Talk to experts in Singapore payroll
Hawksford also offer a cloud-based service to manage payment arrangements, expense reimbursement and employee benefits computation.
The purpose of this guide is to provide a general introduction to the statutory requirements as per the Singapore Employment Act and common practices applied to employment contracts, wages, and benefits when hiring employees in Singapore. The guide does not address specialized industries involving manual labour and blue collar workforce.
The relationship between employer and employee in Singapore is regulated largely by the contract of employment between them. Generally parties are free to contract as they choose subject to complying with the Employment Act and certain limits. The Singapore Employment Act does not apply to all employees. Instead, it applies only to “employees” as defined under the Act. Specifically, the Employment Act does not apply to:
Furthermore, employees earning below SGD 2,600/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.
Employment Contract is also known as Employment Agreement, Appointment Letter, Offer Letter, etc. It is an agreement between an employee and employer that specifies the terms and conditions of employment. It is advisable to have a written employment contract in Singapore. Typically, only senior management employees might have the option of negotiating their employment contracts. A violation of one or more of the terms in an employment contract by either an employee or employer is considered breach of contract. Most employment contracts include several important clauses such as:
The terms and conditions of the employment contract cannot be less favorable than what is stipulated in the Employment Act.
Employee benefits are often called fringe benefits or perks. There are various types of compensations provided to employees in addition to their normal salaries. Employee benefits in Singapore might include sick leave, annual leave, maternity leave, incentives & bonuses, relocation assistance; healthcare benefits, retirement fund contributions, housing allowance, allowance for children’s education, childcare benefits, transportation reimbursements, etc.
Statutory Requirement: The Employment Act does not regulate the minimum salary every employee must be paid. In other words there is no minimum salary requirement and it is subject to negotiation between the employer and the employee. However, the salary must be paid at least once a month within 7 days after the end of the salary period. Overtime pay, if applicable, must be paid within 14 days of the stipulated salary period. There is no requirement of bonus payment under the Employment Act of Singapore.
Common Practice: The salary paid to an employee obviously depends on the position and skills required. Annual bonus equivalent to at least 1 month’s salary, commonly known as 13th month payment, has become a common practice in Singapore. The exact amount of annual bonus can vary from employee to employee as per the company policies and will normally be tied to the employee’s performance as well as performance of the company. The details of the annual bonus policy will normally be specified in the employment contract. It is not uncommon to see employees in Singapore receiving annual bonuses of 2-3 times the monthly salary during good economic times.
Statutory Requirement: Hours of Work & Overtime are regulated under the Singapore Employment Act only for those employees earning below SGD 2,600/month. Employees that are covered under the Employment Act as above are entitled to work no more than 44 hours per week. Singapore’s Ministry of Manpower has stringent laws regarding hours of work and conditions for working overtime. An employee is entitled to work not more than 8 hours daily, or 44 hours weekly. The Employment Act also deems that employees cannot work for more than 6 hours without a break. Inclusive of overtime work, employees cannot work more than 12 hours per day except under certain circumstances, including but not limited to an actual or threatened accident, work that is essential to national defence or security, or unforeseeable circumstances which leads to work being interrupted. Shift workers, on the other hand, are not allowed to work more than 12 hours daily under any circumstances. Employees are entitled to 1 rest day (deemed as a non-working day from midnight to midnight) per week, and is not considered a paid day. The longest possible interval between 2 rest days is 12 days.
Common Practice: For employees earning above SGD 2,600/month, the above conditions of the Employment Act do no apply and it is free to be determined by agreement between the employee and the employer. As a general rule in Singapore, office employees work from Monday through Friday, from 9am to 6pm or 7pm, depending on the industry and company policies. It is not uncommon for Singapore employees to work 9-10 hours during the weekdays and half-day on Saturdays.
Considering Singapore’s multicultural diversity, public holidays are designed to accommodate many different ethnic communities. These include New Year’s Day, Chinese New Year, Good Friday, Labour Day, Vesak Day, National Day, Hari Raya Puasa, Deepavali, Hari Raya Haji, and Christmas Day.
