Guide to Hiring Employees in Singapore

After setting up a Singapore company, hiring employees is an important milestone that involves some serious and important decision-making. The hiring process brings with it certain legal protocols which both employers and employees need to adhere to. Most employees today are well versed with Singapore Employment Act and have a clear idea of their rights and protection that is offered to them under various legislations. As an employer, it is equally important to be aware of the do’s and don’ts while hiring employees.

Before starting the hiring process, it’s important to ask yourself the following questions:

  • What are the labour laws that I need to know and that have a binding effect on me and my employees?
  • Are there any formalities for hiring local or foreign employees? Is there a restriction on the number of foreign employees I can hire?
  • Is there any distinction in hiring full time, part time and contract staff?
  • How much does hiring an employee really cost? Do I have to pay any levies, provident fund contributions etc.?
  • In the absence of statutory requirements are there any common practices being followed in Singapore?
  • Are there any recruitment guidelines or do’s and don’t’s that I need to be aware of?

This guide sheds light on the above mentioned points including key labour legislations, hiring guidelines for local and foreign employees and common recruitment practices in Singapore. The guide is meant primarily for new Singapore companies that are planning to hire staff for the first time. The guide is for general information only and not meant to replace professional advice.

  • Employment act overview

    Singapore Employment Act is the key legislation that spells out certain basic terms and conditions of employment.

    What is Employment Act?

    •  The Employment Act is Singapore’s all encompassing statute relating to labour and employment issues. It lays down specific regulations regarding the basic terms and conditions of employment and the rights, duties and responsibilities of employers and employees.
    • Your first step is to know whether your employee is protected by the Employment Act.
    • If your employee is covered by the Employment Act, you should remember that the terms you draw out in the employment contract cannot be less favourable than what is mentioned in the Employment Act.
    • If your employee is not covered by the Act, then the terms and conditions of employment can be negotiated between both parties and once finalised upon it must be clearly stated in the employment contract. The contract will bind both the parties.

    Who does the Employment Act apply to?

    The Employment Act covers all employees, except the following:

    • Managerial & Executive Positions. Such a position is defined as one where a person has direct authority or influence in the hiring, firing, promotion, transfer, reward or discipline of other employees; or the main duties involve management and running of the business. It is also applicable to professionals (possessing tertiary education along with specialised knowledge or skills) who carry out the same or similar responsibilities as managers or executives. Examples of such professionals include lawyers, accountants, dentists, and doctors.
    • Domestic Workers
    • Seamen
    • Most of the Government Staff

    Furthermore, the Employment Act makes a distinction between employees, categorizing them into

     

    • Employees earning less than SGD 2,000 a month
    • Employees earning above SGD 2,000 a month

    Employees earning less than SGD 2,000 a month are provided additional protection (concerning “Rest Day, Hours of Work and Overtime, Public Holidays, Annual Leave, Sick Leave, Retrenchment Benefits, Retirement Benefits, Annual Wage Supplement and other variable payment”) under Part IV of the Employment Act.

    Key Features of Employment Act

     

    Features Managers / Executives positions Employees earning > 2,000/month Employees earning < 2,000/month
    Max. Hours of Work per Week As per contract

     

    Common practice:40-50 hours

    As per contract

     

    Common practice: 40-50 hours

    44 hours
    Max. Days of Work per Week As per contract

     

    Common practice: 5 days

    As per contract

     

    Common practice: 5 days

    6 days
    Overtime As per contract

     

    Common practice: Not applicable

    As per contract Maximum 72 hours per month

     

    Paid at 1.5 times of the basic hourly rate

    Central Provident Fund Contribution for Singapore Citizens and PRs Required Required Required
    Annual Bonus As per contract

     

    Common practice: equivalent to 1-4 months of salary

    As per contract

     

    Common practice: equivalent to 1-4 months of salary

    As per contract
    Paid Annual Leave As per contract

     

    Common practice: 15 days

    As per contract

     

    Common practice: 15 days

    1styear – 7 days

     

    2nd year – 8 days

    3rd year – 9 days

    (annual increase up to a max. 14 days)

    Paid Sick Leave As per contract

     

    Common practice: 14 days per annum

    As per contract

     

    Common practice: 14 days per annum

    Outpatient: 5-14 days (depending upon the period of employment served)

     

    Hospitalisation: 15-60 days (depending upon the period of employment served)

    Paid Maternity Leave(if eligible) 16 weeks

     

    First 8 weeks employer payable for first 2 confinements

    16 weeks

     

    First 8 weeks employer payable for first 2 confinements

    16 weeks

     

    First 8 weeks employer payable for first 2 confinements

    Paid Annual Childcare Leave (until child turns 7 years old)(if eligible) 6 days

     

