Running payroll in Singapore

Payroll processing in Singapore is less complicated than in other countries as employers have no legal obligation to withhold income tax from their employees’ salaries. The social security system is administered by one centralized fund and the calculation of the necessary contributions is pretty straightforward. 

Setting up payroll in Singapore is a straightforward process. Since employers have no obligation to withhold income tax from employee salaries and wages, it is not necessary to register for tax withholding purposes. The only registration with the Inland Revenue Authority of Singapore (IRAS) employers must complete is for the Auto Inclusion Scheme (AIS) which allows them to submit the required annual earnings reports for their employees. Adhesion to the AIS is mandatory for employers with 5 or more employees. 

Furthermore, employers are required to hand in an application for a CPF Submission Number (CSN) which must be used for any exchange with and payment to the Central Provident Fund (CPF). The CSN must be applied for as soon as the first employee is hired by the company. 

In order to apply for a CSN, entities should first get a Unique Entity Number (UEN) and a Singapore Corporate Access (CorpPass). The latter is a digital identity certificate for businesses which is used for accessing the government’s online services. There is no need to inform the authorities about new hires.

Income tax calculation in Singapore is highly dependent on the employee’s residency status as residents and non-residents are subject to different tax rates and rules. The social security system is centralized in one single fund. 

Tax considerations

Income tax rates and taxation rules in Singapore differ with regard to residency. Tax rates for residents are progressive and range from 2% to 22%. Earnings up to SGD 20,000 are tax-free. 

Non-residents are either taxed at the same tax rates as residents or at a 15% flat tax rate (no deductions or allowances permitted), whichever one is higher. Please note that this only applies to employment income and does not include income of non-resident directors who are subject to a flat tax rate 22%. A non-resident on a work assignment in Singapore with a duration of less than 60 days may be exempt from paying income tax in Singapore (does not apply to directors). 

An employee’s taxable income includes all employment-related income (i.e. wages, salaries, bonuses, allowances, benefits in kind etc.) earned in Singapore and/or from Singapore sources. As a general rule, income earned from employment exercised in Singapore is to be taxed in Singapore, regardless of whether the employer is based in Singapore or abroad. 

Employment expenses, charitable contributions, life insurance premiums, interest payments on mortgages and pension contributions are deductible, but certain conditions have to be met. Further personal tax reliefs are available for Singapore citizens and permanent residents based on the employee’s family situation. However, the total tax relief is capped at SGD 80,000 per year.

An individual is considered a resident for tax purposes if he or she:

• Is a Singapore citizen whose usual place of residence is Singapore

• Is a foreign individual permanently residing in Singapore

• Is a foreign individual working / staying in Singapore for a period longer than 183 days

There are a few other cases where foreign employees may qualify as tax residents even if the above criteria are not met. 

* Please note that the tax rates and bands given in the table above are valid for the 2021 income year, which is the 2022 assessment year. From the 2024 assessment year on, the top tax rates will increase as follows.

Tax withholding and reporting 

An employee’s income tax is assessed on a yearly basis, i.e. in the year following the tax year, which is the calendar year. Therefore, employers have no monthly withholding obligation with regard to income tax on salaries and wages. 

However, they are required to prepare an annual report for each employee detailing his or her earnings. The deadline is 1 March of the following year. The standard form to use for all employees is the IR8A, but employers may have to fill out additional forms and appendices. Employees file an individual tax return (no joint filing permitted) by 15 April of the following year (18 April if the return is filed electronically), which is used for the final tax assessment. 

A different procedure applies to foreign employees ceasing their employment in Singapore. In this case, the employer will have to withhold the outstanding amount of taxes which has accumulated up to the day the employment ends. A special cessation form must be submitted to the Inland Revenue Authority of Singapore at least one month before the official end date of the employment relationship.

Social security contributions

Social security in Singapore is centralized in the Central Provident Fund (CPF) under which all employees with Singapore citizenship or with permanent residence in Singapore are covered. Contributions are paid by employee and employer, but vary depending on the employee’s age and wage level. Employees earning less than SGD 500 per month are exempt from CPF payments. Employers are exempt from making CPF contributions for employees earning less than SGD 50 per month. Reduced rates apply to monthly earnings not exceeding SGD 750. 

For employees, CPF contributions range from 5% to 20% of their wages. Employer contribution rates vary between 7.5% and 17% - up to a monthly wage ceiling of SGD 6,000. For more details, refer to the table below. Citizens or permanent residents of Singapore who are posted abroad are exempt from making CPF contributions, but may contribute on a voluntary basis. 

Employers withhold the employee share of the contributions and remit them together with their own contributions on a monthly basis. Payments are due by the 14th of the month following the pay period. 

In addition, employees are encouraged to contribute to a supplementary retirement scheme (SRS). Voluntary employer contributions are allowed but capped at 15% of the employee’s wages (35% for foreigners). 

Employers should be aware of two additional levies they have to pay. One is the Foreign Worker Levy (FWL), which is payable for every foreing employee they hire, and the other one is the Skills Development Levy (SDL), which is applicable to all wages and salaries paid to employees working in Singapore. The SDL rate is 0.25% of the first SGD 4,500 of each employee’s earnings - at least SGD 2. Payments go towards the Skills Development Fund. 

While the FWL and the SDL are payable by the employer, employees may be required to contribute to one of the several self-help group funds (SHG) if they belong to one of the Chinese, Muslim, Indian and Eurasian communities in Singapore. Rates vary between SHGs. Contributions to the SHG funds also need to be deducted from employee salaries and paid by the 14th of the following month. The administering body is the CPF.

Please note that the rates given in the table are the standard rates applicable to monthly earnings exceeding SGD 750 (valid as of March 2022) and that different rates apply during the first two years of an employee’s permanent residency in Singapore.  

Employees in Singapore are entitled to various benefits. These include:

• Annual leave and public holidays: 7 days in the first year; one additional day for every year of service thereafter (limited to 14 days); plus 11 public holidays

• Maternity leave: 16 or 12 weeks of maternity leave (depending on different criteria such as the child’s nationality, years of service etc.); depending on the number of children, the employer may have to pay for up to 8 weeks of the maternity leave

• Paternity leave: 2 weeks, which may be paid by the government under certain conditions

• Parental leave: no legal provisions for additional parental leave (except for 6 days of childcare leave), but mothers can transfer up to 4 weeks of maternity leave onto the child’s father

• Sick leave: divided into paid outpatient sick leave and hospitalization leave; normal sick leave varies between 5 and 14 days, hospitalization leave varies between 15 and 60 days (depending on length of service)

For more information on employee benefits and other employment requirements in Singapore (including severance pay and termination procedures), check out our Global Hiring Guide.

There is no minimum wage in Singapore, but certain types of employees are subject to a progressive wage model which provides for wage increases in line with the employee’s years of service. Under Singapore’s Employment Act, employees are allowed to work up to 72 additional hours per month. However, overtime must be remunerated at a rate of no less than 150% of the employee’s normal wages. Although there is no legal obligation, most employers pay their employees an annual bonus similar to a 13th salary, which is known as Annual Wage Supplement (AWS). 

Employees in Singapore must be paid at least once per month. Payments must be issued no later than on the 7th day after the end of the respective pay period - different rules apply to overtime pay and an employee’s final pay. Authorized payment methods include cash, check, money order and bank transfer. The reception of cash payments should always be confirmed in writing.

The Employment Acts mandates employers to provide employees covered by the Act with a payslip for each pay period and keep detailed employment and payroll records. Payslips can be provided either in paper or digitally. They must be issued no later than 3 days after the payment to the employee. Records must be kept for 2 years - including for employees who have already left the company.