Statutory Requirement: For employees earning less than SGD 2,600/month, the following minimum rules are mandated under the Employment Act. The employee is entitled to paid holiday on public holidays, although the specific dates may be substituted by any other day, if this is mutually agreed by the employer and employee. In the event that there is a public holiday that falls on a Sunday, or rest day, the following Monday shall be considered the paid holiday. Additionally, if the public holiday falls on a day when the employee is not contractually required to work, he/she shall be compensated, either with an extra day’s pay or by an extra day off as a substitute.
Common Practice: For employees earning above SGD 2,600/month, the Employment Act does not enforce any rules regarding public holidays. However, as a common practice in Singapore, all employees are given the same public holidays benefit as above.
Statutory Requirement: For employees earning less than SGD 2,600/month, the statutory annual leave is outlined in the Employment Act. To qualify for annual leave, the employee must have served at least 3 months with the employer. The amount of annual leave is dependent on the contractual agreement between the employee and your employer, but is subject to a minimum of 7 days during the first year, and 1 extra day for each additional year of service. Annual leave taken even on a half-working day is considered 1 day’s leave, unless otherwise stated in the employment contract. In the case of dismissal for misconduct, absenteeism from work without permission for more than 20% of working days in the month, or if the leave is not used up within 12 months of every year of continuous service, the employee’s annual leave will be forfeited, unless otherwise specified in the employment agreement.
Common Practice: As a common practice in Singapore, all employees are given an annual leave around 14 days per year, well above the minimum required under the Singapore Employment Act.
Statutory Requirement: For employees earning less than SGD 2,600/month, the statutory sick leave entitlements are outlined in the Employment Act as follows.
The employee must produce a medical certificate from the company doctor (if one is appointed), government doctor, or doctor from an approved hospital.
Common Practice: Sick leave benefits for all company employees in Singapore generally correspond to the minimum requirements of the Employment Act as above.
Statutory Requirement: There is no statutory requirement to provide private health insurance benefits to employees in Singapore under the Employment Act. Working professionals who are Singapore Citizens or Permanent Residents are automatically provided with a low-cost medical insurance called Medishield – a basic tier of insurance protection for all Singaporeans. As part of making contributions to the employee’s retirement fund called CPF, a certain portion of the contribution is automatically allocated to the employer’s Medisave account. Medishield insurance scheme helps Medisave account holders and their dependents meet the cost of treatment during old-age or serious illnesses. Medishield premiums are deducted from the Medisave accounts.
Common Practice: When it comes to healthcare insurance benefits, it really depends on the employer. In Singapore, most large companies offer additional private medical insurance benefits to their employees; and conversely, the smaller companies do not offer such benefits . To provide a higher level of healthcare benefits than what is provided under the basic Medshield scheme, as well as to provide medical insurance benefits to Employment Pass holders (i.e. foreign employees), employers may wish to offer private healthcare insurance benefits through any one of the numerous private insurance companies in Singapore.
Statutory Requirement: In simplified terms, female employees that have been employed for more than 3 months may be eligible for paid maternity leave benefits. Eligible female employees are entitled to a total of 16 weeks leave. Employers are prohibited from dismissing any employees on maternity leave. Employers are required to pay maternity leave in full, should notice of dismissal be given without sufficient cause within 3 months of employees’ confinement. Besides maternity leave, the eligible female employees are entitled to 6 days childcare leave per year, if they have worked for the employer longer than 3 months, and are the parent of a child below 7 years of age.
Common Practice: Maternity and Childcare leave benefits for company employees in Singapore generally correspond to the minimum requirements of the Employment Act as above.
Statutory Requirement: The Employment Act does not have any clauses pertaining to the probation period for employees.
Common Practice As a common practice, employees are asked to serve a probation period of 3-6 months. The probation period is usually reflected by a shorter termination notice period.
Statutory Requirement: Either party can terminate the employment contract by giving a written notice or by paying salary in lieu of notice to the other party. There is no statutory requirement on the number of days for the notice period. The notice period depends on what is agreed upon in the employment contract and must be the same for both parties. The employee is allowed to use any accrued annual leave to offset the notice period. The employment contract can be terminated by either party without notice if the other party is in willful breach of the contract.
