Singapore Payroll Regulations – What You Need to Know?

Employers must familiarize themselves with the key regulations relating to payroll in order to ensure compliance. Oversights may result in hefty penalties and also affect the reputation of the employer. Business owners and those who have set up new Singapore companies must familiarize themselves with the prevailing payroll legislations.

It is prudent to outsource payroll processing to professional service providers as they ensure accuracy and compliance. The following is the key regulations relating to payroll in Singapore. The Employment Act (EA) applies to employees (irrespective of nationality) who are working under a contract of service. It does not include seamen , domestic workers and persons employed by statutory boards and government. From 1 April 2014, the EA, excluding provisions in Part IV, is applicable to managers and executives earning a basic monthly salary not exceeding S$4,500.

Salary

Salary refers to remunerations and includes allowances as agreed between the employer and employee in the contract of service or employment contract. It includes, basic pay, incentives, commissions, bonuses and allowances. Salary does not include benefits in kind that the employer has provided for housing, traveling, utilities, medical or other similar benefits. It is important to note that there is no minimum wage law in Singapore. Salary is a mutually agreed sum between the employer and employee. It may be negotiated between both parties. Though there is no minimum wage legislation generally, there are exceptions such as, in the case of foreigners who are under Work Passes (i.e. Employment Pass, S Pass, Work Permit), they must meet the minimum salary criteria for their respective passes in order to qualify.. Likewise, the government has earmarked companies in the cleaning, security and landscape industries, for minimum salary to workers. Companies in the cleaning sector is the first to have the Progressive Wage Model, whereby they are required to pay a basic wage of S$1,000 per month for their workers as a mandatory licensing requirement.

Frequency of Payment

In general, an employee must be paid at least once a month and it must be paid within seven days from the end of the salary period. Payments for overtime work must be made within 14 days from the end of salary period. However there are a few exceptions as below:

Situation Salary Payment
Dismissal/ Termination of Employee On the last day of employment or within 3 days from the date of dismissal or termination
Resignation by the employee and serves the notice period On the last day of employment
Resignation by the employee and does not serve notice period Within 7 days from the last day of employment

Method of Payment

Salary must be paid on a working day and during working hours at the place of work, or at any other mutually agreed place. It may also be paid into an employee’s personal/joint bank account.

Itemized Pay slips

From 1 April 2016, employers are required to give itemized pay slips to all employees covered under the EA and such pay slips must be given along with the payment of salary or within three days from the payment of salary. In case of termination or dismissal, pay slips must be given along with the payment of outstanding salary. It may be a hard or soft copy, though hand written pay slips are also permissible. The following details must be included in the pay slip.

  • Name of employer and employee
  • Date of payment
  • Basic salary
  • Salary Period – start and end date
  • Allowances
  • Any other pay such as, bonuses, rest day pay, public holiday pay etc
  • Deductions made
  • Overtime hours worked
  • Overtime pay
  • Start and end date of overtime pay period (if different from salary period)
  • Net Salary paid

Record Keeping

The employer must keep records of the pay slips in either soft or hard copy. In the case of current employees, records must be kept for the latest two years and in the case of former employees, the records for the last two years must be maintained for a period of one year after the employees leave the employment. In addition to the salary records, the employer must also keep records of employees. The Employee Records must contain the following information.

  • Address of employee
  • NRIC number / Work Pass number and expiry date
  • Gender
  • Date of commencement of employment
  • Date of leaving employment
  • Working hours – including duration of breaks
  • Dates of leave taken and public holidays

Authorized Deductions

Employers may deduct salary only for reasons allowed under the Act, or if ordered by the Court. Such authorized deductions can be made for the following:

  • For absence from work (without valid reasons or notifications)
  • For damage or loss of goods or money that the employee was accountable for. But it must be noted that such deduction is allowed only after an inquiry is held and the deduction must not exceed 25% of the monthly salary of the employee. Such deductions can be made as a one-time deduction only.
  • For cost of meals supplied at the request of the employee.
  • For the cost of accommodation, amenities and services agreed and accepted by the employee and such deduction cannot exceed the value of the supplies made and cannot be more than 25% of the monthly salary.
  • For recovery of advances, loans or overpaid salary. It must be noted that for advances and loans, deductions can be made in instalments spread over a period that does not exceed 12 months and each deduction cannot exceed 25% of the monthly salary. In the case of overpaid salary, the overpaid amount can be fully deducted from the employee.
  • For CPF contributions
  • For approved schemes
  • For payment to any registered cooperative society, with the employee’s consent
  • For any other purposes approved by the Ministry of Manpower

The maximum amount of deduction for a salary period is limited to 50% of the total salary. This does not include deduction made for absence from work, recovery of advances/loans, income tax, and payments to the registered societies that the employee has consented. However, in case of termination, the cap on deduction is not applicable, and the employer is allowed to deduct for all outstanding amounts owed by the employee.

Variable Components

Monthly Variable Component

This is a monthly incentive scheme that is built into the salary to enhance productivity of employees. The reward scheme is not a compulsory component unless specified in the employment contract or collective agreement.

