After you have incorporated a Singapore company, you will need to hire employees, both local and foreign, to work for your company.
While hiring local residents (Singapore citizens and permanent residents) is easy, you will need to apply for work visas – Employment Pass (EP), S Pass or Work Permit, if you intend to hire foreigners in Singapore.
This guide will provide you with an overview of the considerations which must be kept in mind before hiring employees in Singapore.
Employment Act – Applicable to both Singapore and Foreign Employees as defined by the Act
In Singapore, the relationship between the employer and employee is regulated almost exclusively by contract, and the primary legislation governing the hiring, employing and dismissing of employees is the Singapore Employment Act (Chapter 91).
While both parties, employee and employer, are free to put in clauses as they please, the employment contract in general is subject to certain statutory requirements provided for by the Employment Act (EA) and the common law.
EA’s definition of “employee” does not include:
- domestic workers
- managerial and executive position employees (earning more than S$4,500 every month)
- class of persons declared by the Minister not to be part of the EA
An employment contract can also be known as employment agreement, appointment letter or offer letter in Singapore.
Employment of Foreign Manpower Act – Applicable to All Foreigners Employed in Singapore
Employment of all foreigners in Singapore is regulated by the Employment of Foreign Manpower Act (EFMA). Moreover, some Singapore employment laws also apply to foreigners regardless of the contract clauses. This includes compensation for work-related injuries, maternity benefits and childcare leaves for parents.
All foreigners require work visas granted by the Singapore’s Ministry of Manpower (MOM) before they start working for an employer in Singapore. These work visas may be either work permit, S Pass or an Employment Pass (EP).
Work Permits (WP) are issued to basic-skilled workers from an approved source country/territory, which depends on the sector the worker is going to be employed in. S Pass is a notch above WP and is issued to mid-level skilled foreigners (e.g. technicians).
Meanwhile, the Singapore Employment Pass is the most preferred work visa applicable for experienced professionals, managerial personnel, and executives.
Employment Pass eligibility criteria include:
- managerial or executive roles, or specialised jobs
- a fixed monthly salary of at least S$3,600 (effective 1 January 2017) for young graduates and higher for older experienced applicants
- acceptable professional and educational qualifications
Singapore Employment Contract
In general, an employment contract in Singapore must include the following:
- date of commencement – may include probation details if applicable
- salary details – includes basic pay as well as all types of allowances. Singapore doesn’t have a statutory minimum wage or bonus payment but EA mandates that the employee’s salary is paid at least once a month within seven days after the end of the salary period. Normally, at least one month’s salary is paid as yearly bonus to employees in Singapore.
- duties and job profile
- working hours – may include overtime provisions if applicable. EA provisions of employees not working more than 44 hours per week is applicable to only those employees who earn less than S$2,500 per month.
- annual leave –Minimum statutory annual leave of up to 14 working days is applicable to EA employees, based on the duration of employment. The provisions of applying for leaves may also be included. The Ministry of Manpower stipulates that it’s list of annual public holidays are stringently followed by all Singapore employers.
- sick leave – minimum statutory sick leave and hospitalisation leave is applicable to EA employees. Sick leave without pay may also be included. The EA doesn’t have the statutory requirement of providing health insurance to employees.
- parental and childcare leave provisions – the maternity provisions are different for foreign (8 weeks) and Singapore resident employees (16 weeks).
- termination clauses and notice period – the termination notice or resignation must be given in writing
- confidentiality clauses
- governing law – contracts should be governed by Singapore Law.
Statutory Filings per Employee
Every Singapore employer must comply with the relevant mandatory statutory contributions for each employee, subject to certain qualifying conditions. This includes the CPF and SDL.
Central Provident Fund (CPF)
CPF contributions are payable for each Singapore citizen and permanent resident. The employer is required to pay the employer’s and employee’s share of CPF monthly contributions, which are determined according to the CPF rates and the employee’s actual salary. The employer may deduct the employee’s share from his salary.
Skills Development Levy (SDL)
The Skills Development Levy (SDL) is used to fund the Skills Development Fund which supports workforce upgrading programmes and provides training grants to employers.
Employers are required to make SDL contributions for all employees — i.e. all local and foreign employees, including casual, part-time and temporary employees. This must be paid by the employer and cannot be deducted from the employee’s salary.
SDL fund is used in supporting work-force upgrading programmes and training. It’s rate is 0.25% of an employee’s gross monthly remuneration up to the first $4,500, or $2, whichever is higher. Where the employee’s gross monthly remuneration is more than $4,500, the SDL is fixed at $11.25.
Foreign Workers Levy
Singapore companies are required to pay foreign worker levy (FWL) for their Work Permit and S Pass holders. This levy was introduced by the Singapore Government to regulate the foreign manpower numbers in the country.
The amount of FWL to be paid for each worker is determined by the sector the employer/company belongs to, and the educational qualifications and skills of the workers.
Concessions may be available to Employers who employ skilled workers with relevant qualifications. With regard to S Pass holders, the monthly levy per worker ranges between S$315 and S$550.
Other Important Considerations
Changing Employment Terms
If not specifically mentioned in the employment contract, the employer cannot change the terms and conditions of employment during the course of employment.
Confirmation of Employment
The EA makes no such provisions. Thus, whether and when, if ever, an employee gets confirmed depends on his or her specific contract terms.
Payments in Kind
According to Singapore’s EA, this is not permitted. All wages must be paid in legal tender. However, an employee may get food, housing and other privileges in addition to wages if the employer deems fit.
Refusal to Accept Resignation
According to Singapore EA, Section 108, an employee has the right to resign at any time by serving the required notice period or compensating the employer monetarily in-lieu of notice. Failure by the employer to allow the employee leave the employment is a punishable offence by a fine not exceeding S$1,000 or imprisonment up to six months or both.
Tax Clearance for Foreign Employees
It is the employer’s responsibility to ensure that every non-citizen foreign employee pays all his or her due taxes on cessation of employment with the employer in Singapore or he/she plans to leave Singapore for more than three months. The employer must notify the Inland Revenue Authority of Singapore at least one month prior to the non-citizen employee leaving your employment and seek tax clearance from the Authority.
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