Navigating payroll regulations in Singapore can be complex, especially for foreign business owners unfamiliar with local requirements. From statutory contributions like CPF and SDL to accurate calculations of overtime, leave, and allowances, compliance can be challenging. Outsourcing payroll to trusted experts ensures employees are paid accurately and on time while avoiding costly errors and penalties. With professional payroll services, you can focus on growing your business while ensuring full compliance with Singapore’s labor and tax regulations.
Why Payroll Outsourcing?
Payroll outsourcing is the delegation of payroll tasks to external service providers, allowing businesses to streamline operations and ensure accurate employee salary processing. By leveraging specialized expertise, companies can offload the complexities of payroll calculations, tax compliance, and benefits administration, freeing up time and resources for core business activities. This strategic approach enhances efficiency, reduces costs, and provides peace of mind knowing that payroll processes are handled by professionals.
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Reasons to Outsource Payroll in Singapore
Outsourcing payroll is an increasingly popular choice for businesses seeking efficiency, accuracy, and compliance in managing their employee compensation. Handling payroll in-house can be time-consuming and prone to errors, especially when navigating complex regulations and statutory requirements. By entrusting payroll functions to experienced professionals, businesses can streamline operations, reduce administrative burdens, and ensure employees are paid accurately and on time. This strategic move allows companies to focus on core activities, improve compliance with local labor laws, and save costs in the long run.
Singapore Payroll Management: Key Things to Note
To ensure that employees are well-protected, employers in Singapore have to fulfil these 6 requirements for a successful payroll management and avoid facing penalties from non-compliance.
Understanding Payroll in Singapore: Essential Insights for Foreign Employers
If you’re a foreign business owner in Singapore, there are 3 key things that you’ll need to know when it comes to payroll in Singapore.
Employee Central Provident Fund (CPF)
The CPF is one of Singapore’s mandatory social security savings scheme where both employees and employers contribute based on the salary. The employee is expected to contribute 20% of its gross salary, while the employer will contribute 17% of the employee’s gross salary.
For example …
Employee A’s gross monthly salary is S$3,000 and she is 25 years old. Employer has to contribute 17% of the salary.
AND
Total cost to employer for Employee A = (Monthly Gross Salary CPF × Contribution Rate) + Monthly Gross Salary
Sample Calculation Table
| Monthly Gross Salary | S$3,000 |
| CPF Contribution Rate | 17% |
| Monthly Gross Salary × CPF Contribution Rate | S$510 |
| (Monthly Gross Salary × CPF Contribution Rate) + Monthly Gross Salary | S$510 + S$3,000 |
| Total Cost to Employer for Employee A | S$3,510 |
Effective from 1 Jan 2023, the CPF contribution rates for seniors aged between 56 to 70 years old are set to increase on both employee and employer levels.
| Employee’s age (years) | CPF Contribution Rates from 1 Jan 2023 | |||
| Current Total (% of wage) | New Total (% of wage) | By Employer (% of wage) | By Employee (% of wage) | |
| 55 and below | 37 | 37 | 17 | 20 |
| Above 55 to 60 | 28 | 29.5 (+1.5) | 14.5 (+0.5) | 15 (+1) |
| Above 60 to 65 | 18.5 | 20.5 (+2) | 11 (+1) | 9.5 (+1) |
| Above 65 to 70 | 14 | 15.5 (+1.5) | 8.5 (+0.5) | 7 (+1) |
| Above 70 | 12.5 | 12.5 | 7.5 | 5 |
Another key change from September 2023 is the increase in CPF monthly salary ceiling from S$6,000 to S$6,300, which will continue to increase incrementally, reaching to S$8,000 from January 2026 onwards. This means that the amount of CPF payable by the employer is set to increase if they have employees earning more than the current ceiling.
| Effective Date | CPF Monthly Salary Ceiling |
|---|---|
| Current | S$6,000 |
| Sep 2023 | S$6,300 |
| Jan 2024 | S$6,800 |
| Jan 2025 | S$7,400 |
| Jan 2026 | S$8,000 |
Community Funds
Aside from the CPF contributions, every employee is required to donate a small amount based on their monthly total wages to self-help groups in Singapore, unless they withdraw.
Chinese Development- Assistance Council (CDAC) Fund
Eurasian Community Fund
Mosque Building & Mendaki Fund (MBMF)
Singapore-Indian Development Association (SINDA) Fund
Tax Clearances
It is also Singapore employers’ obligation to do income tax clearance for all employees via Form IR8A. The Auto Inclusion Scheme (AIS) is also mandatory for all companies with 5 or more employees – all employers must submit their employee’s employment income for each year.
As such, employers need to know about income tax in Singapore. The current personal income progressive tax rate on employment income is from 0% to 24% for tax residents. For non-tax residents, it is a high flat rate of 15% or the progressive rate, whichever is higher.
Importance of Singapore Employment Contract
The Singapore Employment Contract is a critical aspect when hiring local or foreign employees in your company as the Employment Act does not fully cover every employee. For instance, if you are utilising payroll services for both your in-house and outsourced workforce, the policies will be different for each type of worker. Thus, you will need to understand the Singapore Employment Contract to know your rights as an employer and what you should provide your employees.
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