Guide to Hiring Employees in Singapore

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:

• Domestic Workers
• Seafarer
• Statutory board employee or civil servant

Key Features of Employment Act

Important duties and obligations

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 by law [S68(2) of the Income Tax Act] to prepare Form IR8A and Appendix 8A, Appendix 8B or Form IR8S (where applicable) for employees who are employed in Singapore by 1 Mar each year..  For employer with more than 5 employees, it is mandatory to submit the employment income information electronically, under the Auto Inclusion Scheme. Unlike other jurisdictions such as Europe or China, the employer is not responsible to withhold employee’s tax as it is a responsibility of every employee to file their personal income tax by mid-April each year. 
  
  

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 at least 1 month before he/she ceases 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 17% and 20% respectively and can be lower depending on certain factors such as employee age, permanent resident status, etc. The total amount of Ordinary Wage (OW) and Additional Wages (AW) (i.e. Bonuses) that will attract CPF is capped at 102,000 SGD per Year. Specifically the ordinary wage ceiling is capped at 6000 SGD a month (i.e. 72.000 SGD a year). For example, if an employee has  an OW of $6,500 in a calendar month, only $6,000 would attract CPF contributions; the remaining $500 would not. As for the AW ceiling is computed as $102,000 - Total OW subject to CPF for the year. For example, if an employee  joined the company in January 2020 with a monthly wage of $6,000 and was granted a year-end bonus of $35,000 in December 2020, the AW ceiling that is applicable would be $102,000 – ($6,000 x 12) = $30,000. Since the year-end bonus amount is more than the ceiling, only $30,000 would attract CPF contributions; the remaining $5,000 would not.

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

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.
  
  

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.

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.