After you have set up a Singapore company, you will need to start hiring employees to work for your company. This is another important milestone that involves some serious decision-making.
While hiring locals is easy, there are other requirements that you will have to meet if you want to hire foreigners in Singapore. This guide will help you understand the main labor laws and hire local and foreign employees the Singaporean way.
We target an audience of Singapore startups who are hiring employees for the first time to help them avoid costly and time-consuming mistakes. Keep in mind that these general guidelines should not replace professional advice.
What you need to know before hiring employees in Singapore
Before starting the hiring process, it’s essential to ask yourself questions such as:
- What employment laws do I need to be aware of, and which ones have a binding effect on me and my employees?
- Are there formalities for hiring local or foreign employees? Is there a limit to the number of foreign employees I can employ?
- Are there differences in hiring full-time, part-time, and contract staff?
- How much does it cost to hire an employee? Do I have to pay any levies, provident fund contributions, etc.?
- If there are no legal requirements, is there a general practice followed in Singapore?
- Are there hiring guidelines or what I should and shouldn’t know about?
Labour laws applicable to Singapore employees
Two primary laws govern the hiring of employees:
- Employment Act (EA) which applies to both local and foreign employees
- Employment of Foreign Manpower Act (EFMA) for work pass employees
What is an Employment Act?
The Employment Act is Singapore’s primary labor law which governs the basic terms and conditions at work for employees covered by the Act. Foreign workers holding work permits are also covered by the Foreign Employment Act, which outlines employers’ responsibilities and obligations to employ foreigners.
All local and foreign employees under a contract of service with an employer are covered under the Employment Act. These employees can be employed as full-time, part-time, temporary, or contract and can be paid based on hourly, daily, monthly, or piece-rated.
Amendments to the Employment Act
Since the 1st of April, 2019, the Employment Act has been amended to cover all employees. Changes made to the Employment Act include:
- Covering all employees under the Employment Act.
- Covering a larger proportion of non-workers under Part IV of the Employment Act.
- Wrongful dismissal claims to be heard by ECT.
The Employment Act covers managers and executives with a base monthly salary of more than $4,500. All employees but seafarers, domestic workers, and public officers will be covered for core provisions such as:
- Minimum days of annual leave
- Paid public holidays and sick leave
- Timely payment of salary
- Statutory protection against wrongful dismissal
Seafarers, domestic workers, and public officers continue not to be covered under the Employment Act. Other Acts and regulations cover them due to the nature of their work.
Salary threshold and salary capped for overtime for non-workmen qualifying under Part IV of the Employment have changed and shown in the table below:
|Before Amendments to EA||After Amendments to EA|
|Workers earning up to $4,500/month||No change|
|Non-workmen earning up to $2,500/month||Non-workmen earning up to $2,600/month|
|Non-workmen: The basic monthly salary used to calculate the hourly rate for overtime work is from a salary level of $2,250/month to not more than $2,500/month.||Non-workmen: The basic monthly salary used to calculate the hourly rate for overtime work is capped at the salary level of $2,600/month.|
Non-workmen earning up to $2,600 are covered under Part IV of the Employment Act, which provides additional protections such as hours of work, rest, and overtime pay.
Essential responsibilities of employees in Singapore
Here are a few things employees in Singapore are responsible for.
Formalizing employment contract
Employers are required to comply with the terms and conditions specified in the employment contract. If you are unfamiliar with the labor regulations in Singapore, it may be wise to use a lawyer or HR consultant who has the expertise to assist you in this area. If the Employment Act protects your employees, you must meet the requirements set out in that Act.
Some of the important points to be included in the contract are:
- Employer’s full name
- Employee’s full name
- Position, main duties, and responsibilities
- Employment start date
- Duration of work (if the employee has a fixed-term contract)
- Work arrangements, such as daily working hours, number of days worked per week, rest days
- Basic salary
- Fixed allowances and deductions
- Overtime payday (if different from salary payday)
- Overtime pay rate
- Other salary-related components such as bonuses and incentives
- Types of leave include annual leave, sick leave, hospitalization leave, maternity leave, child care leave, etc.
- Other health benefits such as insurance, dental, etc.
- Probational period
- Notification period
- Workplace (especially if the work location is different from the company address)
Issuing detailed salary slips
All employers must issue detailed payslips to employees covered by the Employment Act. Singapore has no statutory minimum wages or bonus payments. Still, EA mandates that employee salaries are paid at least once a month within seven days after the end of the pay period. Usually, a minimum of one month’s salary is paid as an annual bonus to employees in Singapore.
To streamline your company’s payroll management, consider engaging a payroll service provider in Singapore. With their help, you can ensure on-time salary distribution and accurate salary and tax calculation.
