How to hire employees in Singapore

Mastering the intricacies of Singapore’s labor laws is vital for businesses looking to establish a strong presence in this global financial hub.

This guide offers comprehensive insights into Singapore’s employment regulations, ensuring you can handle payroll insights with compliance and efficiency. From understanding employment contracts to cultivating a positive workplace culture, this resource provides the tools necessary to attract and retain top talent in Singapore’s competitive market.

» Find out more about payroll in Singapore.

Singapore: What to know before hiring

Foreign talent

While a skilled local workforce exists, there’s also a need for foreign talent. Employers can utilize the Employment Pass system to bring in qualified professionals.

» Take a look at the leading global hiring trends.

Innovation hub

The Singaporean government actively supports research and development so much that the country has become a leading force in the tech industry. This fosters a tech-savvy workforce that can be a valuable asset for innovative companies.

» Learn why global mobility programs need payment mobility.

Open economy

Singapore’s heavy reliance on international trade exposes it to global economic fluctuations. However, the government actively manages these risks through diverse strategies. Singapore maintains substantial foreign reserves, implements flexible economic policies, and focuses on economic diversification.

» Explore our guide on surviving and thriving in an economic downturn.

Three options for employing people in Singapore

1. Via local entity

With a legal entity, an employer must register their business in Singapore, allowing direct hire of local and foreign talent. It’s ideal for companies with long-term plans in Singapore who want complete control over their team.

Pros

• Employers will completely control their team, company culture, and HR processes.
• Having a legal entity creates a stronger brand image and fosters trust with clients and investors.

Cons

• Registering a business involves initial costs and time investment compared to other options.
• Employers are responsible for handling payroll taxes, HR administration, and adhering to strict labor laws.
• Scaling the team up or down can be more complex than using an EOR or contractors.

» Go over our simple guide on setting up an entity in Singapore.

2. Via an employer of record (EOR)

The employer will partner with a registered EOR in Singapore. The EOR acts as the legal employer on paper, handling payroll, taxes, and employee HR administration. The employer manages their team’s recruitment, onboarding, and day-to-day work. This is a good option for companies who want to hire in Singapore quickly and avoid the complexities of setting up a legal entity. It’s also useful for short-term projects or testing the Singapore market.

Pros

• An EOR simplifies the hiring process, allowing employers to recruit quickly and onboard employees in Singapore.
• The EOR handles payroll, taxes, and HR administration, ensuring compliance.
• There is no need for initial setup costs associated with registering a legal entity.

Cons

• The EOR has some control over HR processes.
• An EOR might not be ideal for long-term plans in Singapore.

» Learn what an EOR is and how it can simplify payroll and hiring in Singapore.

3. Hiring contractors

Employers can hire contractors or freelancers to complete specific projects or tasks. They handle their taxes and social security contributions. This is best for short-term engagements or specialized skills not readily available in the employer’s permanent workforce.

Pros

• It’s ideal for short-term projects or acquiring specific skills not readily available in your permanent workforce.
• Employers only pay for the work completed, potentially saving on benefits and payroll taxes compared to full-time employees.

Cons

• There is less control over work schedules, day-to-day activities, and company culture compared to full-time employees.
• It’s unsuitable for ongoing or core business functions requiring a dedicated team.
• Managing multiple independent contractors can be time-consuming and require clear communication.

» Explore the differences between a sole proprietor and an international contractor.

Employees vs. contractors in Singapore

» Learn how to convert your contractors to employees.

Labor laws in Singapore

• Central Provident Fund (CPF): There must be mandatory contributions from employers and employees towards a social security scheme.
• Foreign worker levy: Employers hiring foreign workers must pay a levy based on the worker’s nationality and salary.
• Maternity leave: According to the Child Development Co-Savings Act., working mothers are entitled to at least 16 weeks of paid leave.
• Working hours and the rest day: Employees are supposed to work 12 hours a day and are entitled to at least one rest day per week, usually on Sundays.

» Explore Asian labor laws that affect Singaporean employees.

Compliance risks in Singapore

Incorrect payroll contributions

This occurs when employers miscalculate their and their employees’ mandatory contributions to the CPF scheme due to complexity or lack of awareness.

Mistakes during data entry, software glitches, or manual calculation errors can also lead to incorrect deductions or contributions. If overtime work isn’t properly compensated or factored into payroll calculations, CPF contributions might be inaccurate.

» Avoid non-compliance issues with an automated payroll system.

Unfamiliar employment laws

Singapore’s labor laws are subject to revisions. Employers who don’t stay updated might miss crucial changes in areas like minimum wage, leave entitlements, or working hours.

Companies expanding into Singapore might need to be fully aware of the specific employment regulations compared to those in their home country. Also, not seeking professional advice on employment laws can lead to unintentional non-compliance.

» Discover how global payroll compliance can help you avoid these issues.

Employee misclassification

Classifying an employee as a contractor to avoid benefits and CPF contributions can lead to legal trouble if the worker meets the definition of an employee under Singaporean law.

» Explore this guide to learn how to avoid employee misclassification.