    First 3 days employer payable

    6 days

     

    First 3 days employer payable

    6 days

     

    First 3 days employer payable

    Unpaid Infantcare Leave (until infant turns 2 years old)(if eligible) 6 days 6 days 6 days
    Paid Public Holidays 11 days 11 days 11 days
    Probation Period As per contract

     

    Common practice: 6 months

    As per contract

     

    Common practice: 6 months

    As per contract

     

    Common practice: 3-6 months

    Termination Notice Period As per contract

     

    Common practice: 1-3 months

    As per contract

     

    Common practice: 1-3 months

    As per contract

     

    Common practice: 1 month

    Retrenchment As per contract As per contract Eligible to:

     

    – receive salary on last working day

    – receive retrenchments benefits

    – serve notice period

    Medical Insurance As per contract As per contract As per contract
    For more detailed information on the Employment Act, prefer to Introduction to Singapore Employment Act and Employee Benefits.

  • Important duties and obligations of employers in Singapore

    Formalizing Employment Contract

    For all employees: The employment contract is the most important document as it specifies the terms and conditions of employment between you and your employee. Although you can draft the contract on your own, it is advisable to seek guidance from a lawyer or HR consultant who are familiar with such documentation. Please bear in mind that if your employee is covered under the Employment Act, the contract terms should abide by the minimum requirements under the Act. Some of the key points to be included in the contract are:

    • Appointment position
    • Duration of employment contract, if applicable
    • Date of employment commencement
    • Remuneration package
    • Hours of work
    • Employee benefits
    • Probation clause, if applicable
    • Code of conduct
    • Termination

    Reporting Employee Earnings

    •  For all employees: As an employer you are required to prepare tax forms for all your employees (who are employed in Singapore) to report their remuneration every year under the Income Tax Act.

    Tax issues for Foreign Employees

    • For foreign employees ceasing employment with you, leaving on an overseas posting, leaving Singapore for any period exceeding three months: Tax Clearance is required for the above mentioned categories of employees, to ensure that all taxes have been paid by him/her. As an employer, you must notify the tax authority (IRAS) and withhold all payment due to your foreign employee from the day he/she notifies you of his/her intention to cease employment or when you decide to terminate the employment or post the employee to an overseas location. Once the IRAS does an assessment and issues a tax clearance certificate, confirming that all taxes have been paid, you can release the payment due to your employee.

    Making Central Provident Fund (CPF) Contributions

    •  For local employees: CPF contribution by the employer is mandatory for all local employees (citizens and PRs) earning more than SGD 50 a month. The maximum CPF contribution rate for employer and employee is 16% and 20% respectively and can be lower depending on certain factors such as employee age, permanent resident status, etc.
    • For foreign employees: CPF contributions for foreign employees is not applicable.

    Paying levies

    •  For low-skilled and unskilled foreign employees a Foreign Worker Levy (FWL) is collected by the government. The foreign worker levy is a pricing control mechanism to regulate the demand of foreign workers in Singapore. Refer to the foreign manpower section below for more details.

    Hiring students

    •  For students who are Singapore citizens/Singapore PRs: Students who are citizens or SPRs can be hired on a full time and part time basis, without any restrictions. Students are entitled to CPF contributions, unless exempted. If you wish to take on students for an internship there is no need to make CPF contributions, as they are only undergoing training in your organisation as part of their curriculum. The common practice is to pay interns only a monthly allowance.
    • For students who are foreigners: Foreign students are not allowed to work in Singapore during term time or vacation time unless they are granted Work Pass exemption under the Employment of Foreign Manpower (Work Pass Exemptions) Notification. If you wish to take on foreign students as interns or part of an industrial attachment programme, you must apply for a Training Employment Pass or Training Work Permit on their behalf. No foreign worker levy payment needs to be made since they are only undergoing training in your organisation as part of their curriculum. The common practice is to pay interns only a monthly allowance.

    Hiring part time employees and contractual staff

    •  Part-time employees are defined as those who are required to work for less than 35 hours a week.
    • Contract workers refer to those on fixed-term employment contract as well as those on casual/on-call employment who are employed on an ad-hoc basis, as and when the company requires additional manpower. The contract lasts only for a specified time frame and ends when the specified task/job is completed.
    • Unlike most other countries, under Singapore’s employment laws, part-timers and contract workers enjoy almost the same protection as permanent full-time employees. There is however a certain amount of flexibility for both employers and employees, including the pro-rating of employment benefits, encashment of annual leave and provision of rest day. Please be advised that as a common practice in Singapore, part time and contract employees are usually not entitled to certain privileges like bonus, medical insurance and other perks that full-time employees normally tend to enjoy.

