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Every business in Singapore that employs and pays workers must follow the country’s payroll regulations to ensure compliance. This article offers an overview of the essential requirements for employers, encompassing salary pay-out schedules, mandatory contributions, and overtime management. Whether you are a new employer or need a refresher, this guide will provide the necessary knowledge for smooth payroll processing.

Key takeaways

  • Employers and HR personnel should thoroughly understand of laws such as the Employment Act, CPF Act, Income Tax Act, EFMA, PDPA, and WICA. These laws govern various aspects of employment and payroll management within the country.
  • Setting up payroll includes having a business bank account and efficient payroll software to automate data collection, calculation, payslip issuance and statutory submissions.
  • Employers must prepare and submit tax forms accurately and timely to IRAS and provide annual earnings summaries to employees.
  • Individual income tax rates vary based on residency status and income levels, with changes in the highest marginal tax rates starting from YA 2024, emphasising the importance of staying updated on tax laws.

Key regulations governing Singapore payroll

Singapore has a robust legal framework governing payroll practices to ensure fair and transparent employee compensation. Below is a brief overview of the key regulations that govern this system:

  • Employment Act: This regulation outlines fundamental employment terms and conditions for most Singaporean employees. It covers areas like salary payment, overtime and leave entitlements and provides guidelines for salary calculation, working hours and termination procedures.
  • Central Provident Fund (CPF) Act: This law mandates contributions to the CPF, which is intended to help employees save for retirement, receive healthcare benefits and have access to housing benefits. Employers and employees must make contributions to the CPF.
  • Income Tax Act: It oversees income taxation for individuals and businesses, requiring employers to deduct income tax from employees’ salaries and submit tax returns to tax authorities.
  • Employment of Foreign Manpower Act (EFMA): The EFMA regulates the employment of foreign workers by setting guidelines for hiring them, including obtaining work permits and employment passes.
  • Personal Data Protection Act (PDPA): The PDPA oversees how personal data, including employee data, is collected, used, and shared. Employers must obtain consent for data collection, ensure data security and provide individuals with access to and the ability to correct their personal information.
  • Work Injury Compensation Act (WICA): WICA establishes a framework for compensating employees for work-related injuries or occupational diseases. It outlines the rights and responsibilities of both employers and employees in workplace accidents.

Payroll setup

Setting up payroll in Singapore requires a business bank account, a registered company, and payroll software to streamline the process. The software should be capable of automating tasks like data collection, payroll calculation, payslip issuance, and statutory submissions. Additionally, employees should also have their personal bank accounts.

Payroll processing steps

Data collection

The first step in payroll processing is collecting data. This includes employee information, salary components, hours worked, leaves taken, employee bank details, annual leave and allowances.

Payroll calculation

Next, the payroll is calculated. This includes the basic salary, payment frequency, overtime, authorised deductions, CPF contributions, other mandatory contributions and levies and variable components like incentives, bonuses and variable payments.

Furthermore, the 13th month’s pay is not compulsory in Singapore. If it is included in the employment contract, the payment of the 13th month’s pay along with any bonus, should be in accordance with the terms outlined in the contract.

Payslip issuance and payment

After the payroll is calculated, payslips are issued, and payments are made. The payslip should include all the necessary information, such as the employee’s total salary, deductions and net pay. Payments should be made by the stipulated payday.

As per Singapore’s statutory rules, the salary must be paid at least once a month, not later than the seventh day after the end of the salary period. Overtime pay, if any, must be paid within 14 days after the specified salary period.

Statutory submissions

Employers must submit statutory submissions to various government bodies. This includes CPF contributions to the CPF Board for Singaporeans and permanent residents, tax deductions to the Inland Revenue Authority of Singapore (IRAS) and workforce data to the Ministry of Manpower (MOM).

Annual reporting for individual income tax & year-end payments

At the end of the year, employers must prepare tax forms for their employees, provide a summary of annual earnings to employees and submit these documents to the IRAS by April 15 of the following year.

Individual income tax in Singapore

Taxation in Singapore depends on the individual’s tax residency status. An individual will be considered a tax resident for a specific Year of Assessment (YA) if they fall under one of the following categories:

  1. A Singapore citizen or permanent resident who resides in Singapore, excluding temporary absences.
  2. A foreigner who has:
    1. Stayed in Singapore for at least 183 days in the preceding calendar year.
    2. Remained continuously in Singapore for three consecutive years, even if their stay was less than 183 days in the first and/or third year.
  3. A foreigner who has worked continuously in Singapore over two calendar years, with a total stay of at least 183 days (including physical presence immediately before and after employment). This excludes company directors, public entertainers or professionals.

If the conditions above are not met, an individual will be considered a non-tax resident of Singapore for tax purposes.

The highest marginal individual income tax rate will be raised starting from YA 2024. Income exceeding SGD 500,000 but not more than SGD 1 million will be taxed at 23%, and income exceeding SGD 1 million will be taxed at 24%, representing an increase from the current rate of 22%.

Resident tax rates

According to the IRAS, individual income tax rates for YA 2024 and onwards are as follows:

Chargeable income (SGD)Income tax rate (%)Gross tax payable (SGD)
First 20,000
Next 10,000
0
2
0
200
First 30,000
Next 10.000

3.5
200
350
First 40,000
Next 40,000

7
550
2,800
First 80,000
Next 40,000

11.5
3,350
4,600
First 120,000
Next 40,000

15
7,950
6,000
First 160,000
Next 40,000

18
13,950
7,200
First 200,000
Next 40,000

19
21,150
7,600
First 240,000
Next 40,000

19.5
28,750
7,800
First 280,000
Next 40,000

20
36,550
8,000
First 320,000
Next 180,000

22
44,550
39,600
First 500,000
Next 500,000

23
84,150
115,000
First 1 million
In excess of 1 million

24
199,150

Non-resident tax rates

Taxes on employment income: Non-resident individuals are taxed at a flat rate of 15% or the progressive resident tax rates (refer to the table above), whichever is the higher tax amount.

Taxes on director’s fees, consultation fees and other income: The tax rate for non-resident individuals is 24%. This rate applies to all income, including rental income from properties, pension, director’s fees, and other sources, except for employment income and specific income subject to reduced withholding rates.

Common challenges and payroll mistakes

Common challenges and payroll mistakes faced by businesses include:

  • Failing to calculate and contribute to the CPF for employees accurately.
  • Mistakes in calculating income tax deductions for employees.
  • Inadequate record-keeping
  • Incorrectly classifying employees as full-time, part-time, or contract workers.
  • Incorrect overtime pay calculations
  • Late salary payments

To mitigate these challenges and errors, Singapore businesses should invest in robust payroll systems, stay informed about regulatory changes, conduct regular audits and provide the necessary training to HR and payroll staff.

Conclusion

Singaporean employers navigate a complex landscape of regulations when compensating their employees. The Employment Act, CPF Act, Income Tax Act, EFMA, PDPA, and WICA all play a role. To navigate these requirements efficiently, businesses must establish a robust payroll infrastructure, maintain proper data collection, and promptly fulfil statutory obligations.

Complying with these regulations is not just about avoiding penalties but also about creating a smooth operational environment with happy employees. By adopting best practices and leveraging appropriate payroll tools, businesses can streamline their processes and minimise administrative errors.Bottom of Form

Streamline and outsource your payroll to Acclime

At Acclime, we ensure error-free payroll processing that meets CPF, income tax, and all statutory requirements. Our secure system and data-driven approach guarantee compliance, freeing you to manage your business. Outsource payroll to Acclime and gain confidence in a smooth, efficient operation.


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