Payroll in Singapore: Complete guide for businesses

Between 2021 and 2023, the Ministry of Manpower (MOM) received nearly 700 complaints annually about issues like delayed or missing payslips.¹ This highlights a common challenge new business owners face: staying compliant with payroll regulations.

Starting and managing a business in Singapore can be rewarding, but it requires careful attention to payroll compliance. In this guide, we’ll cover everything you need to know about payroll regulations in Singapore, from mandatory contributions to payslip requirements, and how to avoid noncompliance. We’ll also explore how to choose a payroll software to simplify these processes, and how Airwallex can automate payments to your local and global employees.

What is payroll in Singapore?

Payroll in Singapore is the process of calculating and disbursing employees’ salaries, while factoring in components like their basic pay, overtime, and other earnings. A unique feature of payroll in Singapore is that employers are responsible for contributions to government schemes like the Central Provident Fund (CPF), Skill Development Levy (SDL), and Foreign Worker Levy. Accurate payroll management ensures employees are paid correctly while meeting these legal obligations.

Managing payroll can present significant challenges for businesses. Errors in calculations or missed deadlines can lead to fines, strained employee relationships, or reputational damage. For new business owners, understanding these requirements is essential to avoid costly mistakes and ensure smooth operations.

What is a payroll system?

A payroll system is a software or service that automates the calculation, processing, and payout of employee salaries and statutory contributions. For example, it can automatically generate accurate payslips for employees, detailing their gross pay, deductions like CPF contributions, and net salary. By handling these tasks efficiently, payroll systems save time, reduce errors, and ensure compliance with local regulations.

In contrast, manual payroll processes use spreadsheets, handwritten records, and manual calculations to determine and pay out salaries. While this approach is inexpensive, it's also time-consuming and prone to human error. 

What is global payroll? 

Global payroll is the process of managing payroll for employees based in different countries. It includes tasks such as salary calculations and complying with tax regulations in Singapore and the remote worker’s host country. 

Singapore is currently a leading country in Asia Pacific for hiring remote workers.² This trend is expected to continue as it allows businesses to access global talent or retain employees who move abroad. If you’re looking to build a remote workforce, you need a reliable system in place to manage global payroll.

What are the differences between global payroll and local payroll? 

The key difference between global payroll and local payroll lies in its scope. 

Local payroll focuses on managing salaries for Singapore-based employees. This includes calculating CPF contributions and issuing payslips in compliance with Singapore’s employment laws. In contrast, global payroll involves handling payroll across multiple countries, each with its own tax systems, labor laws, and reporting requirements. 

Managing global payroll can be challenging, with businesses often facing high transfers and foreign exchange (FX) costs as well as payment delays due to long transfer times. These hurdles can disrupt timely salary payments and increase operational expenses. A fintech partner like Airwallex can help you overcome the challenges of paying out global salaries. Its network of local payment rails guarantees fast, low-cost salary payments to 120+ countries and 130+ currencies.  

While local payroll is more straightforward, global payroll requires businesses to navigate varying regulations and ensure consistency in payments for international employees.

Payroll tax and regulations in Singapore: What do businesses need to know?

Businesses in Singapore need to be aware of local payroll regulations and taxes to comply with legal requirements and avoid fines or disputes. 

What is payroll tax?

A payroll tax is a tax that employers deduct from an employee’s salary and remit to the government, typically covering income tax and social security contributions. 

Unlike other countries, Singapore employers don't withhold income tax from employees’ salaries on a monthly basis. Instead, employees are responsible for submitting their tax returns directly to the Inland Revenue Authority of Singapore (IRAS). However, employers are required to report employees' income to IRAS through the Auto-Inclusion Scheme (AIS) for Employment Income.³

Instead of making income tax deductions, employers in Singapore are required to make social security contributions, such as CPF payments, which we’ll elaborate on further below.

What is the difference between payroll taxes and corporate taxes?

The difference between payroll taxes and corporate taxes is the earnings they apply to, and which government agencies benefit from them. 