Making Central Provident Fund (CPF) contributions
For local employees, the CPF contribution is mandatory. You are required to pay your employees’ CPF contributions monthly if they earn more than $50 per month, and your employees must contribute to CPF if they make more than S$500 per month. The maximum CPF contribution rate for employer and employee is 16% and 20%, respectively, and can be lower depending on certain factors such as employee age, permanent resident status, etc.
Paying Foreign Worker Levy (FWL)
If you employ low-skilled and unskilled foreign employees, the Foreign Worker Levy (FWL) applies. The foreign labor levy is a price control mechanism to regulate the demand for foreign workers in Singapore. If you want more information on how much the government will collect through the levy, check out the Ministry of Manpower (MOM) website.
Paying Skills Development Levy (SDL)
SDL is a mandatory levy that you must pay each month for all your employees who work in Singapore, including foreign employees and employees hired on a freelance, part-time or temporary basis. SDL is calculated up to the first S$4,500 of the total monthly salary of each employee with a levy rate of 0.25% or a minimum of $2 (for a total salary of $800 or less), whichever is higher.
Reporting Employee Income
Employers must prepare tax forms for all employees annually before March 1. This form allows employees to file their tax returns with the Inland Revenue Authority of Singapore (IRAS) as required under the Singapore Income Tax Act.
Preparing tax forms can be a pain in the neck for new entrepreneurs. Therefore, it is always good to seek assistance from an authorized corporate service provider.
Tax clearance for foreign employees or Singapore permanent residents leaving Singapore permanently
According to the IRAS, employers should request tax clearance by completing Form IR21 at least one month before non-citizen workers:
- quit working in Singapore; or
- is in posts abroad; or
- leave Singapore for more than three months.
Otherwise, reasons must be stated in Form IR21. Unless there is a valid reason, such as the employee’s immediate resignation, employers who fail to file or fill out Form IR21 may be subject to a fine of up to $1,000.
Hiring foreign employees in Singapore
Most companies in Singapore hire foreigners to supplement their local workforce. Specific jobs, such as domestic help and construction, are not very attractive to locals. IT, finance, and R&D firms find a shortage of highly skilled local talent and employ foreign labor.
Under the Employment Act, foreigners must have a valid work visa to work in Singapore. If you wish to hire foreigners, you must apply for valid work passes before they can start working with you.
The Singapore work pass system distinguishes three levels of employees:
- Skilled professionals (e.g., software engineers, doctors, R&D specialists, etc.) who are eligible for an Employment Pass or Personalized Employment Pass
- Mid-level skilled professionals (e.g., technicians, chefs, administrative professionals) who are eligible for an S Pass
- Semi-skilled workers (e.g., construction workers, retail assistants) who must obtain a work permit
For more detailed information about Singapore work passes, refer to:
General recruitment guidelines
Singapore’s workforce varies significantly in terms of ethnicity, age, and nationality. Therefore, employers are strongly advised to adopt progressive and fair HR practices, especially in matters relating to the recruitment of talented employees. To curb abusive practices, the MOM has announced a series of edicts:
- Employers are advised to hire employees based on merit
- Age, race, gender, religion, family status, and disability are less important than the ability, experience, and skills to do the job
- Employers are required to inform all job applicants of the job-related selection criteria and ensure that those criteria remain relevant
- Job advertisements must avoid including attributes such as age, gender, marital status, race, religion, and language unless they can be justified
- Job application forms should only ask for information that is relevant to assessing an applicant’s suitability for a job
- Employers can ask applicants personal questions, but only for administrative purposes
- Employers must conduct interviews and tests related to job requirements
Below are some of the popular recruitment channels that most employers use for their hiring solutions:
Employment agencies/recruitment firms
Most medium and large companies prefer partnering with headhunters to recruit suitable candidates. This approach helps you save time and effort. However, do note that you need to check each agency’s rate and policy (as well as the candidate’s salary) before finalizing one.
You can place recruitment ads on The Straits Time, the leading newspaper in Singapore. Both recruiters and job seekers often use this approach. Before investing your money, find out how much you will pay and how well the ads will reach your target audience.
Job search websites
Several paid websites are popular with job seekers (e.g., JobStreet and JobsDB). These sites cater to the Singapore market and are good places to find regional positions and applicants.
Job fairs have become popular in Singapore, attracting over 400,000 applicants each year. These venues give employers access to several potential candidates and the opportunity to conduct on-the-spot interviews. You will do best if you use this method to recruit applicants with job-specific skills and talents.
Most campuses in Singapore allow employers who are interested in hiring graduates/postgraduates to conduct interviews and recruitment talks.
Once you have successfully incorporated a company in Singapore, make sure to practice a fair hiring process, follow our tips above, and fulfill your responsibilities as an employer to avoid any obstacles in the future.