    Age restrictions

    The legal age to work in Singapore is 17 years and above. However, you are permited to employ children and young persons aged 13 years – 16 years. Please note that there are restrictions on the the type of work that children and young persons can perform. The retirement age in Singapore is 62 years.

  • Hiring foreign Employees

    Most companies in Singapore hire foreign talent to supplement their local workforce. The reasons behind this trend are several: an ageing population, declining birth rate, unprecedented economic growth and mostly non-availability of adequate local talent for certain job sectors. IT, business and finance and R&D companies find a shortage of highly skilled local talent and therefore resort to hiring foreign manpower. Likewise, certain job profiles, such as construction work and domestic help are not preferred by locals, leaving no option other than hiring foreign workers. Given the country’s history in attracting and hiring foreign professionals, the Singapore government has liberalised the immigration policy and put in place adequate provisions.

    Under the Employment Act, a foreigner must have a valid work visa to be able to work in Singapore. If you wish to hire a foreigner, you will have to apply for a valid work pass or work permit on his/her behalf before he/she can commence employment with you. Please note that certain work passes place a restriction or ceiling on the number of foreign employees you can hire.

    The foreign work force an be categorised in three main groups:

    • Skilled professionals (e.g. software engineers, doctors, R&D specialists etc.) who are issued an Employment Pass.
    • Semi-skilled professionals (e.g. technicians, chefs, administrative professionals) who are issued the S Pass.
    • Unskilled Professionals (e.g. construction workers, domestic help) who are issued a work permit, also known as R Pass.

    Tabulated below is an at-a-glance details of the various work passes you will need to apply for depending on which category of foreign talent you intend to hire.

     

    Pass Type Employment Pass S Pass R Pass (Work Permit)
    Suitable For Skilled employees with tertiary level education and relevant work experience

     

    Monthly salary > $3,0 00

    Mid-skilled employees with diploma level education and relevant work experienceMonthly salary > $2,000 Unskilled workers with relevant work experience

     

    Monthly salary < $2,000

    Validity Issued for 1-2 years initially

     

    Renewable

    Issued for 1-2 years initially

     

    Renewable

    Issued for 1-2 years initially

     

    Renewable

    Quota System No Yes

     

    20% of the company’s total workforce

    Yes

     

    Variable across industries

    Eligibility for Dependants Pass Yes Yes No
    Restrictions on Nationality No No Yes
    Levies No Foreign Worker Levy Foreign Worker Levy
    For further details on the various types of work passes please refer to Singapore Work Permit Schemes.

  • General recruitment guidelines

    Since Singapore’s workforce comprises of a diverse mix of individuals in terms of ethnicity, age and gender, employers are strongly advised to adopt progressive and fair HR practices, especially in matters relating to recruitment of talent. In this regard the Ministry of Manpower has issued certain guidelines on fair employment practices. A summary of the guidelines is as follows:

    • Employers are advised to follow a system of meritocracy while selecting and recruiting candidates for employment.
    • Skills, experience and ability to perform the job should take precedence over age, race, gender, religion, family status or disability.
    • Selection criteria should be related to job requirements and must be made known to all job applicants and reviewed regularly to ensure relevancy.
    • Job advertisements should avoid listing attributes such as age, gender, marital status, race, religion and language, unless it is duly justifiable.
    • Job application forms should only ask for information relevant to assessing an applicant’s suitability for a job. If personal data is required, it is important to state that it is for administrative purposes only.
    • Job interviews and tests should be confined to questions that are relevant to the job requirements.

    Listed below are several popular recruitment channels that most employers resort to for their staffing solutions.

     

    • Employment Agencies/Recruitment Firms – Most medium to big sized firms prefer to partner with headhunters for hiring the right candidate. This approach is convenient as it takes less time and effort. It is important that you check each agency’s rate (usually the candidate’s salary) and policy before finalising one. In addition to local recruitment firms, most international agencies like Hudson, Hays, Robert Walters etc. have set up a base in Singapore and cater to a large MNC base.
    • Newspaper advertisements: Classified advertisements in The Straits Times (local publication with the highest circulation) is popular amongst both recruiters and job seekers. It is important to consider the advertisement rates and your target audience before you place your advertisement.
    • Internet websites: There are four to five popular job websites where you can post your requirements for a fee. These websites are popular for regional positions and mainly cater to the Singapore market.
    • Job/Career Fairs: Job fairs are becoming increasingly popular in Singapore attracting more than 400,000 job seekers per year. This avenue provides employers access to several potential candidates and the opportunity to conduct on-the-spot interviews. This is a suitable option for those seeking to hire talent for skill based jobs.
    • Campus recruitment: Most of the Universities and Polytechnics in Singapore allow employers interested in hiring graduates/post-graduates to conduct campus interviews and recruitment talks.

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