Common Practice: It is common practice to provide 2 weeks’ notice period during the probationary period, and 1 month’s notice period following the confirmation of employment. Although the Employment Act provides that both sides may give salary in lieu of notice, the Singapore courts have held the view that the employee can not terminate the contract by giving his salary in lieu of notice, because of the practical difficulties faced by the employer in such a situation.
Normally a company goes through retrenchment to reduce outgoing money or expenditures or redirects focus in an attempt to become more financially solvent. Implementation may result in positive or negative consequences and this has implications for employees who are retrenched and those who stay on their jobs. Although there are a number of other ways (such as hiring freeze, cutting salaries, reducing benefits) to implement the retrenchment process, the most common way utilized by companies is reducing the workforce by way of layoffs.
Statutory Requirement: As per the Singapore Employment Act, the following general rules apply for employee earning less than SGD 2,600/month:
Since retrenchment has negative implications on the workforce including loss of skills, energy, morale, commitment, physical and mental health degradation that results from employees withdrawing physically and emotionally, the Ministry of Manpower advises employers to carry out any retrenchment exercise responsibly.
Common Practice: As a common practice, retrenchment benefits in Singapore depends on the size and financial position of the company. A small company might not be able to offer anything beyond what is required as per the statutory requirements listed above. To avoid any conflicts and confusion, it is best to stipulate the specifics of retrenchment benefits in the employment contract.
CPF is a mandatory retirement savings scheme for Singapore Citizens and Permanent Residents.
Statutory Requirement: For employees that are Singapore Citizens or Permanent Residents, the employer is required to make contributions to the CPF fund. Monthly contributions are made by both the employee and employer. The employer is responsible for sending the monthly payment, which includes both the employer’s and the employee’s respective contributions, by the 14th of the following month. The employee’s portion is then deducted from the salary. 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. There is no CPF contribution for foreign employees holding an Employment Pass or Work Permit in Singapore.
Common Practice: There is no variation in common practice that contrasts the statutory requirement for CPF contributions.
Statutory Requirement: There are no statutory requirements to provide education and training benefits to Singapore company employees. In general, employers are encouraged by the Ministry of Manpower to provide their employees with opportunities for training and development, to improve job competency and possible career advancement. The Singapore government also has various schemes to partially cover the training and skills upgrading costs.
Common Practice: There is no standard practice to offer training and skills upgrade benefits to employees. It usually depends on the company size, nature of business, and the employee category.
Most companies in Singapore provide certain non-statutory benefits to their employees, ensuring that their workforce is well looked after. Some of the common benefits provided include:
Healthcare, well being and personal benefits – Many of Singapore companies offer medical insurance plans that extend to dependants and typically cover personal accident and hospitalization.
Per Diem – For travel related jobs, many companies provide a per-day allowance, transportation allowance or reimbursement of actual expenses while traveling. The per diem amount depends on the place the employee is travelling to.
Relocation package – Most companies provide a relocation allowance to employees who have to move with their family from their home country to Singapore. An expatriate compensation package typically includes: paid shipping of personal effects, paid air fare, free or subsidized housing, payment of utility bills, paid childcare and payment of school fees for children. Some employees come on “full expat” terms, some on “semi expat” terms and some others on “full local” terms. It is a common practice to accommodate employees in a serviced apartment or hotel, paid for by the company for certain duration until they find suitable accommodation.
Employee stock purchase plans – Some companies provide employee stock purchase plans, especially to senior employees.
Other additional perks – Other perks may include: paid corporate memberships, sponsoring employee training programs and educational courses, providing restaurant discount vouchers, mobile phone plans, paid gym/club memberships, organize sporting activities, team parties and outings, staff referral schemes, sabbaticals etc.
Hawksford also offer a cloud-based service to manage payment arrangements, expense reimbursement and employee benefits computation.
Let our experienced team help you with managing your accounting, tax and payroll issues.Contact us
Back to top