Payroll taxes in Singapore relate to contributions made by employers, such as CPF and levies, based on employee wages. These are tied to an employer's responsibility toward their workforce. Corporate taxes, on the other hand, are taxes on a company’s income and are paid directly by the business to the IRAS. 

In other words, payroll contributions support systems like CPF while corporate taxes fund the government’s operating expenditures and economic development initiatives.⁴

Payroll compliance and regulations in Singapore

Here's a quick overview of the regulations that impact your employer's contributions and your employees’ mandatory payroll deductions:

• Salary and payments. Employees covered by the Employment Act in Singapore must be paid a salary at least once a month, though employers can choose to pay at shorter intervals like weekly or bi-weekly. Salaries must be paid within 7 days after the end of the salary period, while overtime payments must be made within 14 days after the salary period ends.⁵

• Payslips and pay records. Employers are required to issue itemised pay slips to all employees covered by the Employment Act. These pay slips must be provided together with their salary or within three working days of payment and can be in soft-copy, hard copy, or even handwritten. The Ministry of Manpower website has a list of what items should be included in payslips.⁶

• Yearly reporting to IRAS. Employers in Singapore are legally required under Section 68(2) of the Income Tax Act to prepare Form IR8A and Appendix 8A for employees by 1 March of the following year. Form IR8A details an employee's income earned during the year, while Appendix 8A provides information on benefits-in-kind received.⁷

• Central Provident Fund (CPF). CPF contributions support key social benefits in Singapore, including retirement, health care, and home ownership. A percentage of the employee’s monthly salary is automatically deducted for CPF contributions, with rates depending on the employee’s age and wage bracket. You also need to make CPF contributions for all Singapore-based citizens and Permanent Residents.⁸

• Skills Development Levy (SDL). The SDL is a mandatory employer contribution for all employees. Employers pay 0.25% of an employee's monthly salary, capped at S$11.25 per employee each month. This fee supports workforce training under the SkillsFuture initiative.⁹

• Foreign Worker Levy (FWL). The FWL is a monthly fee employers in Singapore must pay for hiring foreign workers who hold Work Permits or S Passes. The amount varies depending on the worker's qualifications and your company’s sector.¹⁰

When can non-compliance occur? 

Non-compliance with Singapore's payroll policies can happen when businesses rely on manual processes, making it harder to meet strict payment deadlines and issue accurate payslips on time. Manual methods increase the risk of errors, delays, and missed deadlines, which can result in penalties or strained employee trust. 

Ensuring compliance requires efficient systems that streamline payroll tasks and keep up with regulatory requirements.

Payroll software vs. payroll services: Which is right for your business?

The difference between payroll software and services comes down to a tool versus a service. Payroll software is a tool that helps you manage payroll in-house, automating calculations and tax filings while keeping you in control. Payroll services, on the other hand, handles payroll and HR services.

Most payroll companies offer both options, so you can choose the one that best fits your business needs and resources. 

What are payroll services?

A payroll service is a third-party provider that assists businesses with their payroll and HR tasks using a combination of software and locally-based teams. On top of managing payroll, they may also provide the following HR services:

• Employer of Record (EOR). An EOR allows businesses to expand into new countries without needing to set up a local entity. When you appoint a payroll service as an EOR, they will handle hiring and onboarding employees on your company’s behalf, with payroll, tax, and compliance managed through their software.

• Local teams. Payroll services offer local support in multiple countries, ensuring businesses can navigate regional payroll requirements effectively. Their services can be tailored to match the unique needs and complexities of each location.

• Employee benefits administration. Manages insurance, leave policies, and retirement plans.

What is payroll software?

A payroll software is a program that automates the payroll process for in-house finance or HR teams. It simplifies tasks like salary calculations and CPF contributions, and often includes features that support hiring and retention. 

Here are just some of the services offered by payroll software:

• CPF contributions. Payroll software can automate CPF calculations and contributions, ensuring accuracy based on employee wages and applicable rates. It also generates detailed reports on CPF contributions, SDL payments, and Self-Help Group contributions, which can be easily uploaded to the CPF website for submission.

