wages (AW). OW are wages due or granted wholly and exclusively in respect of an employee’s employment in that month; while AW is wages which are not granted wholly and exclusively for the month. AW examples include annual bonus, leave pay, incentive and other payments made at intervals of more than a month. Total Wages (TW) is the total amount of an employee’s wages for any calendar month, i.e. OW + AW.

CPF contributions are computed based on the employee’s total wages for a calendar month, subject to a maximum ‘ceiling’. The current OW Ceiling is $5000 and the AW Ceiling is computed on a per employer per year basis.

Skills Development Levy

The SDL is used to fund the Skills Development Fund which supports workforce upgrading programs and provides training grants to employers.

Employers are required to make SDL contributions for all employees — i.e. all local and foreign employees, including casual, part-time and temporary employees. The SDL contribution rate is of 0.25% of an employee’s gross monthly remuneration up to the first $4,500, or $2, whichever is higher. Where the employee’s gross monthly remuneration is more than $4,500, the SDL is fixed at $11.25.

The SDL must be paid by the employer and cannot be deducted from the employee’s salary.

Check the Frequently asked question on Skill Development Levy 

Community-related Funds

Certain members of communities are required to contribute to respective funds. For example, all working Chinese Singapore Citizens and Permanent Residents contribute monthly to the Chinese Development Assistance Council Fund and all working Indians in Singapore who are Singapore citizens, PR or EP holders and from certain ethnic origins in the Indian sub-continent must contribute to the SINDA fund. These amounts may be deducted from the employee’s salary.

Foreign Workers Levy

The Foreign Worker Levy (FWL) is a pricing mechanism implemented by the Government in order to regulate the number of basic skilled foreign workers in Singapore and is applicable to all employees who hold Work Permits or S Passes. The Employer is required to pay the levy, and cannot deduct the amount from the employee’s salary. When computing the levy, MOM will consider the employee’s qualifications and the dependency ratio ceiling (DRC).

National Service

All male Singapore citizens and second-generation PRs from the age of 18 are liable for two years of national service (NS), unless they are exempt. Once this full-time service has been completed, he will become an NS Reservist and may from time to time be called up to perform NS duties and undergo training. The employer is not required to pay the employee his salary during this period; however, the employer must continue to make the CPF contributions.

Inland Revenue Authority of Singapore – Income reporting

The IRAS requires employers to report employee earnings by March 1st of each year by submitting the applicable forms, namely Form IR8A and Appendix 8A, Appendix 8B or Form IR8S.

Employers who have 15 or more employees for the entire calendar year or who have received the “Notice to File Employment Income of Employees Electronically” will fall within the scope of the Auto-Inclusion Scheme (AIS) for Employment Income and must submit their employees’ income information to IRAS electronically by 01 March of each year.

Companies which don’t fall within the aforementioned scope are still encouraged to join the AIS and submit the information electronically.

Withholding Tax for Tax Clearance Purposes

Tax clearance is a process of ensuring that non-citizen foreign employees have paid all outstanding taxes. The employer is required to notify the IRAS via FormIR21 and at least 1 month in advance if a non-citizen foreign employee will cease employment with the employer, be placed on an overseas posting, or intends to leave Singapore for more than 3 months. Note that this obligation applies to all work pass holders including PEP holders.

The employer must withhold all monies, including salary, bonus, overtime pay, leave pay, allowances, and gratuities etc. due to the employee. The monies should be withheld for a period of 30 days from the day the employer notified the IRAS, or until the tax clearance directive is issued, whichever is earlier.

Proper Records

From Year of Assessment 2008 onwards, employers are required to keep proper records of all employees’ income and deductions submitted to IRAS for 5 years.

Income Tax Returns

It is the employee’s responsibility to file their own personal income tax return. Employees will receive a notification from the IRAS to file an income tax return for the Year of Assessment (based on income earned in the previous year).

Unpaid Leave

If an employee takes any unpaid leave during the month, the salary will need to be calculated using the aforementioned formula.

Overtime

Payment of overtime is only a statutory requirement if the employee falls within the scope of the Employment Act. For all other employees, payment for overtime will depend on the Employer’s policy and any agreement between the employee and the employer.

The Employment Act provides that any time worked in excess of 44 hours a week shall be paid at one and a half times the hourly rate. The hourly rate is determined as follows:

12 x Monthly Basic Rate of Pay
_____________________________________
52 x 44

Public Holidays

Public holidays are typically considered to be paid holidays. If the employee is requested to work on a public holiday by the employer, the employee should be paid an additional days pay on top of the monthly salary.