Beyond Singapore’s unique culture and beauty, this charismatic country is also known as a global business hub. This Southeast Asian country has not only stood up as a tourist attraction but also as a thriving business hub for tech-giants like Google and Meta. There are ample reasons that support of business growth in Singapore, like - a mindful infrastructure, secure financial services, competent and skilled workforce.
Achieving right business growth requires perfect balance of enabling conditions and Singapore provides it. If you are looking for an opportunity for global expansion in Singapore, then probably understanding its labor laws, and significance of global payroll and compliance can hold prominence as they are designed to ensure that both employee and employer undergo a fair treatment.
In this blog we will be covering the employee benefits and payroll cycle in Singapore. Let us dive in:
Employment Structure in Singapore
The Employment Act in Singapore is a guide that specifies labor laws, providing an outline of the working conditions and other basic terms of employment. The Employment Act is similar for all the employment types and nationalities.
According to this act, the employees are bound to be paid depending on their agreed terms, it can be hourly, daily, monthly or any other way. Notably, part IV of the Employment Act has defined the rest days, working hours, overtime pay only to a certain category of employees. These categories are majorly differentiated as:
- Workmen earning a basic monthly salary of up to $4,500.
- Non-workmen employees earning a monthly salary of up to $2,600.
Interestingly, the managers and executives or any other supervisory designated roles are not entitled to any overtime pay under the Employment Act.
Employment Contract
The employment contract in any form is the fundamental start to the employee-employer relationship. This contract must follow the foundational rules or the basic directives of the Employment Act while highlighting the KETs or Key Employment Terms.
KETs includes:
- Employee and Employers names: Who has employed whom.
- Designation, Role, and Responsibility: What are the basic expectations from the candidate.
- Joining Date and Duration: Joining date of the candidate and minimum duration of employment.
- Work Hours and Leverages: What are the defined work hours, and leave entitlement.
- Salary and Benefits: What is the base salary and what benefits are included.
- Place of Work and Notice Period: Where will you work, and what will be your notice period.
The employers are bound to provide a written contract to the employees and assure their consent before adding any additional terms to the contract. The probation period often lasts between 3 to 6 months which usually precedes permanent employment.
Working Hours and Overtime Statutes
The typical work hours in Singapore ranges from 40 to 44 hours. These contractual hours must be agreed upon by employees before the beginning of employment. The standard limit is:
- 9 hours per day or 44 hours per week for employees working 5 days or fewer per week.
- 8 hours per day or 44 hours per week for employees working more than 5 days per week.
Overtime
An employee who exceeds the normal work hours usually is eligible for extra pay or overtime. The entitled employee’s pay is generally 1.5 times their base hourly rate. One employee can only work overtime for 72 hours a month, someone exceeding the count needs government approval.
Leave Entitlements
The leave policies in Singapore briefly discusses and encourages employee welfare and time for family and responsibilities.
Annual Leave:
The annual leave of the employee who has undergone employment for over 3 months is eligible for a minimum of seven-day leave. This count keeps increasing every year until it reaches 14 days.
Sick Leave:
The number of sick leaves in Singapore is based on the employee’s service period in the organization. It is bifurcated into two categories one: Paid Outpatient Leave and Paid Hospitalized Leave
|
No of Months of Services |
Paid Outpatient Leaves in Days |
Paid Hospitalization Leaves in Days |
|
3 Months |
5 |
15 |
|
4 Months |
8 |
30 |
|
5 Months |
11 |
45 |
|
6 Months |
14 |
60 |
Maternity Leave:
A new mother is eligible for 16-week maternity leave under the following circumstances:
- The newborn must be a Singapore citizen.
- The mother must have worked for the employer for at least three months before availing the leave.
- Before availing maternity leave the mother must serve one week’s notice
The pay in the case of maternity leave is divided as:
- For the first and second child, the pay for first 8 weeks is processed by the employer and next 8 weeks by government of Singapore.
- For the third and fourth child, the pay is processed by the government itself for all the 16 weeks of leave.
The mothers who do not qualify for the above-mentioned terms are eligible for 12 weeks of leave. Wherein the employer covers first 8 weeks of leave, which later continues based on the employment contract. The new mothers can also enjoy 8 weeks of leave flexibly. The pay during these leaves is usually provided by the employer initially, which is later reimbursed by government, under the Government-Paid Maternity Leave (GPML) scheme.