• Auto-Inclusion Scheme (AIS) submissions. The AIS is a tax scheme by the IRAS that requires employers to submit their employees’ income records digitally. IRAS then automatically includes this information in employees’ online tax returns and assessments. Certain payroll software use APIs to automate this process by submitting records directly to IRAS.¹¹

• Global contractor management. A dashboard that lets you onboard, manage, and pay overseas contractors while staying compliant with their local country’s regulations. 

• Time and attendance tracking. Automated time and attendance tracking ensures wages and leave are calculated accurately. 

• HR services platform. A dashboard that centralises HR operations and employee data. Features vary from software to software, and can include onboarding, employee engagement, time off requests, and OKR tracking.

Talenox and Employment Hero are some examples of payroll software in Singapore.

Key differences between payroll services and payroll software

Payroll services and payroll software offer different approaches to managing employee compensation. 

Payroll services outsource payroll tasks to a third-party provider, which makes it ideal for businesses with global payroll needs. 

On the other hand, payroll software is a tool used by in-house HR teams to automate the payroll process. The choice between the two depends on a business's industry, HR resources, and complexity of payroll requirements. However, many payroll firms offer both software and services, and give businesses the flexibility to choose which to use.

5 best payroll software and services in Singapore

Looking for the best payroll software and services in Singapore? We’ve selected the following companies based on their popularity and their ability to efficiently handle both global and local payroll requirements.

• ADP. A comprehensive payroll and HR service provider offering global coverage with solutions for compliance, tax filing, and employee management.

• Deel. A global HR software and service provider that makes it easier for companies to hire overseas employees and manage international payroll.

• Employment Hero. An all-in-one recruitment, HR, and benefits platform for Australia, New Zealand, and Southeast Asian countries. 

• Remote. A global payroll software with Employer of Record (EOR) solutions for managing international teams.

• Talenox. A Singapore-based payroll software designed for seamless CPF calculations, leave management, and tax reporting.

How to process payroll

As soon as you’ve identified a good payroll software or service, the payroll process is fairly straightforward: 

Step 1: Gather employee details. Collect necessary information, such as residency status and salary details.

Step 2: Calculate salaries. Compute gross pay, including base salary, overtime, allowances, leaves, and mandatory deductions.

Step 3: Submit statutory contributions. Each country and region will have different mandatory contributions. For your Singapore employees, you need to file and pay CPF contributions and other statutory payments (e.g. Skills Development Levy). 

Step 4: Generate and issue payslips. Prepare and send itemised payslips to each employee. Pay slips should break down earnings, deductions, and net pay for the payroll period.

Remember that your Singapore-based employees’ income details must be filed with IRAS at the end of the calendar year. This information should include monthly income paid through payroll and any additional benefits like annual bonuses. The submission deadline is 1 March each year.

Simplify global payroll management with Airwallex 

Getting payroll right ensures that your employees are paid accurately and on time while staying compliant with local regulations. However, it becomes more complex when you have international teams. On top of navigating different tax laws and local compliance requirements, you also need a cost-effective way to disburse salaries in various currencies.

That’s why it can be a good idea to pair your chosen payroll service with a global payments platform like Airwallex. Whether you’re handling local or international payroll, Airwallex’s all-in-one Business Account simplifies the complexities of paying your workforce:

• Unlimited free FAST transfers. Unlike many business bank accounts, which put a cap on their free FAST transfers , Airwallex has unlimited FAST transfers to ensure quick salary payments without additional costs.

• Multi-currency accounts. Create 23+ local currency accounts in 60+ countries, and use these to receive and hold funds in these currencies. The funds in these accounts can be used to pay employee salaries. This helps you avoid fees and potential losses from unwanted currency conversions.

• Fast, low-cost international transfers. Avoid hefty SWIFT fees and use Airwallex’s network of local payment rails to pay salaries in 120+ countries. Fees are near zero and 90% of transfers arrive on the same day.

• Interbank exchange rates. Enjoy friendly exchange rates and low fees when you need to convert SGD to your employees’ preferred currencies.

• Batch transfers. Pay up to 1,000 employees in a single transaction by uploading a spreadsheet with your employees’ payment details.

