Many of the fastest-growing economies in the world are located in Southeast Asia, and Singapore, an integral part of the APAC zone, is a trade-centric country with third-highest GDP per capita in the world (with respect to purchasing power parity). Singapore's thriving economy offers an environment that’s conducive for businesses, along with other advantages such as:
- Great infrastructure, effective communication and transport links
- Range of tax benefits, such as progressive tax rates, no capital gains tax subject to conditions
- Stable and diverse economy comprising several industries such as manufacturing, financial services, big data and integrated electronics etc.
- Transparent regulatory framework with comprehensive control mechanisms to ensure fairness and security of businesses
Statutory framework for individuals
Some of the key aspects of Singapore’s well-organized system are:
Taxes: All resident individual taxpayers are required to pay taxes based on progressive tax rates ranging from 0% to 22%. They are eligible to claim personal income tax rebate, depending on their age as on December 31, but subject to the cap imposed by Inland Revenue Authority of Singapore (IRAS). For employment income, a non-resident individual is charged a flat rate of 15 percent or at the resident rates, whichever is higher.
Social Security: The Central Provident Fund (CPF) is a comprehensive social security system that enables working Singapore Citizen (SC) and Singapore Permanent Resident (SPR) to set aside funds for retirement. It also addresses their healthcare, home ownership, family protection and asset enhancement needs.
Mandatory levies, contributions and statutory requirements: Mandatory levies besides CPF contributions that need to be made by employers every month include:
- Skills Development Levy: Provides employers with training grants when they send their employees for training
- Foreign Worker Levy (FWL): Employers hiring foreigners with Work Permits of S Passes will have to pay FWL
- Ethnic funds: For e.g., Chinese Development Assistance Council (CDAC), Eurasian Community Fund (ECF), Singapore Indian Development Association (SINDA), etc., which aim at helping the less privileged in the respective ethnic communities
Responsibilities as an employer
Payroll processing in Singapore involves specific rules and should take the status of foreign workers into account.
- Taxes: For personal income taxes, employers are not required to withhold taxes from salary for any employee via monthly estimated payroll tax deduction
- Social Security: The employer is required to pay both the employer’s and employee’s share of CPF contributions every month if an employee earns more than $50/month
- Minimum Wages: There is no minimum wage legislation in Singapore with the exception of a few specific categories. However, international employees with work passes must receive wages corresponding to their immigration documents
- Frequency of payment: Singaporean employees are required to be paid once a month. Payments must be made within seven days before the end of the pay period, subject to prescribed conditions
- Payslips: A detailed itemized payslip has to be provided with mandatory fields on or within 3 days of salary payment
- Data Retention: Employers are required to maintain mandatory employee information/documents in the form prescribed for the stipulated period of seven (7) years in hard or soft copy
Challenges of processing payrollWhile employers may have a robust team to handle the challenging task of payroll operations, there are six areas that have to be given attention:
- Regulatory changes – Managing payroll in this era of unprecedented regulatory changes require incorporating strict internal standards as well as ensuring that the systems are up to date with regulatory compliance. There are huge financial and reputational risks when it comes to delaying payroll processing and non-adherence to data privacy, among other things.
- Accuracy of employee information – Erroneous employee account numbers or any modifications made to employee data that are not updated instantly in the database can result in expensive errors that can take a long time to rectify.
- Human error –The human element involved in payroll processing almost always results in expensive mistakes such as miscalculations and improper calculation methods.
- Irregular salary payment – It is vital for a business operating in Singapore to ensure that its payroll system is capable of seamlessly performing accurate calculations, managing turnaround times, and paying its employees' wages on time to avoid any unnecessary confusion and negative impacts on their payroll processing, their expenditure plans or their General Interbank Recurring Order (GIRO) agreements.
- Maintenance of employee records – In Singapore, employment forms including the IR8A and Annex 8A, IR8S or Annex 8B, must be systematically consolidated and presented to the competent authorities by March 1 of each year.
- Confidential employee data – If there’s a human factor involved in payroll processing, there is a high risk that confidential employee information may be leaked or accessed by third parties.
Companies need to exercise extreme caution and partner with an experienced payroll companion to get them through such challenges. Ramco HR & Payroll, equipped with advanced AI and Machine Learning capabilities, facilitate seamless payroll processing for organizations operating not just in Singapore but also across the globe.