Everything You Need to Know About Payroll Processing in Singapore

Processing payroll in Singapore involves more than just paying employees on time. Employers must ensure payroll accuracy and compliance with Singapore’s legal requirements to avoid penalties, reduce compliance risks and maintain employee satisfaction.

This article explains everything you need to know about payroll management in Singapore, including its regulations, compliance and best practices.

Key Payroll Legislations in Singapore

The Employment Act

The Employment Act outlines the key terms and conditions of employment, including salary, working hours, leave, and other workplace rights. 

The CPF Act

The Central Provident Fund Act is the law that governs CPF contributions for Singapore citizens and permanent residents. It sets out the rules for CPF contributions and provides a compliance framework for CPF payments.

The Income Tax Act

The Income Tax Act 1947 is Singapore’s primary tax law, setting out the rules for how income is taxed and administered by the Inland Revenue Authority of Singapore (IRAS). 

The Employment of Foreign Manpower Act 

The Employment of Foreign Manpower Act, 1990 (EFMA) governs the employment of foreign workers in Singapore. It sets out the rules to obtain and manage work passes, defines the responsibilities of employers, and helps protect the rights and well-being of foreign employees. 

Core Components of Processing Payroll in Singapore

Payroll Cycle, Currency & Frequency

•  Employees must be paid at least once a month. 
• All payments are processed in Singapore Dollars (SGD).
• Salaries must be paid within 7 days after the end of the salary period. 
• Overtime should be paid within 14 days. 

The deadline for an employee’s final salary payment may vary depending on the circumstances of their resignation, termination, or end of employment.

Payroll Components in Singapore

Overtime Payroll Rules

Who is Eligible for Overtime?

• Workmen earning up to S$4,500 per month.
• Non-workmen (e.g., clerical and office employees) earning up to S$2,600 per month.

Maximum Overtime Hours

According to the Employment Act in Singapore, employees can work up to 72 hours of overtime per month. Their total working time, including overtime, generally must not exceed 12 hours in a day, unless approved by the Ministry of Manpower (MOM). 

Leave and Payroll

Employees covered under the Employment Act are generally entitled to public paid holiday if it falls on a working day. Some other leave entitlements include:

• Paid statutory leave such as maternity leave, paternity leave and childcare leave subject to applicable eligibility requirements.
• At least 7 paid annual leave which can be increased up to 14 leave annually.
• Entitlement to at least 14 days of paid outpatient sick leave and 60 days of paid hospitalization leave per year.

Minimum Wage vs Progressive Wage Model (PWM)

Singapore has not implemented a universal national minimum wage for all employees. Instead, the country uses a Progressive Wage Model (PWM), which is mandatory in specific sectors such as cleaning, security, landscape, lift and escalator maintenance, retail, food services and waste management.

Statutory Contributions, Deductions, and Levies

Central Provident Fund (CPF)

It is a mandatory monthly social security savings scheme which is funded by contributions from employers and employees. 
CPF contributions are made for Singapore citizens and Singapore permanent residents (SPRs). 

The following table shows in detail the current contribution rates for Singapore citizens and Singapore permanent residents.

Source

Note: The CPF contribution rates will rise from 1 January 2027 to strengthen retirement savings for employees aged above 55 to 65.

Mandatory Employer Levies & Deductions

• Skills Development Levy (SDL): Employers pay SDL for employees, including foreign workers, based on monthly wages and applicable minimum and maximum amounts.
• Foreign Worker Levy (FWL): This is a monthly levy imposed on employers who hire foreign workers at sector-specific rates. This applies to workers holding Work Permits and S Pass holders.
• Self-Help Group (SHG) Funds: Employers are expected to deduct SHG contributions from eligible employees’ salaries and submit them to the relevant self-help group fund.

Income Tax and Employer Reporting in Singapore

Unlike many other countries, Singapore does not require employers to withhold income tax from employee salaries. Instead, employees are responsible for filing and paying their own income tax. While employers have specific reporting obligations to IRAS.  

