With its proximity to many Asian countries and its status as a financial and commercial hub, Singapore is a great place to expand your company. The World Bank named Singapore the easiest country in the world in which to do business. However, it’s critical to understand the country’s various employment laws, taxation rules, and how to stay compliant when setting up payroll.
Singapore Payroll Taxation Rules
Singapore operates under the Central Provident Fund — its nationally mandated benefit or social security program similar to a retirement fund in the US. You should budget around 17% of your employees’ salaries as a cost paid to the CPF by the employer. CPF contributions are not required on reimbursements of a number of expenses incurred due to COVID-19 such as home office equipment, utilities, and transport. The Singapore government has several support measures available for employers unable to make their payments to the CPF as a result of COVID-19.
Singapore has a progressive tax rate that ranges from zero to 22%. The taxes your employees pay will depend on their salary, but they will only get taxed on the income they earn in the country. As an employer, you’ll use Form IR8A and Appendix 8A, Appendix 8B, or Form IR8S to prepare an annual wage report by March 1. Due to the COVID-19 pandemic, some tax filing deadlines have been extended.
Singapore Payroll Options
Before you set up payroll in Singapore, you’ll need to learn about the different available payroll options:
- You can pay employees yourself through your parent company. However, you will need to establish a subsidiary in Singapore before you can officially hire and pay an employee.
- If you set up a subsidiary but don’t have the means at the parent company to administer payroll, you can look at Singapore payroll outsourcing. While the outsourcing company can manage compensation, you are still responsible for making sure you stay compliant with all payroll regulations.
- You can also choose to work with a global PEO such as Globalization Partners. We can act as a Singapore payroll processing company and the employer of record. We make sure that your employees are all paid and that you stay compliant with all laws.
What Is Required to Set up Payroll in Singapore?
Before setting up Singapore payroll, you have to establish an entity or subsidiary. You will need to send someone from your company to Singapore to officially hire a local candidate. The process to establish a subsidiary could lag on for months, taking a significant amount of time, money, and emails. Instead, you can work with Globalization Partner’s Employer of Record model to hire employees on your behalf.
What Entitlement/Termination Terms Are Needed to Set up Payroll?
You need to establish certain entitlement and termination terms with any Singapore payroll option. Both should be included in the employment contract that you write up before your employee’s first day. The notice period for termination ranges by the length of a worker’s service. For example, an employee who works less than 26 weeks only gets a one-day notice period.
Employees are also entitled to medical leave, hospitalization, time off, and a set number of working hours per week. If you are handling payroll yourself, consult with someone well-versed in Singapore employment law to make sure all aspects of entitlement and termination are compliant.
If you decide to go with Singapore payroll outsourcing, then contact Globalization Partners today. We can help you through the process in days instead of months.