Permanent establishment risk

Foreign companies with employees physically working in Singapore might unknowingly establish a “permanent establishment,” which would subject them to corporate tax obligations in the country. If the roles and responsibilities of overseas and Singapore-based employees are unclear, it can be challenging to determine if a permanent establishment exists.

Companies might not know the criteria for establishing a permanent establishment and its tax implications.

» Uncover all there is to know about permanent establishment risk and how to avoid it in Singapore.

Unions and labor organizations in Singapore

Singapore’s labor movement is centered around a single national trade union federation, the National Trades Union Congress (NTUC). This umbrella organization represents the vast majority of Singaporean workers across various industries. It negotiates wages, provides training and education for workers, and promotes good relations between employers and employees.

However, within the NTUC, numerous affiliated unions cater to specific sectors:

• Singapore Airlines Staff Union (SIASU): This group represents employees of Singapore Airlines.
• Singapore Nurses Association (SNA): It represents registered nurses in Singapore.
• Electrical Union of Singapore (EU Singapura): It represents workers in the electrical industry.

While Singapore has a strong labor movement, unions tend to collaborate with the government and employers to balance worker rights and economic growth.

» Uncover effective strategies to use to pay employees globally.

How much does it cost to hire an employee in Singapore?

In Singapore, there is no universal minimum wage. Instead, a Progressive Wage Model (PWM) applies to sectors like cleaning and security, with wage floors ranging from SGD 1,000 to SGD 2,000 monthly. For most industries, salaries are market-driven. When hiring, employers must consider not just base pay but also mandatory Central Provident Fund (CPF) contributions of up to 17% of wages.

Companies often offer salaries well above PWM floors to attract top talent in Singapore’s competitive market, tailoring compensation to the candidate’s qualifications and industry standards. Additional benefits like flexible work arrangements and professional development opportunities are crucial for attracting and retaining high-caliber employees in this knowledge-based economy.

Employer payroll contributions in Singapore

» Take a detailed look into the hiring costs on a global scale.

How do foreign companies pay workers in Singapore?

Foreign companies have several options for paying workers in Singapore:

• Electronic funds transfer (EFT): This is a standard method for transferring salaries directly into employees’ bank accounts in Singapore. However, salaries must be paid in Singapore dollars (SGD) by law.
• Subsidiary company: Some foreign companies establish a subsidiary in Singapore. The subsidiary then handles payroll for employees in Singapore using local bank accounts. This option offers more control over the payroll process but involves setting up and managing a separate legal entity.
• Payroll service provider or EOR: Many companies outsource payroll processing to a licensed service provider in Singapore. These providers handle all aspects of payroll, including calculating deductions, making electronic transfers to employees’ accounts, and ensuring compliance with local regulations. They can also manage currency exchange if necessary. This option is convenient but incurs additional fees for the service provider.

» Learn how you can pay your Singaporean employees quickly.

How do employers pay taxes in Singapore?

Employer tax contributions

In Singapore, employers don’t directly pay taxes on their employees’ salaries. However, they’re responsible for making mandatory contributions to various schemes:

• Central provident fund (CPF): This is the most significant contribution, with employers currently paying 17% of an employee’s monthly salary (capped at a specific wage limit) into the employee’s CPF account. This is a social security scheme for retirement, housing, and healthcare.
• Additional levies (for foreign workers): Employers must pay levies based on the worker’s nationality and salary. These levies regulate the foreign workforce and contribute to skills development programs.
• Minor contributions to other schemes: Employers also contribute a small amount to schemes such as the Skills Development and the Foreign Worker Levy.
• Employee income tax: While employers don’t directly pay income tax, they are responsible for deducting it from the employee’s salary before paying them. Singapore uses a progressive tax system, so the tax rate depends on the employee’s total income. Employees are responsible for filing their tax returns, but employers must provide them with the necessary paperwork (e.g., IRAS Form IR8A) for this process.
• Employer’s corporate income tax: Separate from payroll taxes, employers in Singapore pay corporate income tax on their company’s profits. The current corporate tax rate is 17%.

» Stay in the loop with relevant info on Singapore’s end-of-tax-year requirements.

Work permits

Professionals

• Employment pass: This permit is for foreign professionals, managers, and executives earning at least $5,000 monthly.
• EntrePass: This permit is for foreign entrepreneurs starting and operating a venture-backed or innovative technology business in Singapore.
• Personalized employment pass: This is for high-earning existing employment pass holders or overseas foreign professionals offering greater flexibility.
• Overseas networks and expertise pass: This pass is for top talent in business, arts and culture, sports, academia, and research.

Skilled and semi-skilled workers

• S pass: This pass is for skilled workers earning at least $3,150 monthly.
• Work permit for migrant workers: This permit is for skilled and semi-skilled workers in the construction, manufacturing, marine shipyard, process, or services sectors.
• Work permit for migrant domestic workers: This is for migrant domestic workers in Singapore.
• Work permit for confinement nannies: This permit allows Malaysian confinement nannies to work in Singapore for up to 16 weeks after the birth of the employer’s child.
• Work permit for performing artists: This is for foreign performers working in public entertainment outlets such as bars, hotels, and nightclubs.

