Managing your payroll can be tough, especially when you’re a small business here trying to grow your team. There’s a lot to take note of from computing and disbursing salaries to ensuring compliance with the legal requirements in Singapore. One thing’s for sure, when it comes to providing for other people’s rice bowls, you have to make sure that you’re managing your business’ payroll accurately and efficiently.
Here’s what you have to know when it comes to payroll in Singapore:
1. Salaries only include basic pay and allowances.
Salary refers to the basic pay and allowances that your employee has agreed to receive as remuneration for work done under a contract of service. Allowances here does not include those for travelling, food or housing. Salary also does not include pension, retrenchment benefits as well as other expenses incurred during work.
2. Salaries must be paid once a month
Salaries must be paid to your employees at least once a month or at shorter intervals such as every two weeks. Salaries must be paid within 7 days after the end of the salary period. Failure to do so may be considered as non-payment of salary and is an offence according to the Ministry of Manpower (MOM). However, there can be exceptions such as overtime and resignation without notice.
3. Itemised pay slips must be issued to all your employees
From 1 April 2016, you must issue itemised pay slips to your employees covered by the Employment act. Both soft and hard copies are acceptable as long as they include details such as the date of payment, basic salary and allowances, overtime pay, salary period, as well as deductions made. Take note that you can be fined for not doing so.
You are also expected to keep detailed employment and salary records for all your employees. For current employees, you are expected to keep records for the latest two years while records of ex-employees must be kept for one year after they leave employment.
4. Prorated and overtime pay must be calculated and paid correctly
If your employee works for an incomplete month, he or she is only entitled to the prorated portion of his or her salary based on the amount of days in the month that he or she worked. The basic formula for calculating prorated salary is as follows:
Monthly gross
rate of pay
————————— X number of days employee worked in that month
Number of working
days in month
For overtime work, you are expected to pay your employee at least 1.5 times the hourly basic rate of pay. Overtime work here is defined as any work done in excess of the normal hours of work (excluding breaks) and your employees can only work up to 72 overtime hours in a month. Payment must be made within 14 days after the end of the salary period.
5. Mandatory levies, contributions and statutory requirements must be adhered to
Apart from Central Provident Fund (CPF) contributions, you are also required to make other monthly contributions on the behalf of your employees such as Self-Help Group (SHG) funds, Skills Development Levies and additional monthly levies if you are employing foreigners with Work Permits or S Passes.
Also take note of the Auto-Inclusion Scheme (AIS) for Employment Income in which you have to submit the employment income information of your employees to IRAS electronically. From Year of Assessment 2021, participation in AIS is compulsory for employers with 6 or more employees or those who have received the to file their employment income electronically. Additionally, you also have to seek tax clearance for your foreign employees at least one month before they end their employment, commence an overseas posting, or leave Singapore for three months or more.
Consider investing in a payroll software
Successful payroll management is integral to keep your employees motivated and therefore it is your duty as a business owner to ensure that the process runs smoothly and payments are made in a timely manner.
As the number of employees you are hiring continues to grow alongside your business, payroll processing will naturally require more time and effort on your part. You may want to consider investing in a payroll software that can help you handle the process in a less stressful and more cost-effective way.
There are many affordable payroll software options in the market so do your research and make use of free trials so that you can pick the best one. Once you have your payroll processes sorted, you can free up more time for yourself and concentrate on running your business.
Frequently Asked Questions
