Employer of Record (EOR) Singapore

Employment Contracts in Singapore

All employers must provide written Key Employment Terms (KETs) and itemized payslips to employees covered under the Employment Act (EA) who are hired after April 1, 2016, and will be employed for at least 14 consecutive days. KETs must include:

KETs must be provided within 14 days of starting employment and can be in digital or hard copy. General policies like leave and medical benefits may be included in an employee handbook or on the company intranet, as long as they are accessible and provided within the same 14-day period. If all KETs are included in the employment contract, no extra documents are needed. While employees do not have to sign the KETsw, employers are encouraged to get confirmation that the terms were issued.

Written employment contracts are not legally required, but they are recommended. Part-time employees (working less than 35 hours per week) must have contracts that specify their hourly basic and gross rates of pay, working hours, and days per week or month. Part-time employees also need to receive KETs if they are covered under the EA, hired after April 1, 2016, and employed for at least two consecutive weeks.

Failure to provide KETs may lead to administrative penalties and affect an employer’s ability to apply for work passes. Employers must also maintain employee records according to the Employment Regulations of 2016

Working Hours

In Singapore, standard contractual working hours are typically up to 9 hours per day or 44 hours per week for those working 5 days or fewer, and up to 8 hours per day or 44 hours per week for those working more than 5 days. Alternative arrangements may vary, with caps on hours and averaging applied. It’s crucial to refer to specific employment contracts and understand applicable terms.

Overtime Pay

Overtime work encompasses any work performed beyond the regular hours, excluding breaks. Eligibility for overtime claims is determined by the monthly basic salary: for non-workmen earning $2,600 or less and workmen earning $4,500 or less. Workmen, primarily engaged in manual labor, fall under this category. The overtime rate for non-workmen is capped at $2,600 or an hourly rate of $13.60. Employers must pay at least 1.5 times the hourly basic rate for overtime work, with payment due within 14 days after the salary period. To illustrate, if a non-workman earning $2,600 a month works 2 hours of overtime, the overtime pay is calculated as $13.60 × 1.5 × 2 hours, amounting to $40.80. Understanding the calculation methodology is crucial to avoid disputes or claims related to overtime pay.

Probation Period

In Singapore, the majority of employees typically begin their employment with a probationary period, typically lasting 3-6 months. Successful completion of the probation results in the appointment as permanent employees. However, the employer retains the right to terminate employment before the probationary period concludes by issuing notice, usually 1-2 weeks, or by providing salary in lieu of notice, as stipulated in the contract.

13th Month Salary (Annual Wage Supplement)

The AWS, often known as the “13th month payment,” is an annual bonus given in addition to an employee’s total annual wage. While not mandatory, it depends on the employment contract or collective agreement. Employers are encouraged to grant AWS as a reward for their employees’ contributions. The amount can be negotiated lower in challenging business years. There is a limit of 1 month’s salary for AWS if not paid before August 26, 1988. Bonuses, one-time year-end rewards, and variable payments for increased productivity are not obligatory unless specified in the employment contract or collective agreement.

Independent Contractor vs Employee in Singapore

Payroll in Singapore

Mercans’ Payroll Capabilities 

Navigating payroll complexities in Singapore requires careful attention and comprehensive solutions. Mercans simplifies this process through its Employer of Record (EOR) services, ensuring accuracy, compliance, and operational efficiency in the unique landscape of Singapore payroll.

Singapore payroll operates on a monthly cycle and involves several stages, such as setup, salary calculations, and reporting. Mercans’ EOR services expertly manage these tasks with precision, providing a seamless payroll experience.

Facilitating payments in the local currency enhances convenience and minimizes currency exchange issues. Mercans simplifies this with its multi-country payment solutions, ensuring smooth financial transactions.

From initial payroll setup and processing to comprehensive administration, Mercans’ EOR services cover every aspect efficiently within the Singapore payroll framework. Whether it’s configuring software, processing salaries, or managing leave balances, Mercans ensures a streamlined payroll experience.

Compliance with local regulations is essential, and Mercans provides support for statutory filings, ensuring adherence to Singaporean laws. As your trusted payroll partner in Singapore, Mercans leverages its expertise in Employer of Record services to deliver accurate and efficient payroll operations, making it a reliable choice for businesses operating in Singapore.