Bonus

This is not compulsory unless specified in the employment contract or collective agreement. Usually it is paid once, at the end of the year.

Annual Wage Supplement

Popularly known as the ‘thirteenth month’ salary, this single annual payment is not compulsory and the employer may negotiate for a lower amount of AWS, if the business performance is poor.

Non-Compliance

The failure to pay salary in accordance with the EA constitutes an offence under the EA. A first-time offender will be liable to a fine of between $3,000 and $15,000 and/or 6 months’ imprisonment. A subsequent offence will be liable to a fine of between $6,000 and $30,000 and/or 12 months’ imprisonment.

Calculating Salary

Monthly Basic Rate

: This is the basic wage that an employee is entitled according to the employment contract and does not include allowances, bonuses, incentives or reimbursements paid to the employee. Basic rate of pay is used to compute the pay for working on a rest day or public holiday and overtime pay. It is computed as follows

12 x monthly basic rate of pay
————————————
52 x average number of days an employee is required to work in a week

Monthly Gross Rate

This is the money payable, including allowances, to an employee for one month. But this does not include bonuses, reimbursements, incentives and allowances paid for food, travelling and housing. This is used to compute payment for paid leave/holiday, absence from work, salary in lieu of notice of termination.

Incomplete Month and wages

A ‘complete month’ for the purpose of salary is defined as any month of a calendar year. The working days of the month excludes rest days and non- working days but includes public holidays.

A situation to compute wages for an incomplete month may arise in the following scenarios, when an employee

  • Starts work after the first day of the month
  • Leaves employment before the last day of the month
  • Takes no-pay leave of one day or more during the month

The formula to calculate salary for incomplete month is as below:

{Monthly gross rate of pay/ Total number of working days in that month}* Actual days worked

Payment for Work done on Public Holiday

All employees covered under the EA are entitled to 11 paid public holidays a year and the employee and employer may mutually agree to substitute a public holiday for any other day. However, if the employee is on an unauthorised leave or on an approved unpaid leave on the day before or after the public holiday, he is not entitled to public holiday pay.

If situation warrants, the employer may require the employee to work on a public holiday. In that case, the employer must pay an extra day’s salary at the basic rate of pay. If the employee works beyond the normal working hours on a public holiday he must be paid at least 1.5 times of his basic rate of pay as overtime payment.

Payment for Rest Day Work

Rest day can be a Sunday or any other day that is mutually agreed. It is an unpaid day. The maximum number of working days between two rest days is 12 days.

If work is done at employer’s request:
One day’s salary if employee works for half of the normal daily working hours
Two day’s salary if employee works more than half of the normal working hours

If work is done at employee’s request:
Half day’s salary if employee works for half of the normal daily working hours
One day’s salary if employee works more than half of the normal working hours

Overtime Payment
An Employee covered under the EA is not required to work more than eight hours a day or 44 hours a week. He is also not required to work more than 6 consecutive hours without a break and the break cannot be less than 45 minutes.

Employer must pay overtime wages if an employee is required to work beyond the specified hours of work. Such overtime cannot exceed 72 hours in a month, but this excludes work done within normal working hours during rest days or public holiday.

An employee must be paid at least 1.5 times his hourly basic rate of pay for all work in excess of the normal hours of work. Overtime payment is applicable to

  • Workmen earning not more than $4,500 basic monthly salary and
  • Non-workmen employees earning not more than $2,500 basic monthly salaries

Effective as of / from 1 April 2014, the overtime rate payable for non-workmen will be capped at the salary level of $2,250 or $17.70/hour.

Paid Leave

Paid Annual Leave

Depending on the period of service with the employer an employee is entitled to paid annual leave, which is 7 days for employees with period of one year of service. The annual leave entitlement increases by 1 day per year additional year of service thereafter and is capped at a maximum of 14 days for employees whose service exceeds 8 years and above. If the employee does not have adequate annual leave the employer may allow him to avail unpaid leave.

Annual leave can be encashed in the event of termination, resignation or at the employer’s discretion or based on contractual terms between the employer and employee.

Paid Sick Leave

Subject to conditions an employee is entitled to paid sick leave, if he has worked for a minimum of 3 months for the employer. The number of days of paid sick leave a new employee is entitled to depends on his service period. The maximum number of paid sick leave for employees who have worked for a minimum of 6 months is 14 days for outpatient treatment and 60 days for hospitalization.

The employer is legally obliged to bear the medical consultation fees for an employee who has worked for at least three months. The employer is obliged to bear cost such as medication, ward charges etc, depending on the medical benefits provided for in the employee’s employment contract or the collective agreement signed between the company and the union.

Government Paid Leave Schemes

In order to conjure a pro-family system and to support young families, the government introduced several paid leave schemes, apart from the standard maternity leave (16 weeks). These schemes include childcare leave, extended childcare leave, paternity leave, shared paternal leave and adoption leave. Employers must take note of these paid leave scheme and are obliged to honour such leave applications by their employees.

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