Singapore Payroll Management
A flourishing payroll management, in turns, needs a steady and flawless interconnection among two most strategic departments of a company – Accounts department and HR department. With faultless processing, reporting and maintenance of payroll, a company can have planning, compliance and budgeting. Staff can keep contented with accurate deductions, appropriate statements and timely disbursement.
This guide is drafted to provide both fundamental and high-end knowhow of some major elements that are involved in payroll management in Singapore. Beyond only one-man performance, when an organization thrives, the compliance and payroll processing goes even more complex with regulatory requisites and it, therefore, needs strategic resources of both software and humans. While such in-house resources can be affordable for large scale organizations, a lot of middle-scale and small scale businesses shall become able to outsource their functions of payroll with affordability.
Central Provident Fund (CPF)
The total amount of CPF consists of both employee and employer contribution. A worker who is either Singapore permanent resident or Singaporean and his/her employer should make contributions of CPF as per the rates defined by the board. When it comes to calculate CPF contribution, the salary is classified as Additional Wage (AW) or Ordinary Wage (OW). On the basis of both OW and AW, the CPF contribution is calculated.
Ordinary Wages are the payment which is granted or due exclusively and wholly in spite of employment of an employee in a particular month and to be paid prior to due date for CPF payment for that particular month. Extra wages are incentives or bonuses and other payments that are made during gap of above one month.
For CPF contributions, a ceiling is considered. For Ordinary Wages, highest amount of CPF contribution to be paid is according to the per-month ceiling of S$5000. With using a formula, highest amount of Additional Wages is calculated in which CPF contribution to be paid.
It is the employer who pays CPF contributions of the share of both employee and the employer per month for the whole staff within 14 days by the end of month on which CPF amount is outstanding.
It is required to be contributed from the employee’s end according to the ethnic group of an employee. That amount of contribution shall be deducted from the salary of an employee per month and will be contributed to the welfare fund of the related ethnic group.
Skill Development Levy
Employers are required to pay contribution on Skills Development Levy for all casual, full time, part time, foreign, and temporary employees who are rendering their services partially or as a whole in Singapore. From the monthly remuneration of an employee, the employer cannot deduct SDL. The SDF offers grants to the companies that send their workers for vocational training.
The levy which is accumulated by the SDF and is payable may differ from the salary of employee. 0.25% of levy rate that to be applied for the gross remuneration per month of $4500 to at least $2 of gross monthly remuneration, whichever is maximum. Gross remuneration per month can be any commission, wage, salary, leave pay, bonus, overtime and allowances like housing or other allowances that are paid by cash. For about S$4500 of gross monthly remuneration, S$11.25 of levy will be paid.
Foreign Workers Levy
Employers are responsible to pay foreign workers levy to foreign employees who are S Pass or Work Permit holders. The Foreign Worker Levy (FWL) is passed by the Singapore Government via MOM for administering overseas employees on the basis of work permits. With this mechanism, employers can have control and management over overseas employees in Singapore.
You can determine the payable amount of levy according to these things
- Qualification of Worker
- Industry related to employers’ niche
All male second generation PRs and Singaporeans, who have become 18 years or older, should register for National Service. When his full-time service is completed by the conscript, and when he becomes ready for operation, he shall become National Service reservist and can qualify to undergo periodic training and perform duty in National Service. The NS men’s employers are not liable to pay when NS men are not present to perform NS activities. In fact, they can make correct deductions for the days when NS men were absent, from the monthly wages. However, NS employers should pay NS employee’s CPF contribution.
Statutory Reporting for Payroll
According to IRAS Auto Inclusion Scheme, employers, having more than 15 employees for a whole year or have notice with which they can file income of employment of employees online, are required submit income details of their employees to IRAS online by the first day of March in every year. After that, the details submitted online shall be transformed in the income tax return for the employees and will be utilized for tax assessment.
For the whole staff, employer is required to fill Form IR8A and Appendix 8A (to pay for the benefits-in-kind), Form IR8S (in case of making excess payments of CPF contribution) or Appendix 8B (from Employee Stock Option), by the first day of March every year. Employers who contribute in AIS are not required to issue Form IR8A to their staff. But they are recommended to issue a copy for future reference.
This is a method to ensure that all the Singapore foreign workers have dully met all of their tax liabilities. All employers are responsible to seek tax clearance for overseas workers and inform IRAS through Form IR21, about a month before these employees:
- Stop working for Singaporean employer,
- Are involved in foreign posting, or
- Leave the country more than 3 months for any period.
When it comes to seek outstanding tax clearance for an employee, employer will have to withhold all bonuses, payments, salary, leave pay, overtime pay, gratuities, allowances and lump sum payments to be paid to the employee from when
- Employee informs that he want to quit the depart/employment,
- Employer makes decision to terminate the employee, or
- Employer makes decision to transfer employee to a foreign country.
- Employer should withhold the payment for 30-day period from when they fill Form IR21 to inform the IRAS or until directive of tax clearance is issued by the IRAS, whichever is done earlier.
Keeping Proper Records
Employers should maintain complete records of all the deductions and income of the employees for 5 years to submit to IRAS, from YA 2008 on wards.
Other Major Considerations Regarding Compensation for Employees
Several other major considerations for the employers should be noted which are related to the total employee’s compensation. Here are some examples of them:
- Overtime Pay: For the staff of your company, it is not important that overtime will be applicable. Employee’s working hours which exceed normal working hours (which shouldn’t extend to 44 hours in a week) is required to be paid at 1 ½ times of the per hour rate. In order to calculate overtime pay, if overtime is applicable, employer has to determine the hourly rate according to the formula issued by the Employment Act according to Section 38(6) (a).
- Leave without Pay: There is a provision in the Employment Act as per Section 20A(c) to compute the salary of an employee for the days when leave without pay or no-pay leave is granted to him.
- Public Holidays: Usually they are called as paid holidays. If an employee has to work on the day of public holiday, he is granted to be paid for additional day as well as with the normal pay.
- Sick Leave: An employer is entitled to provide sick leaves every year during the service of at least 3 months of an employee.
- Annual Leave: If employee has rendered his service for minimum three months, he will get annual leave by the employer.