Tips to manage my payroll in Singapore
How to ensure a successful payroll management
To help you run payroll smoothly and stay compliant with Singapore's employment and tax rules, here are the key points every employer should know:
- What counts as salary. Under the Employment Act, salary is remuneration, including allowances, paid for work done under a contract of service. It excludes the value of accommodation, utilities or other amenities, employer pension or provident fund contributions, travelling allowance, reimbursement of work expenses, gratuity on discharge or retirement, and retrenchment benefits. Allowances such as meal or shift allowances are part of salary.
- When to pay. For employees covered by the Employment Act, salary must be paid at least once a month, and employers may choose to pay at shorter intervals. It must be paid within 7 days after the end of the salary period, and overtime pay within 14 days. Different rules apply to final pay. For example, an employee who resigns and serves the required notice must receive their final salary on the last day of employment.
- Itemised payslips. Employers must issue itemised payslips to all employees covered by the Employment Act, either together with the salary or within three working days of payment. A payslip must show the employer's and employee's full names, date of payment, basic salary, start and end date of the salary period, allowances, other additional payments, deductions, overtime hours and pay, the overtime period if it differs, and net salary. Payslips can be soft or hard copy.
- Record keeping. Employers must keep employment and salary records for all employees, local and foreign. For payslips, MOM requires the latest two years for current employees, and for ex-employees, the last two years kept for one year after they leave. Separately, IRAS generally expects payroll and tax records to be kept for five years.
- Incomplete months. For employees covered by the Employment Act who work only part of a month (for example, joining or leaving mid-month), salary is prorated as: monthly gross rate of pay × days actually worked ÷ working days in that month. Annual leave is also prorated for employees with at least three months' but less than a full year of service.
- Overtime. Overtime is work beyond an employee's contractual hours, excluding breaks. Contractual hours cannot exceed 44 hours a week, and are further capped at 9 hours a day for a 5-day week or 8 hours a day for a longer week. Overtime must be paid at least 1.5 times the hourly basic rate, within 14 days after the salary period ends. Employees may work up to 72 overtime hours a month unless MOM grants an exemption, and generally no more than 12 hours a day. These rules apply only to workmen earning up to $4,500 basic a month and non-workmen earning up to $2,600, and not to managers and executives. For non-workmen, overtime pay is calculated on a salary of at most $2,600, or $13.60 an hour.
- Filing employment income with IRAS. The Auto-Inclusion Scheme (AIS) is compulsory for employers with 5 or more employees, or for those with fewer than 5 who have received a notice to file employment income electronically. The headcount includes full-time and part-time resident employees, non-resident employees, company directors, board members receiving fees, pensioners, and ex-employees who received income in the reporting year. AIS registration is now available year-round, and once registered, participation continues even if headcount later falls below 5. Employment income must be submitted by 1 March each year. Join the Auto Inclusion Scheme AIS for Employment Income
- Monthly contributions and levies. Employers must comply with the following each month:
- CPF contributions for Singapore Citizen and Permanent Resident employees.
- Skills Development Levy (SDL). Payable for all employees working in Singapore, local or foreign, with limited exemptions (such as domestic workers). It is charged at 0.25% of each employee's total monthly wages, with a minimum of $2 for wages below $800 and a maximum of $11.25 for wages above $4,500. Self-help group contributions (CDAC, MBMF, ECF and SINDA). These are deducted from the employee's wages based on race or religion and paid over by the employer. Employees may opt out.
- Foreign Worker Levy for Work Permit and S Pass holders.
Payroll management mistakes to avoid
Accurate payments, on-time payouts, proper record keeping, data protection and regulatory compliance are the foundations of good payroll management. Here are common mistakes to avoid when doing business in Singapore.
- Not keeping employee details accurate and up to date
An up-to-date employee database is essential for accurate payroll. A wrong bank account number, or a change in name, address, residency status or citizenship that isn't updated promptly, can lead to failed payments, wrong CPF rates and incorrect tax filings. These errors take time to fix and confuse employees.
- Inexperienced payroll staff and human error
To save costs, some companies don't invest in payroll software or outsourced payroll. Manual processing is prone to mistakes such as wrong calculations, inconsistent methods across months, and applying the wrong CPF or SDL rates. Even one small error can take significant time and effort to correct, especially once CPF or IRAS submissions have been made.
- Late or irregular salary payments
Paying employees late or irregularly hurts morale and can disrupt their budgets and GIRO arrangements. It can also breach the Employment Act's payment deadlines. Your payroll process should meet every deadline: salary within 7 days of the salary period, overtime within 14 days, and CPF contributions by the 14th of the following month.
- Not keeping and maintaining payroll records
Employers must be able to produce employee records and payroll documents when required, whether for a pay dispute, an MOM inspection, or an IRAS query. At year-end, employers must prepare Form IR8A for each employee, plus Form IR8S, Appendix 8A or Appendix 8B where applicable, by 1 March. AIS employers submit these to IRAS electronically. Separately, Form IR21 must be filed at least one month before a non-citizen employee stops working or leaves Singapore.
- Compromising personal and confidential employee information
Salaries, employment contracts, benefits, NRIC/FIN numbers and bank details are sensitive personal data. Employers must protect them under the Personal Data Protection Act (PDPA). Limit access to payroll data to authorised staff, use secure systems for storage and sharing, and have clear procedures to prevent unauthorised disclosure.
