Guide to Hiring Employees in Singapore
Whether you are a local company or a foreign company looking to set up an office in Singapore, there comes a point where you need to hire employees. Once you have decided that you would like somebody to work for you, the next few considerations are likely to be:
- Are the employees on a temporary, full time, contract or part time basis?
- What are the labour laws that are applicable to the employees?
- What are the additional visa requirements for foreign employees?
- What are the additional levies, charges or employer contributions to an approved fund such as the CPF?
- Who is responsible for tax compliance when there are foreign employees?
- What are the requirements for terminating an employment contract?
Temporary, full-time, contract, or part-time employees?
Temporary employees offer a business the advantage of extra manpower for specific tasks or times when a current project exceeds the capabilities of the existing manpower. The administrative procedures are minimized as there is no requirement to layoff the employee. It is often a good way to assess if the business would benefit in the long term from the extra assistance or as a way to determine the fit of the employee.
Full time employees are valuable as they become familiar and efficient with the operations of the business. This minimizes disruptions to the business relative to temporary workers who may have to be replaced often.
Contract employees allow a business to tap into their expertise for specific needs. Such workers tend to be highly skilled workers with technical or professional backgrounds and can be engaged and released at short notice. They are different from temporary workers as they are engaged in a contract for service. They are sometimes known as independent contractors.
Part time employees are employees of a business who work less than 35 hours a week.
What are the labour laws that are applicable to the employees?
There are two main pieces of legislation that regulate the hiring of employees:
- Employment Act (EA) which is applicable to both local and foreign employees
- Employment of Foreign Manpower Act (EFMA) for work pass employees
All employees whether foreign or local working under a contract of service are covered by the Employment Act except the following:
- Manager or executive with monthly basic salary of more than $4,500 (A person who has direct authority or influence in hiring, firing, promotion, transfer and discipline of other employees; is involved in the operation and management of a business. Also includes professionals such as lawyers, accountants, doctors or persons with specialised skillsets)
- Domestic worker
- Statutory board employee or civil servant
The business is also required to adhere to additional requirements set out in Part IV of the Employment Act if it engages employees on the following terms:
- A workman (doing manual labour) earning a basic monthly salary of not more than $4,500
- An employee who is not a workman, but who is covered by the Employment Act and earns a monthly basic salary of not more than $2,500
Such additional requirements include rest days and limitations on the hours of work.
Employment Agreements in Singapore
The relationship between employers and employees in Singapore is regulated by contracts. Parties are free to include any terms that they see fit subject to requirements found in the Employment Act. This employment agreement may alternatively be called an offer letter, terms of engagement, appointment letter or employment contract.
Although this agreement can be in writing, verbal, express or implied, it is highly recommended that the agreement be in writing setting out the terms of employment. A well drafted employment agreement will help minimise potential disputes of the terms and conditions.
A sample employment agreement template can be found here.
Itemised payslips and key employment terms
Starting from 1 April 2016, in addition to having an existing employment agreement, employers MUST do the following in relation to employees covered by the Employment Act
- Issue itemised pay slips (soft copy, hard copy or handwritten and issued within three working days of payment)
- Issue Key employment terms (KET) together with a contract of service (these must be issued within 14 days from the start of employment and will include items such as leave policy, medical benefits and other relevant terms)
- Keep employment records which consist of employee records and salary records (soft copy, hard copy or handwritten)
The aim of these new requirements is to help employees better understand how their salary is calculated and also to help employers minimize misunderstandings and disputes at the workplace.
Items to be included after 1 April 2016
An itemised pay slip must include the following items (not exhaustive) where applicable
- Full name of employer
- Full name of employee
- Date of payment or dates when a consolidated pay slip is issued
- Basic salary that includes details of the rate and hours worked
- Any allowances such as uniform, food and transport
- Any additional payments which may include bonuses, public holiday pay, rest day pay
- Any deductions such as CPF contributions, no pay leave, absence from work
- Overtime hours worked
- Overtime pay
- Start and end date of overtime work
- Total net salary
Key Employment Terms (KET) issued to employees covered by the Employment Act starting from 1 April 2016 must include the following items (not exhaustive) where applicable
- Full name of employer
- Full name of employee
- Job title, main duties and responsibilities
- Start date of employment
- Duration of employment for fixed term contracts
- Working arrangements
- Salary period
- Basic salary and rate of pay
- Fixed allowances and deductions
- Overtime rate of pay
- Bonuses, incentives
- Types of leave such as annual leave, hospitalisation leave, childcare leave, maternity leave
- Other benefits such as insurance, medical, dental benefits
- Probation and notice periods
An employee record must contain sufficient details and list the following:
- NRIC or work pass number and expiry for non-citizens
- Date of birth
- Start and end dates of employment
- Working hours which include details of meal and break durations
- Dates on which leave was taken and other details such as public holidays
The items to be included in a salary record are similar to the items appearing on an itemised pay slip
For current employees, records of the last two years are kept. For ex-employees, records of the last two years are kept for duration of one year starting from the date the employee leaves employment.