Social Security in Singapore

Social Security Contributions

Central Provident Fund (CPF)

The CPF is Singapore’s national pension scheme designed to provide financial security for citizens and permanent residents. Only Singaporean citizens and Singapore Permanent Residents (obtained through immigration) are required to make CPF contributions. Employers contribute 17% while employees contribute 20% of their ordinary monthly wages, subject to a cap of SGD 6,800 from January 1, 2024, to December 31, 2024. This translates to maximum monthly contributions of SGD 1,156 for employers and SGD 1,360 for employees. These rates apply to Singaporeans and SPRs aged 55 and below from their third year of residency onward.

Additionally, these contribution rates also extend to extra wages, such as year-end bonuses, with the following limits for 2024:

• Total Wages : Up to SGD 102,000
  • Additional Wages : Equal to actual additional wages if annual ordinary wages are not more than SGD 81,600.
• Total Wages : Exceeds SGD 102,000
  • Additional Wages : Actual additional wages if annual ordinary wages are not more than SGD 81,600, or SGD 102,000 minus annual ordinary wages if they exceed SGD 81,600.

Note : The annual ordinary wage ceiling for 2024 is set at SGD 81,600 (SGD 6,800 x 12).

Reduced rates apply for employees earning less than SGD 750 per month and for those above 55 years of age, with gradual increases in these rates planned.

Increases to the income ceiling are scheduled: it will rise to SGD 7,400 from January 1, 2025, and SGD 8,000 from January 1, 2026. While the maximum monthly contributions for both employers and employees will be adjusted accordingly, the annual salary cap, which includes both ordinary and additional wages, will remain at SGD 102,000.

It’s important to note that foreign nationals and their employers are not required to contribute to the CPF. However, foreign employees who become Singapore permanent residents, along with their employers, may contribute at reduced rates for their first two years.

For further details, please refer to the Employment Income section under Income Determination and Personal Deductions for related information.

Supplementary Retirement Scheme (SRS)

The SRS is a voluntary savings scheme designed to encourage employees and self-employed individuals to save for retirement beyond their CPF contributions. The maximum contribution is capped at an income threshold of SGD 102,000. Employers may contribute to their employees’ SRS accounts, subject to the following limits:

Employers’ contributions to SRS accounts are taxable for employees but also provide corresponding tax relief.

Local Non-Income Taxes

• Foreign Worker Levy (FWL): Employers are responsible for paying a monthly levy for each foreign employee (Work Permit or S Pass holders) they hire. The levy rate varies based on the employer’s industry and the ratio of foreign workers to Singaporean citizens and permanent residents in the workforce.
• Skills Development Levy (SDL): Employers must contribute a levy of 0.25% of the total monthly wages for each employee. The minimum levy payable is SGD 2 for employees earning less than SGD 800 per month, while the maximum is SGD 11.25 for those earning more than SGD 4,500 per month.

The SDL contributes to the Skills Development Fund (SDF), which supports workforce upgrading programs and provides training grants to employees under the National Continuing Education Training system. The SDL and SDF are managed by SkillsFuture Singapore Agency, with the CPF Board acting as the collecting agent.

Singapore Employee Hiring Cost

In this hypothetical example of employing an individual in Singapore with a Gross Annual Salary of SGD 9,999.96, the employer incurs Total Annual Employer Costs amounting to SGD 1,725.00. These additional costs cover various components such as Employer CPF Contribution, Skills Development Levy, and Work Injury Compensation Insurance. The comprehensive Total Annual Cost, which includes both the Gross Annual Salary and the associated Employer Costs, sums up to SGD 11,724.96. This example underscores the holistic financial commitment involved in employing individuals, extending beyond the base salary to encompass various employer-related contributions and obligations in the Singaporean context.

Personal Income Tax

Income taxation in Singapore is applicable when income accrues within or is derived from Singapore, regardless of an individual’s residency status. However, income obtained from sources outside Singapore is taxable only if received in Singapore by a resident individual through a local partnership.

Residents and non-residents in Singapore face differing tax regulations. Residents benefit from personal reliefs and deductions and are subject to graduated tax rates ranging from 0% to 22% (24% from the year of assessment 2024). In contrast, non-residents face a flat tax rate of 22% (24% from the year of assessment 2024) without personal reliefs, except for employment income. Non-residents’ employment income is taxed at either a flat rate of 15% or the graduated resident rates with personal reliefs, whichever results in higher taxation. However, this concession does not extend to non-resident directors.

