What you need to know on hiring your first employee in Singapore
7 minute read
Thinking about hiring your first employee to help run your business? This guide will outline what you need to know, including relevant laws, compliance and levies you will encounter.
Regardless of whether you have a local or a foreign company, there are a few things to consider when you are looking to hire. These include:
- What are the current needs of your business? Do you want a temporary, full time, contract or part-time employee?
- Do you want to hire someone already in Singapore or from abroad? You will need to apply for a visa for them to allow them to work in Singapore if the latter.
- In addition to salary, have you accounted for all levies, charges or employer contributions in your budget?
- Will you need to be responsible for tax compliance for your foreign employees?
Overview:
- What help do you need?
- What laws will be applicable to my employee?
- Employment Agreements in Singapore
- Payslips and other key employment terms
- Additional requirements for foreign employees
- Central Provident Fund (CPF) contributions and additional levies
- Paying levies
- Hiring students
- Tax clearance for foreign employees
What help do you need?
There are several categories of employees, which incur varying levels of responsibility and compliance from you.
- Full-time employees are an invaluable resource for your business because they become more skillful and efficient with the daily business operations over time. This helps to reduce disruptions to your business.
- Temporary employees offer a business the advantage of the extra workforce for provisional projects that require more labour. There are minimal administrative procedures since there are no requirements to layoff a temporary employee.
- A contract employee, or independent contractor, lets a business tap into his or her expertise for specific purposes. An independent contractor tends to be someone with the technical or professional background, such as a consultant. You can hire and release contract employees with short notice periods.
- A part-time employee is an employee who works not more than 35 hours per week.
What laws will be applicable to my employee?
Two forms of legislation come into play when you hire an employee: the Employment Act and the Employment of Foreign Manpower Act (EFMA), for those who hold a pass such as an EP, PEP, and EntrePass etc.
The Employment Act protects all employees both foreign and local, except:
- Managers or executives who draw more than S$4,500 in monthly salary.
- Employees who work at sea
- Domestic workers such as maids
- Statutory board employees or employees in the civil service
Your business needs to follow the extra requirements of the Employment Act if you hire:
- A manual labour worker earning a basic monthly salary of $4,500 or less
- An employee who is covered by the Employment Act and makes a basic monthly salary of $2,500 or less
These extra requirements include mandatory break times, overtime pay and rest days for your employees. Workers cannot work for 6 straight hours without being given a break. All breaks are to be at least 45 minutes long. Workers can only work up to 44 hours a week, and they are entitled to overtime pay for any additional work hours at $11.80 per hour. Lastly, you need to give 1 day of rest per week.
Employment Agreements in Singapore
Sometimes called an offer letter, terms of engagement, appointment letter or employment contract, the employment agreement determines the terms between Singapore employers and employees.
Both employers and employees are free to put in any extra terms as they see fit, as long as it complies with the Employment Act. Like any business contract, an employment agreement can be in writing, verbal, express or implied.
A properly drafted employment agreement reduces potential employment disputes in the future, so you should have a professional draft it for you.
A free example of a Singapore Employment Agreement can be downloaded from the Ministry of Manpower website here.
Payslips and other key employment terms
According to the Employment Act, on top of an existing employment agreement employers need to do the following:
- Issue payslips within three working days of salary payment.
- Issue Key Employment Terms (KET) that explicitly state leave, benefits, etc
- Keep employment records which consist of employee records and salary records
These new requirements aim to help employees better understand how their salary is calculated and also to help employers minimize misunderstandings and disputes in the workplace.
Additional requirements for foreign employees
Should you choose to hire foreigners, you will need to apply for work passes for your employee with the Ministry of Manpower (MOM). These include:
- Employment Pass (experienced professionals and managers)
- S Pass (mid-level skilled workers)
- Work permit (semi-skilled workers in the construction, manufacturing, marine, process or services sector)
There are stiff penalties for foreigners who work without the relevant work passes, so make sure that the MOM approves them before they start working in Singapore.
Want to know how to apply for an Employment Pass for your employee? Click here to read our article, The Employment Pass: What you need to know as an employer.
You can also refer to the MOM website that clearly outlines the eligibility criteria for each type of work pass in Singapore.
Central Provident Fund (CPF) contributions and additional levies
As an employer, you need to contribute to your employee’s Central Provident Fund (CPF) if they are a Singapore citizen or permanent resident (PR). You will be required to make these payments within 2 weeks after the last day of each month.
There are 2 portions for paying monthly CPF, and as an employer, you need to pay both.
The employee’s share is automatically deducted from their monthly salary. Employers have 6 months to recover this portion of the contribution.
Paying levies
The Singapore Government collects a Foreign Worker Levy for all low-skilled and unskilled foreign employees a Foreign Worker Levy (FWL). This is to regulate the demand for foreign workers in Singapore.
If you are already paying a foreign worker’s levy, then you will pay a skills development levy instead of monthly CPF payments.
Hiring students
There are several options when it comes to bringing students into your company. There are no restrictions to hiring students who are Singapore citizens or PRs on a full-time and part-time basis. If you place students in an internship, you are exempt from paying their CPF – instead, you can choose to pay a monthly allowance as per standard practice.
If you wish to give an internship to a foreigner, you will need to apply for a Training Employment Pass, Training Work Permit, Work Holiday Pass or Work and Holiday Visa Programme for them.
- A Training Employment Pass (TEP) is a visa given to foreign students from acceptable institutions to allow them to undergo training in well-established Singaporean companies during 3 months provided that this training is a part of their academic course.
- A Training Work Permit (TWP) is for semi-skilled and unskilled employees sent by overseas companies to undertake training in a related company in Singapore, or for foreign students studying in educational institutions in Singapore and taking the training as part of their course requirements.
- A Work Holiday Pass (WHP) is meant for foreign undergraduates and graduates who wish to work and stay in Singapore for 6 months. It is non-renewable. Applicants must be between 18 to 25 years of age and be an undergraduate or have graduated from a recognised university in Australia, France, Germany, Hong Kong, Japan, New Zealand, Switzerland, United Kingdom or United States. The WHP has a capacity of 2,000 applicants at any one time.
- A Work and Holiday Visa Programme (WHVP) is open only to Australian students and graduates and applicants must be Australian citizens between 18 and 30 years of age. If approved, the WHVP is valid for 12 months, cannot be renewed and has a capacity of 500 applicants at any one time. Please note that the WHVP has very specific conditions such as applicants are not allowed to work for the same employer for more than 6 months,
In addition to the above, there are quotas for the company respective sector if you apply for the TWP; however a company is not obliged to meet any quota requirement (a certain ratio of the foreigners hired under work visas to the total company’s staff) and pay a monthly levy when hiring a TEP holder.
Tax clearance for foreign employees
It is your responsibility as an employer to make sure that a non-Singapore citizen employee pays all outstanding taxes before they leave Singapore for more than 3 months. Additionally, you should file an IR21 form with the IRAS (Inland Revenue Authority of Singapore).
Separately, please also ensure that their work pass is cancelled and the physical pass returned to the MOM.
Next steps
If you’re ready to take your business from dream to reality, we can help you make it happen. Get tailored, practical advice from us about your situation – get in touch with us today.
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