Managing your payroll can become a rather onerous process, especially when your employee head count begins to grow, along with your business. To ensure compliance with the regulatory requirements, computing and disbursing salaries, as well as calculating, processing and reporting payroll components such as government remittances, benefits, allowances and deductions must be done with care.
This article provides information on the key elements involved in the payroll process and discusses the various statutory requirements companies are required to align with.
The Employment Act defines “salary” or “wage” as all remuneration payable to an employee with respect to his employment, including allowances and bonuses. However, it excludes:
- The value of accommodation, supply of light, water, medical attendance or other amenities;
- Pension or provident fund contributions paid by the employer;
- Travelling allowance;
- Payments to defray special expenses incurred in the course of duty; and
- Gratuity paid on retirement or any retrenchment benefits payable.
Salary is subject to negotiation and mutual agreement between the employer and the employee. There is no minimum salary or wage in Singapore. However, an employer who intends on hiring foreign employees must consider the minimum salary requirements applicable to qualify for the various employment passes.
If an employee works for an incomplete month, he is only entitled to the pro-rata portion of his salary for that part of the month he worked. An incomplete month is a month in which the employee:
- Commenced employment after the first working day of the month;
- Takes any unpaid leave during the month;
- Leaves before the end of the month; or
- Is on national service reservist training during the month.
Note that ‘month’ refers to any calendar month in the calendar year.
When calculating the pro-rata portion of the salary for an incomplete month, the following formula must be used:
Monthly Gross Rate of Pay
_______________________________________ x No. of days the employee worked in the month
No. of working days in the month
Gross Rate of Pay is defined as the total amount of money including allowances to which an employee is entitled under his contract of service either for working for a period of time, that is, for one hour, one day, one week, one month, or for such other period as stated or implied in his contract of service, but does not include:
- additional payments by way of overtime payments;
- additional payments by way of bonus payments or annual wage supplements;
- any sum paid to the employee to reimburse her for special expenses incurred by her in the course of her employment;
- productivity incentive payments; and
- travelling, food or housing allowances.
For example, if an employee who earns a salary of $3000 per month plus a travel allowance of $500 per month took 3 days unpaid leave during the month of April, the employee’s pro-rata salary for April would be $2591. This is computed as follows:
_____________ x 19 = $2591
Managing your payroll can become a time-consuming and complicated process. By outsourcing your payroll management to Rikvin, you can be assured of an unparalleled service experience. Have some peace of mind, knowing that your company’s payroll is managed in the most efficient manner.
Our payroll experts will take care of all your payroll needs, from initial set-up to ongoing support.
Call us to discuss how we can help you manage your payroll in compliance with Singapore laws. Contact us at +65 6303 4617 or email email@example.com to get started.