Guide to hiring employees in Singapore
As a business grows, hiring additional employees become imminent. As a business owner you must be aware of all the legal requirements relating to topic of hiring employees and administering their pay. It is important that owners and relevant personnel have a high-degree of knowledge of managing all these aspects. There are a number of legal requirements that needs to be followed as well as reporting requirements that must be complied. Engaging a professional firm like Transcend is usually the best choice in these cases.
Government authorities are usually strict about matter relating to employees, salary payment and CPF contributions.
What is Central Provident Fund (CPF)
In Singapore the Central Provident Fund is a compulsory comprehensive savings plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare, and housing needs. It is administered by the Central Provident Fund Board, a statutory board under the Ministry of Manpower. The employer has to contribute 16% of the employee's monthly gross salary while the employee contributes 20% of his monthly gross salary. Many other countries also have similar arrangements called by various names like pension, Superannuation or social security.
Below information will give you comprehensive overview of all of your responsibilities as an employer while recruiting either a local Singapore person or a foreigner.
As an employer you must have a proper written employment contract with the employee. The contract must be signed by both employee as well as representative of the employer. Contract needs to be signed in duplicate with one copy being given to the employee.
The employment contact may be called by different names like “letter of offer”, “employment letter”etc. Typically this letter will include terms like – scope of work, hours of work salary amount, annual leave, medical leave and other appropriate clauses. If you do not have a format of such a letter then we can provide a sample letter to its clients.
Fair opportunity to all prospective employees
As an employer you are expected to give fair chance to all prospective employees. When you advertise for the job you cannot put discriminating clauses like;
- Foreigners preferred
- Only those below 35 years of age preferred
- Female environment
If you are found putting up such discriminate advertisements then Ministry of manpower can impose fine on your company. This provision is in line with Singapore’s drive to provide equitable and fair opportunity for all to participate in work and career opportunities.
Work authorization in Singapore
When you employ a person in Singapore it is your duty to ensure that the person has proper work authorization to work for your company. More than 25% of the Singapore population is a foreigner working on employment or work passes. So this check is very important to ensure that you are employing a right candidate.
People who are Singapore citizen or permanent resident are free to work for any company without specific authorization, whereas those who are on employment pass, dependent pass or any other work passes cannot work for your company unless specifically authorized to work for your specific company.
As an employer it is your duty to ensure that the people you employ have right work authorization.
It is a general practice in Singapore that employees are provided with some basic medical + accidental insurance coverage. For employment pass holders holding Q1, P2 or P1 passes it is not a legal requirement however as a practice most of the companies provide this. For the lower level passes like S pass or work passes, provision of a medical insurance is mandatory by law.
Similar to above for higher level passes some employees also provide insurance cover for the entire family of the employee. As an employer you will be required to adhere to these practices / requirements.
Adherence to quota system
For the lower level passes like work permit and S passes Singapore uses a quota system. Depending on the industry you are in, you are allowed to employ specific % of employees who are foreigners on lower level passes. For example the quota for construction industry is at 87%. That means for a company in construction industry max 87% of its employees can be foreigners working on work pass. Similarly the quota for food and beverage industry is 45%.
For higher level employment passes (Pass P1, P2, Q1) there is no quota. The application for these employment passes is approved by the ministry of manpower on a case to case basis.
If you employ lower level pass holders then it is your responsibility to ensure the quota limits are not violated.
Qualification of the employee
In some specific sector qualification of the employee may be one of the condition. For example if you are into the business of storing, distributing medicines then appointing a manager with proper pharmacy education is mandatory. Similarly if your company works on projects in industrial electrification then the employees need to have Singapore certification on industrial electrification standards.
As an employer it is your responsibility to ensure this conditions are met.
Ongoing training of employees
For certain business sectors ongoing training and proficiency attainment standards are in place. For example if your employees are likely to work in hazardous environment then orientation on how to take proper care in such a situation may be mandatory requirement to be completed. Drivers of tankers which carry flammable material, liquid nitrogen are required to attain such courses periodically.
As an employer it is your responsibility to ensure that proper training and orientation is provided to your employees.
CPF deduction and deposit with CPF board
For every employee who is Singapore citizen or PR, you are required to deduct 20% of his monthly wages as CPF contribution. In addition to this you are also required to contribution 16% as employer’s contribution to CPF. The total of this 36% needs to be deposited with CPF board within 14 days from the date of deduction. The detailed information about employees for whom contribution is deposited needs to be communicated to CPF board in an electronic file. The maximum salary amount on which CPF is deducted can not exceed 5000 SGD.
Employers are required by IRAS through the Auto Inclusion Scheme to submit the income information of their employees electronically. Filing of the requirement must be completed before March 1 and the information provided will be the basis of all employees’ income tax return and assessment of tax liabilities. Various forms must be completed and submitted by the employer prior to the date mentioned.
In case an employer is not liable for electronic submission then a paper IR8A form must be issued to every employee that worked with the employer during the year. Based on this paper form them employee can report his income to income tax department.
Employee Tax Clearance
Tax clearance is filed by employers on behalf of their foreign workers in order to fulfill the employees’ tax obligation. Form IR21 needs to be submitted to IRAS when:
- An employer no longer works in Singapore; or
- When assigned overseas; or
- Is out of the country for more than three months.
All manner of payment due to the employee is withheld for 30 days upon submission of Form IR21 or until a clearance is issued by IRAS, whichever is accomplished earlier.