Additional requirements for foreign employees
If the business decides to hire foreign employees, the Ministry of Manpower issues a wide variety of work passes. The three most common types of work passes are:
- Employment Pass (professionals, managers and executives who are earning at least $3,300 per month)
- S Pass (mid-level skilled workers who earn at least $2,200 per month and fulfil assessment criteria set by MOM)
- Work permit (semi-skilled workers in the construction, manufacturing , marine, process or services sector)
Ensure that the foreign employees have valid work passes issued by the Ministry of Manpower (MOM) before commencing employment. There are stiff penalties for contraventions.
The table below lists some of the common work pass offences and their associated penalties
|Employing a foreign employee without a valid work pass||First offence
· Fine between $5,000 to $30,000 and/or imprisonment up to 1 year
· Mandatory imprisonment and
· Fine between $10,000 and $30,000
|Contravening any work pass condition||· Fine up to $10,000 and/or imprisonment up to 1 year|
|Providing false information or making a false statement in an application or renewal of a work pass||· Fine up to $20,000 and/or imprisonment up to 2 years|
|Receiving money in connection with the employment of the foreign employee||· Fine up to $30,000 and/or imprisonment up to 2 years|
|Obtaining a work pass for a foreign employee for a business that is non-existent, is not in operation or does not need a foreign employee||· Fine up to a maximum of $6,000 and imprisonment of 6 months
· Offenders may be caned
Central Provident Fund (CPF) contributions and additional levies
Employers are required to make contributions towards the Central Provident Fund (CPF) of employees who are Singapore citizens or permanent residents. These CPF payments must be made within 14 days of the end of the month.
Employers must pay both the employer and employee’s share of the monthly CPF payments. The employee’s share is subsequently deducted from their wages of that month. Employers have 6 months to recover this portion of the contribution.
For the updated CPF contributions payable for employees please refer to CPF Contribution and Allocation Rates.
The CPF scheme will take effect and become applicable to work permit holders who become Singapore Permanent Residents on the day they are granted permanent residency.
Employers who fail to make CPF payments may be subjected to the following penalties:
|Late payment interest charged at 18% per annum (1.5% per month) which starts to accrue the first day of the following month after the payments are due|
|Late payment||Fine between $1,000 to $5,000 per offence and/or imprisonment up to 6 months|
|Repeat offenders||Fine between $2,000 to $10,000 per offence and/or imprisonment up to 12 months|
|Deduction of employee’s share of CPF contributions and failure to pay these contributions to the CPF board||Fine up to $10,000 and/or imprisonment up to 7 years|
Tax clearance for foreign employees
The employer has a responsibility to ensure that a non-Singapore citizen employee who ceases employment in Singapore or plans to leave Singapore for more than three months pays all the taxes. The employer must file an IR21 form with the Inland Revenue Authority of Singapore (IRAS). Please refer to the guide on the tax clearance procedures.
Termination of employment contracts
An employment contract may be terminated in a number of ways
- Independent contractor has completed the project or fulfilled the terms of the contract
- Fixed term contract period has been completed
- Employee decides to resign
- Employer terminates or dismisses the employee
Termination without misconduct and notice
In cases where termination of the employment contract takes place without misconduct, parties are required to follow the terms of the employment contract. This usually involves the giving of an advance notice period by either the employer or employee.
The employee may choose to use his/her leave entitlement to offset the notice period. Employees who are covered by Part IV of the Employment Act may choose to encash their leave entitlement instead.
Termination due to misconduct
If the termination is due to misconduct, the employer must hold an inquiry before any disciplinary action or termination takes place. Depending on the employment contract terms, a termination due to misconduct may take place without the need of advance notice.
No notice period in the employment contract
If the employment contract does not indicate an advance notice period, the Employment Act prescribes the following notice periods:
|Length of Service||Notice Period|
|Less than 26 weeks||1 day|
|26 weeks to less than 2 years||1 week|
|2 years to less than 5 years||2 weeks|
|5 years and above||4 weeks|
Termination without notice
If termination takes place without notice, the terminating party is required to pay the other party salary in lieu (this equates to the amount of salary the employee would have earned during the required notice period)
Employees have a right to terminate without notice if they are not paid within 7 days of their salary being due; employers may do the same if the employee has failed to show up or at least attempted to notify the employer of a valid reason for being absent from work for more than 2 continuous working days.
Employees have a right to appeal to the Ministry of Manpower if they have a valid claim of wrongful dismissal. If the appeal is successful, the employer may be required to reinstate the employee to the former job or pay the employee compensation.
There are some additional requirements that an employer must adhere to if the services of a foreign employee is terminated. These are part of the work pass terms.
If the business terminates the services of a foreign worker, the employer has the responsibility of
- Cancelling the work permit within 7 days of the termination of employment
- Sending the worker back, this includes the purchase of the air ticket with luggage allowance
- Finalizing and paying all outstanding payments and salaries
In the unfortunate event where the foreign worker passes away, the employer has the responsibility of ensuring:
- Work permit is cancelled within 12 hours of the death
- Burial, cremation or the transport of the body back to the worker’s home country are arranged and paid for
- Cost of sending the worker’s personal belongings back to family members are arranged and paid for
- All outstanding payments and salaries are paid to the estate
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