Trainees and students

• Training employment pass: This pass is for foreign professionals undergoing practical training, earning at least $3,000 a month.
• Work holiday pass (under the work holiday program): This pass is for students and graduates aged 18 to 25 wanting to work and holiday in Singapore for six months.
• Work holiday pass (under work and holiday visa programs): This pass is for Australian and New Zealand students and graduates aged 18 to 30 who want to work and holiday in Singapore for 12 months.
• Training work permit: This permit is for semi-skilled foreign trainees or students undergoing practical training in Singapore for up to six months.

» Explore all of the challenges faced with employee relocation policies.

Employment contracts in Singapore

While an offer letter is a crucial first step, Singapore doesn’t legally require a formal written employment contract. However, having a well-drafted employment contract offers significant benefits for both employers and employees. Here’s what to include in an employment contract in Singapore:

• Basic information
• Compensation and benefits
• Working hours and conditions
• Probation period
• Leave entitlements
• Termination clause
• Confidentiality clause (optional)
• Dispute resolution clause (optional)
• Governing law

» See how an EOR service can ensure payroll compliance.

Working hours in Singapore

Singapore’s Employment Act doesn’t specify a maximum working week, but it does set limits on daily and overtime hours.

• Work hours: Most companies follow a standard workweek of 44 hours, with 8 hours daily from Monday to Friday.
• One-hour lunch break: A one-hour lunch break is generally factored into the working hours.
• Flexible arrangements: Some companies might offer flexible work arrangements, allowing for compressed workweeks or remote work options.
• Overtime: Working more than 8 hours a day or 44 hours a week is considered overtime. Employers must pay employees at least 1.5 times their hourly introductory rate for overtime work.
• Rest day: Employees are entitled to at least one rest day per week, usually on Sundays.

Benefits workers get in Singapore

• Central Provident Fund (CPF): This is a mandatory social security scheme. Employers and employees contribute a percentage of their salary to a member’s CPF account, contributing a percentage of the salary towards a member’s CPF account. This provides retirement savings, housing benefits, and healthcare options.
• Annual leave: At least 14 days per year, increasing with tenure and position.
• Sick leave: Typically six days per year, accumulating over time.
• Maternity leave: At least 16 weeks with partial salary compensation.
• Paternity leave: Two to four weeks.
• Public holidays: 11 paid public holidays per year.

Expected optional benefits include:

• Medical insurance: Many companies offer employer-provided or subsidized health insurance plans.
• Flexible work arrangements: Options like compressed workweeks or remote work are becoming increasingly common.
• Bonuses: Performance-based or annual bonuses are prevalent in many companies.
• Allowances: Companies might offer allowances for transportation, mobile phone usage, or other work-related expenses.
• Employee assistance programs (EAP): These programs provide confidential counseling and support services for employees facing personal or work-related challenges.
• Training and development: Many companies invest in employee training and development opportunities.

The specific benefits offered by an employer can vary significantly depending on the company size, industry, and position.

Paid and sick leave in Singapore

Paid leave

All employees are entitled to at least seven days of annual leave in their first year of employment. This entitlement increases with tenure and position, reaching a maximum of 14 days on the 8th year of service. The leave can be accumulated over the year. Employers can set specific guidelines for requesting and taking annual leave.

Sick leave

Entitlement depends on the employee’s length of service:

• Three months or less than six months: No entitlement.
• Six months and above: The employee is entitled to 14 days of paid outpatient sick leave per year.
• If the sickness requires hospitalization, the 14 days of outpatient sick leave are included within 60 days of paid hospitalization leave per year.

Unused annual leave can be carried forward to the next year with limitations depending on the company’s policy.

» Go over why you need to protect your employee’s PII.

Onboarding workers in Singapore

Before the first day:

• Draft an employment contract outlining job title, salary, working hours, and probation period.
• Register the employee with the Central Provident Fund (CPF) and tax authorities.
• Set up payroll insights for accurate tax and CPF contributions.

The first day:

• Conduct an induction covering company policies and Singaporean labor regulations.
• Introduce the new hire to their team and immediate supervisor.
• Ensure their workstation is fully equipped with the necessary tools and system access.

The first week:

• Provide comprehensive training on job duties, company products/services, and industry standards.
• Outline performance objectives and evaluation methods.
• Inform about benefits, including leave policies and medical insurance.

Beyond the first week:

• Hold regular feedback sessions to assess progress and address any issues.
• Promote participation in company social events to build rapport.
• Facilitate continuous learning and professional development programs.

Hire in Singapore and grow your business

Papaya Global’s robust framework accommodates various global hiring needs. Businesses can utilize contractor, payroll, and employer of record models, all reinforced by local regulatory expertise. The integrated platform centralizes workforce management, transcending geographical and employment model limitations.

By handling employment contracts, registrations, payroll insights, and contributions, Papaya empowers businesses to concentrate on team-building and expansion.

Thriving in Singapore’s employment market requires a solid grasp of local regulations. Papaya’s support helps employers establish a compliant and efficient workforce, paving the way for success in Singapore’s dynamic economy.

» Discuss hiring in Singapore with a country expert now.

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