• Form IR8A: Reports employee remuneration and is submitted through the Auto-Inclusion Scheme (AIS) where applicable.  
• Appendix 8A: This is required for employees who receive applicable taxable benefits in kind.
• Appendix 8B: Employers need to use this when employees derive gains from employee stock option (ESOP) plans and other employee share ownership (ESOW) schemes. 
• Form IR21 (Tax Clearance): If a foreign employee or Singapore Permanent Resident (SPR) is leaving Singapore or leaving their job, the employer may need to file Form IR21 with IRAS. 

Notice Periods & Final Settlements

A Notice period refers to the advance notice that either the employer or the employee must provide to end the employment relationship. 

The full and final settlement includes salary earned up to the employee’s last working day, along with the encashment of accrued but unused annual leave, where applicable. 

• If an employee is terminated without serving notice, the employer generally pays salary in lieu of notice.
• Employees can be terminated without notice only in cases of proven misconduct such as willful disobedience, repeated unauthorized absence or criminal offences.

Step-by-Step: How to Process Payroll in Singapore

1. Establish the Pay Base: Determine the employee’s gross monthly salary, including basic salary, fixed allowances, and other recurring payments. Identify if the employee is a Singapore Citizen, Permanent Resident, or Foreign Employee.
   
   
2. Calculate Variable Components & Overtime: Add all variable earnings for the payroll period, such as bonuses, commissions, incentives, shift allowances, and overtime pay. 
   
   
3. Apply Payroll Deductions: Deduct employee contributions and authorized deductions where applicable. 
   
   
4. Compute Employer Liabilities: Calculate CPF contributions, Skills Development Levy (SDL), and any applicable Foreign Worker Levy for eligible Work Permit and S Pass holders. 
   
   
5. Calculate Net Pay: Determine the employee’s net pay after all earnings, deductions, and adjustments have been applied.
   
   
6. Disburse Salary & Issue Payslips: Pay employees within the required timeline and issue payslips. 
   
   
7. Complete Statutory Filing & Payments: Employers should ensure timely CPF submissions and other statutory filings within the prescribed deadlines, AIS reporting where required.

Requirements for Payroll Record Keeping In Singapore 

Employers must maintain a detailed record of employment and salary records for employees covered under the Employment Act. These records include:

• Employee identification and employment details 
• Basic salary, allowances, deductions, overtime, and net pay 
• Hours worked and overtime records 
• Leave and public holiday records
• CPF contributions
• Date of employment termination 

Note: The employer must retain these records for at least 2 years for current employees and 1 year after an employee leaves the company.

Why Use Payroll Software to Simplify Singapore Payroll

It is crucial for employers to calculate payroll accurately every time. They must also meet statutory requirements such as CPF contributions, SDL, and IRAS reporting.

A reliable payroll system for Singapore, such as Empxtrack, can simplify payroll processing by automating key calculations, validations, and reporting tasks.

• Automate salary calculations: Process basic salary, earnings, deductions, overtime, bonuses, and allowances. 
• Calculate contributions: Accurately calculate CPF and SDL contributions based on applicable payroll rules.  
• Itemized payslip: Generate itemised payslips and maintain payroll records. 
• IRAS reporting: Generate AIS and year-end tax reporting.  
• Employee self-service: Provide access to payslips and payroll information.  
• Minimize compliance risks: Reduce administrative workload and help avoid compliance penalties. 
• HR modules integration: Integrate attendance and leave data with payroll to reduce manual processing. 
• Payroll transparency: Improve payroll visibility with real-time reporting and dashboards.

Conclusion 

Managing payroll in Singapore requires employers to maintain accurate calculations, meet statutory requirements, and keep up with changing payroll regulations. 

In this comprehensive guide, we’ve covered the key payroll requirements, compliance considerations, and step-by-step process for processing payroll in Singapore. By understanding these requirements, employers can reduce errors, ensure timely salary processing, and maintain compliance. 

Organizations evaluating a cloud-based payroll software provider in Singapore should choose a payroll solution that can automate CPF calculations, statutory reporting, employee record management and other key payroll processes. By shifting to global software platforms such as Empxtrack, organizations can improve payroll accuracy, reduce administrative effort. This also helps ensure timely salary processing, strengthen employee trust, and ensure compliance.