• Expense Management. Instantly reconcile your corporate card expenses and calculate employee reimbursements with our built-in Expense Management system.

Discover what Airwallex can do to propel your business’s growth. Open a free Airwallex account today.

Frequently asked questions

1. How can SMEs ensure data privacy and security in payroll management?

SMEs can ensure data privacy and security in payroll management by using trusted payroll software with robust encryption or a payroll service with a track record of security. If you decide to use payroll software, ensure that systems are regularly updated and that your payroll team is trained on data security best practices. 

2. What are the common payroll compliance challenges faced by SMEs in Singapore?

SMEs in Singapore often rely on manual payroll processes, which increase the risk of errors and inefficiencies. Ensuring compliance with payroll regulations, such as CPF contributions and tax reporting, can be challenging for businesses with little in-house expertise. Keeping up with frequent regulatory changes adds to the complexity, making it essential for SMEs to adopt reliable payroll solutions to avoid compliance issues.

3. What are the tax implications for foreign employees in Singapore's payroll system?

The tax implications for foreign employees in Singapore are based on their residency status, which affects the tax rates they must pay. Foreign employees are considered tax residents if they live and work in Singapore for a continuous period across two calendar years and their total stay is at least 183 days.²¹ Like Singapore citizens and Permanent Residents, they pay taxes directly to IRAS, but employers must submit all employee income details to IRAS by 1 March each year.

4. How can SMEs stay updated with changes in payroll regulations and tax laws?

SMEs can stay updated with changes in payroll regulations and tax laws by subscribing to updates from relevant authorities like IRAS and CPF Board. Regularly attending industry seminars or engaging with trusted payroll service providers also helps ensure compliance. SMEs may also consider outsourcing their payroll to a third-party service instead of handling payroll in-house.

Sources

1. https://www.hcamag.com/asia/specialisation/payroll/mom-suspends-two-employers-work-passes-for-pwm-non-compliance/492670

2. https://sbr.com.sg/hr-education/news/singapore-one-top-apac-countries-hiring-remote-workers-report

3. https://www.iras.gov.sg/taxes/individual-income-tax/employers/auto-inclusion-scheme-(ais)-for-employment-income

4. https://www.iras.gov.sg/who-we-are/what-we-do/taxes-in-singapore/the-singapore-tax-system

5. https://www.mom.gov.sg/employment-practices/salary/paying-salary

6. https://www.mom.gov.sg/employment-practices/salary/itemised-payslips

7. https://www.iras.gov.sg/taxes/individual-income-tax/employers/auto-inclusion-scheme-(ais)-for-employment-income/reporting-employee-earnings-(ir8a-appendix-8a-appendix-8b-ir8s

8. https://www.cpf.gov.sg/employer/employer-obligations/how-much-cpf-contributions-to-pay

9. https://www.cpf.gov.sg/employer/employer-obligations/skills-development-levy

10. https://www.mom.gov.sg/passes-and-permits/work-permit-for-foreign-worker/foreign-worker-levy

11. https://www.iras.gov.sg/media/docs/default-source/uploadedfiles/pdf/ais-payroll-software-vendors.pdf

12. https://sg.adp.com/

13. https://www.deel.com/employees/singapore

14. https://www.deel.com/pricing/

15. https://employmenthero.com/sg/

16. https://ecommercenews.com.au/story/employment-hero-hits-100bn-global-payroll-expands-to-144-countries

17. https://employmenthero.com/sg/pricing/

18. https://remote.com/country-explorer/singapore

19. https://remote.com/en-sg/pricing

20. https://www.talenox.com/sg/

21. https://www.iras.gov.sg/who-we-are/what-we-do/annual-reports-and-publications/taxbytes-iras/individuals/working-in-singapore-for-the-first-time

This publication does not constitute legal, tax, or professional advice from Airwallex nor substitute seeking such advice, and makes no express or implied representations / warranties / guarantees regarding content accuracy, completeness, or currency. If you would like to request an update, feel free to contact us at [[email protected]]. Airwallex (Singapore) Pte. Ltd. (201626561Z) is licensed as a Major Payment Institution and regulated by the Monetary Authority of Singapore.