Singapore Payroll Management

1. Salary includes basic pay and allowances. It does not include travelling, food or housing allowances. 

Salary is simply remuneration paid for work done under a contract of service. Besides travelling, food or housing allowances, it also does not include pension, expenses incurred during work as well as retrenchment benefits.

2. Salary must be paid at least once a month.

Employers must pay salaries at least once a month, or at shorter intervals if they choose. Salaries must be paid within 7 days after the end of the salary period – non-payment of salary is an offence.

3. Itemised pay slips are a must.

As of 1 April 2016, all employers must issue itemised pay slips to employees covered by the Employment Act. Hard or soft copies are acceptable, and should include details such as the date of payment, basic salary and allowances, overtime pay, salary period, as well as deductions made. Failure to do so will result in a fine.

4. Keep employment records.

Are you keeping detailed employment and salary records for your employees? In Singapore, employers are expected to keep two years of such records for all employees. Records of ex-employees must be kept for one year after they leave employment.

5. Pro-rate an employee’s salary for incomplete work months.

If an employee works for an incomplete month, he is only entitled to the pro-rated portion of his salary for that part of the month he worked. The formula for calculating wages for an incomplete month is as follows:

Monthly gross
rate of pay

———————  X  number of days employee worked in that month

# Working
days in month

6. Calculate overtime pay correctly.

Overtime work is any work done in excess of the normal hours of work (excluding breaks). An employee can only work up to 72 overtime hours in a month. For overtime work, you will be expected to pay at least 1.5 times the hourly basic rate of pay. Payment should be made within 14 days after the last day of the salary period.

7. Take note of mandatory levies, contributions and statutory requirements.  

Besides Central Provident Fund (CPF) contributions, employers are also required to make the following monthly contributions:

• Ethnic funds such as CDAC, ECF, MBMF and SINDA, which aim at helping the less privileged in the respective ethnic communities;
• Skills Development Levy, which provides you training grants when you send your employees for training;
• CPF contributions for National Servicemen even if they undergo periodic NS trainings. Employers, however, do not have to pay NS men for the days they are away.
• In addition, employers hiring foreigners with Work Permits of S Passes will have to pay monthly levies for each worker.

8. Take note of statutory reporting requirements.  

From Year of Assessment 2017, IRAS requires that employers who have (i) received notice to file their employment income electronically or (ii) 10 or more workers in their employment during the entire year must submit their employees’ income information to IRAS electronically by 1^st Mar each year.

In addition, employers with foreign employees must seek tax clearance for their foreign employees by filing Form IR21 at least one month before such employee ends his employment, commences an overseas posting, or leaves Singapore for three months or more.

On a Final Note

Successful payroll management involves not only the accurate processing but also good maintenance and timely disbursement. Other than ensuring compliance, this also lifts staff morale and keeps employees motivated.

As your business grows and your employee profile becomes more complex, payroll processing could require more time and effort on your part. If you are a small to mid-size Singapore-based company with a staff strength of up to 25 employees, you may find outsourcing to a payroll service provider more cost-effective and less stressful than trying to manage this function in-house.