Below is an overview of the individual income tax rates for residents based on the years of assessment 2023 and 2024:

For non-residents, a flat tax rate of 22% (24% from the year of assessment 2024) is generally applicable. However, non-resident directors’ remuneration doesn’t qualify for the reduced rate and is subject to withholding tax (WHT) at the rate of 22% (24% from the year of assessment 2024).

Singapore imposes no additional local income taxes beyond the aforementioned regulations.

Leaves

Annual Leave

Employees are granted seven days of annual leave during the first year (after the initial three months) and receive an additional day per year, culminating in 14 days by the 8th year of service. Most employees typically enjoy 14 days of annual leave per annum.

For those not engaged in manual labor earning over SGD 2,600 monthly, annual leave agreements in employment contracts can exceed statutory entitlements.

Public Holidays

There are 11 paid public holidays a year for employees under the Employment Act, offering payment in lieu or an alternative day off. If an employee works on a public holiday, they are entitled to an extra day’s salary.

Sick Leave

Employees, after six months of service, are eligible for 14 days of paid outpatient sick leave and 60 days of hospitalization leave annually. Sick leave requires prompt notification to the employer and a medical certificate to be valid.

Maternity/Paternity Leave

Mothers receive 16 weeks of full-paid maternity leave, while fathers get two weeks of paid paternity leave, funded by the government. Additionally, adoptive mothers are entitled to 12 weeks of paid leave for adopting Singaporean children, with adoptive fathers receiving two weeks of paid leave.

Shared Parental Leave

Fathers can share up to four weeks of their wife’s maternity or adoption leave if eligible, capped at SGD 2,500 weekly, and if the child is a Singapore citizen.

Childcare Leave

Parents of Singapore citizen children receive six days of paid childcare leave per year, extendable to two days for kids between 7 and 12 years old. The employer covers the first three days, and the government covers the remainder, both capped at SGD 500 per day.

Extended Childcare Leave

For children aged 7 to 12, parents receive two days of extended childcare leave, reimbursed by the government and capped at SGD 500 a day.

Unpaid Infant Care Leave

Parents can take six days of unpaid leave annually for children under two years who are Singapore citizens.

National Service Leave

Male Singapore citizens may be called for up to 40 days of National Service (NS) training annually, with the government handling salary during this period. Employers are not obligated to pay the employee for this duration.

Work Permit

Singapore boasts a highly developed free-market economy, recognized as the world’s second most prosperous in the Global Competitiveness Report 2015. Attracting a significant number of foreigners, Singapore offers high salaries, abundant job opportunities, and an attractive tax system. According to the Ministry of Manpower (MOM), foreign workers constituted over 20% of Singapore’s workforce in 2018, reflecting the nation’s cosmopolitan nature.

To work in Singapore, foreign workers need a Singapore work visa, known as a Pass. This requirement applies to all, irrespective of visa status. Singapore offers various types of work visas based on the nature of work and skill level. The categories include:

Singapore Work Visas for Professionals

• Employment Pass: for foreign managers, executives, and professionals earning a minimum of S$3,600 per month.
• Personalized Employment Pass: offers flexibility for high-earning foreigners or existing Employment Pass holders.
• EntrePass: for investors or entrepreneurs starting a business in Singapore.

Singapore Work Visas for Skilled and Semi-Skilled Workers

• S Pass: for mid-level skilled workers earning at least S$2,300 per month.
• Work Permit for Foreign Workers: for foreign workers in specific sectors.
• Work Permit for Foreign Domestic Workers (FDW): for workers aged 23 to 50 from certain countries.

Other specialized permits for specific categories.

Singapore Work Visas for Trainees and Students

• Training Employment Pass: for foreign nationals undergoing training for up to three months.
• Work Holiday Pass: for foreign nationals under the Working Holiday Programme.
• Training Work Permit: for unskilled or semi-skilled foreign students/trainees with training durations of up to six months.

Short-term Work Passes for Singapore

• Miscellaneous Work Pass: for specific short-term work-related activities.
• Limited work options for foreign students under a Study Visa.

Foreign workers must secure a job in Singapore before applying for a work visa. Employers or Employment Agencies handle visa applications through the MOM’s EP Online service. The process involves submitting an application, obtaining In-Principle Approval (IPA) or Rejection letters, traveling to Singapore, and obtaining the final work Pass. Certain professional and skilled workers can bring family members through the Dependent’s Pass, while others may use the Long Term Visit Pass (LTVP).

EOR Solutions in Singapore