Paternity Leave:
A new father also has the leverage by the Government of Singapore, wherein they can avail paternity leave of 4 weeks, irrespective of the employment types funded by government. The paternity leave benefit has started since January 1, 2024.
Childcare Leave:
Working parents whose children are Singaporean citizens are eligible for childcare leaves. Parents who wish to avail themselves of these leaves are entitled to 6 days of paid leave annually under the Child Development Co-Savings Act. If provided, the youngest child must be under 7 years and the employee must have been working with the employer for three consecutive months.
The parents whose children are not Singapore citizens, are entitled to two days of leave annually, provided by the same employment criteria.
Termination and Retrenchment
Termination of employment in Singapore strictly requires a written notice from either party. The employee can encash their annual leaves, however, if the employee is terminated for their misconduct, then they are not qualified for the encashment. If the unused leaves are encashed, then it should be calculated at the gross rate of pay based on the last drawn salary. If the employer is terminating an employee, and the organization strength ranges to 10 or more, then employees must inform the Ministry of Manpower, about the situation within the next five working days.
Notice Period and Severance Benefits
The notice period must follow the span of 1 month based on the time span one has been working with the employer. If employee’s designation is at higher level than the duration of notice period may vary. Although, the exit period must be written notice, and no verbal declaration would be considered.
Severance benefits are usually entitled to employees who have been a crucial part of the organization for at least 2 years. The severance amount is usually on the employment contract of the unionized companies, and if not mentioned this amount can be negotiated between the employer and the employee. The rule is 2 weeks to 1 month’s salary per year of service, based on the company’s financial status and industry standards. In unionized companies, where severance benefits and terms are in the collective agreement, the standard is 1 month’s salary for each year of service.
Taxation and Social Security
The taxation system in Singapore is simple, and mostly automated. The taxation system usually rates from 0-22%. Besides, no income tax is deducted from the employee’s salaries. The employees pay their own taxes.
The employer must prepare an annual wage report based on Form IR8A and Appendix 8A, Appendix 8B, or Form IR8S (where applicable) for their employees. These reports are provided to the employees by 1st March of the following year of income tax filing.
The Central Provident Fund or CPF is provided by the employer to provide financial security for the employees. These benefits are for retirement, healthcare, home ownership, family protection and others. Yet these benefits are only for the permanent residents, foreigners are not eligible for CPF. PRs and their employers contribute funds in three accounts:
- Ordinary Account: For housing, CPF insurance and investments
- Special Account: For retirement and investment
- Medisave Account: For hospitalization and medical
Additional Employee Benefits
Employees in Singapore are provided with a mandatory benefit, that is, CPF. The country also offers ample other benefits like: (MBMF) Mosque Building and Mendaki Fund, Singapore Indian Development Association (SINDA), Chinese Development Assistance Fund (CDAC), and Eurasian Community Fund (ECF)
Two other benefits include:
- Annual Wage Supplement (AWS):
There are many companies in Singapore that offers performance-based bonuses calculated based on the company profits. Additionally, some companies offer a 13-month bonus where the bonus amount is disbursed in the employee’s account in December.
- Work Injury Compensation:
Employers must provide insurance for manual workers and non-manual employees earning up to S$2,600 monthly. This compensation usually covers medical expenses and loss of income due to work-related injuries.
Foreign Worker Regulation
Foreign Workers must ensure a valid work pass or employment permit before they start with their employment in Singapore. The Ministry of Manpower or MOM issues various passes which include Employment Pass, S Pass, and Work Permits. These are often based on your qualifications, salary, and job profile.
How Can We Help You?
TopSource Worldwide is a global expansion service provider, who has successfully established their signature in over 180 countries. With over 400 in house experts and two decades (and counting) of experience we provide a plethora of services like Employer of Record (EOR) solutions that can help you explore the Singapore market and navigate probable risks and benefits, hire talent without having to establish, manage payroll and compliance and many others. Our Entity Solutions services can also serve best in case of global expansion where your organization is planning to establish in entity in Singapore. Apart from these, our service line also includes payroll processing for local and global clients, HR Advisory, and Talent Acquisition.
TopSource Worldwide offers tailored solutions that caters to your business needs comprehensively and are within budget. Thus, if you are looking for global expansion then contact us today!
