A Quick Guide to Payroll for New Businesses in Singapore

Introduction: Navigating Singapore’s intricate payroll regulations can be a daunting task, especially for small and medium-sized enterprises (SMEs) that make up the majority of the country’s businesses. The consequences of payroll errors can be severe, making it essential for employers to understand and comply with the regulations.

In this guide to payroll in Singapore, we’ll cover everything you need to know to ensure accurate and compliant payroll processing for your employees.

Understanding Salary and Payments

In Singapore, salary includes basic pay and allowances but excludes items like traveling, food, or housing allowances, along with pension, work-related expenses, and retrenchment benefits. It’s crucial to distinguish between these components when calculating salaries.

Setting Up Payroll

When establishing payroll procedures in Singapore for the first time, you must begin by incorporating your local company through Bizfile+. This online portal is managed by the Accounting and Corporate Regulatory Authority (ACRA) in Singapore.

Additionally, it’s essential to have a dedicated business bank account in Singapore to handle your financial transactions with the government.

Payment Frequency

Employers must pay salaries at least once a month, within seven days after the end of the salary period. Non-compliance can result in penalties.

Itemised Payslips

As of April 1, 2016, all employers must provide itemised payslips to employees covered by the Employment Act. These payslips should include essential information like the date of payment, basic salary, allowances, overtime pay, and deductions. Failure to do so can lead to fines.

Employment Records

Employers are required to maintain detailed employment and salary records for all employees for at least two years. For ex-employees, records must be kept for one year after they leave employment.

Pro-Rating Salaries

When an employee works for an incomplete month, their salary should be pro-rated based on the number of days worked in that month. Accurate pro-rating is essential to prevent underpayment or overpayment.

Overtime Pay

Overtime work is any work done in excess of normal hours, and it should be paid at least 1.5 times the hourly basic rate of pay. Timely payment within 14 days after the salary period is crucial.

Mandatory Levies and Contributions

Employers are responsible for various mandatory contributions and levies, including Central Provident Fund (CPF) contributions, Ethnic funds, Skills Development Levy (SDL), and Foreign Worker Levy (FWL).

Statutory Reporting Requirements

IRAS (Inland Revenue Authority of Singapore) requires employers to submit employees’ income information electronically if they meet specific criteria, typically by March 1 each year.

Year-End Payments

Year-end payments, including annual bonuses, are a way to reward employees for their contributions throughout the year.

The Singapore Employment Act

The Singapore Employment Act is the primary piece of legislation governing employment relationships and basic employment rights for workers in Singapore. It covers aspects like working hours, rest days, public holidays, and annual leave entitlements.

Income Taxes in Singapore

Singapore has a progressive income tax system with different rates for residents and non-residents. Employers play a role in withholding taxes from employees’ salaries and issuing tax forms (Form IR8A).

Contributions and Levies

CPF contributions, Self Help Groups contributions, SHARE donations, Skill Development Levy (SDL), and Foreign Worker Levy (FWL) are some of the key contributions and levies employers need to manage.

Leveraging Technology for Payroll Processing

To streamline the complex payroll process in Singapore, consider leveraging payroll software and HR automation tools to ensure accuracy, compliance, and efficiency. Counto provides an advanced range of solutions to streamline your Singaporean payroll system.

Summary

Mastering payroll in Singapore is crucial for any business to remain compliant and maintain employee satisfaction. By understanding the intricacies of salary components, payment frequencies, statutory requirements, and leveraging technology, you can confidently navigate the payroll landscape in Singapore and ensure smooth operations for your business.