Essential Guide to Singapore Payroll Regulations for Businesses in 2025
Singapore is a popular destination for businesses, attracting companies from all over the world. However, with any new location comes new regulations, and payroll is no exception. Understanding Singapore's payroll regulations is essential for any company operating there.
Key Takeaways
The Employment Act is Singapore's primary piece of payroll legislation, covering most of the country's laws relating to paying employees.
All employees working under a contract of service are covered by the Act, including local and foreign employees.
According to the Employment Act, employers must pay their employees' salary at least once a month and within seven days after the end of the salary period.
What is the Singapore Employment Act?
The Singapore Employment Act (EA) is a key law in Singapore that regulates employment practices. It outlines the basic terms and conditions that employers must follow. Although it may seem straightforward, there are nuances and complexities that business owners and employers should be aware of.
Under the Employment Act, employers must provide itemized payslips to employees, including basic salary details, overtime pay, allowances, and deductions. Employers should ensure timely payment according to the agreed-upon salary period, at most one month. Moreover, employers must make Central Provident Fund (CPF) contributions for employees to provide retirement, healthcare, and housing benefits.
It is important to note that the Employment Act does not cover seamen, domestic workers, and individuals employed by statutory boards and the government. However, these workers still have employment rights and protections under other laws.
Scope and Coverage of the Singapore Employment Act
The Singapore Employment Act applies to all employees covered under a contract of service, regardless of whether they are permanent or contract employees, part-time or full-time, or foreign or local workers. However, this rule has some exceptions, such as managers and executives earning more than $4,500 monthly, domestic workers, and seafarers.
The EA covers various employment topics, such as payment of salary and CPF contributions, working hours and rest days, annual leave and public holidays, termination and retrenchment, and workplace safety and health. Employers must comply with these provisions or risk facing penalties and legal action from employees or the Ministry of Manpower (MOM).
Key Provisions and Requirements of the Singapore Employment Act
Under the Employment Act (EA), employers must provide written employment contracts to employees within two months of their start date. The contract should include job details, salary, benefits, work hours, and notice periods for termination.
The EA also sets minimum salary and CPF contributions requirements. For instance, employers must pay salaries within seven days and make CPF contributions for employees who are Singapore citizens or Singapore Permanent Residents.
Another important provision is the requirement for employers to give annual leave and public holidays. Annual leave starts at seven days in the first year and increases to 14 days in the eighth year. Employers must provide 11 public holidays annually.
Salary and Remuneration in Singapore
The Employment Act in Singapore sets rules for salaries and compensation. It defines minimum employment terms and conditions. The Act requires that employees be paid a basic salary amount, excluding allowances, bonuses, and benefits.
Singapore does not have a national minimum wage, but it implements sector‑specific wage floors under the Progressive Wage Model (PWM). This applies to industries such as cleaning, security, landscape, retail, food‑services, lift/escalator maintenance, and waste‑management.
As of 1 July 2024, the base salary for in‑house general cleaners is S$1,740 per month, rising from S$1,570 the previous year, and will continue to increase annually through mid‑2029.
In the security sector, the base wage for outsourced full‑time security officers was S$1,650 in 2023. This jumped to S$2,650 from 1 January 2024, and increased further to S$2,870 from 1 January 2025, with more scheduled rises through 2028.
These increases form part of the PWM’s mandated wage–skill progression ladder, requiring employers to boost base wages and invest in training as workers upskill and take on more responsibilities.
Employees can receive allowances for housing, transportation, and meals. These should be clearly stated in the employment contract. Allowances may be subject to income tax and contributions to the Central Provident Fund (CPF), a mandatory social security savings scheme. Employers consider the cost of living, industry standards, and location when setting basic pay or allowances.
Bonuses and incentives are used with gross monthly remuneration to recognize and motivate employee contributions. Employers can offer performance-based bonuses, such as annual, profit-sharing, or commission. Non-performance-based bonuses, like overtime pay, sign-on, retention, and referral bonuses, may also be used as employment income for their monthly remuneration. Employers should align bonus schemes with clear performance metrics and goals, communicating them transparently to employees.
What is the Singapore Central Provident Fund?
The CPF is a social security savings plan that requires the employer and employee to contribute a portion of the employee's monthly salary towards the fund. The contribution rate varies depending on the employee's age, citizenship status, and income level.
The government invests the funds collected from the CPF in various instruments, such as bonds and stocks, to generate returns. The accumulated CPF funds can be used for retirement, healthcare, housing, and education.
All working Singapore citizens and Singapore Permanent Residents, including self-employed individuals aged 16 to 55, are covered. As an employer in Singapore, you must contribute to your employees' CPF accounts and deduct from their monthly salaries to ensure they have enough savings for the future.
How does the CPF work?
The CPF system is based on key elements:
contribution rate
annual contribution ceiling
different accounts
The contribution rate varies depending on age and income level and is subject to an annual contribution ceiling.
The CPF funds are divided into three accounts:
Ordinary Account (OA) for housing, insurance, and education
Special Account (SA) for retirement and long-term investment
Medisave Account (MA) for healthcare expenses
Once you reach 55, savings from your SA and OA are transferred to your Retirement Account (RA). This account will form the entirety of your retirement sum. You can withdraw monthly payments from this account once you reach the CPF payout eligibility age.
These accounts earn different interest rates, and the funds in the OA can be used to purchase housing, while funds in the SA and MA can be used later in life.
What are the Benefits of the CPF for Employers?
As an employer, contributing to your employees' CPF accounts is a legal requirement and a benefit for your business. By offering CPF monthly contributions, you show your commitment to your employees' financial wellness, which can improve their job satisfaction and retention.
Additionally, the CPF system can help your employees save for their future needs, including housing, healthcare, and retirement, reducing their financial stress and improving their productivity at work.
What is the Skills Development Levy?
As a business owner in Singapore, you are no stranger to the challenging business environment characterized by cut-throat competition and constantly changing regulations.
The SDL is a compulsory monthly contribution introduced in 1979, payable by employers in Singapore. Funds go into the Skills Development Fund, managed by SkillsFuture Singapore, to support quality training and strengthen workforce productivity.
How Much Do Employers Need to Pay for SDL?
Compute per employee: 0.25% of total monthly wages, with a minimum of S$2 (for wages under S$800) and a maximum of S$11.25 (for wages above S$4,500).
Add all employees’ SDL and round down to the nearest dollar.
A helpful SDL calculator is available on the GoBusiness website.
To pay the SDL, employers have a few options:
CPF EZPay (SingPass/CorpPass) with auto-compute for Citizens/PRs; manual entry still needed for foreign employees.
If only foreign employees employed, use the GoBusiness SDL e-payment portal, or PayNow, GIRO, bank transfer, or crossed cheque to “Skills Development Fund” (include UEN and payment period).
Note: AXS is now mostly used for CPF contributions and rarely needed for SDL alone.
Payment Deadline & Penalty - SDL must be paid within 14 days after the month end. Late or missing payments incur a 10% per annum penalty on outstanding amounts.
Are There Exemptions for Skills Development Levy?
Employers may declare exemptions via the SDL e-Declaration portal for:
Domestic servants, gardeners, chauffeurs hired privately, not for business use.
Employees who did no work in Singapore during the wage month (e.g., abroad postings), excluding paid leave.
Certain students/interns are temporarily employed during approved training periods.
Self-employed individuals (e.g., hawkers, taxi drivers) are not liable for SDL on their own earnings, but must pay SDL on wages for any employees they hire.
How do Businesses Benefit from the Skills Development Levy?
Government Funding for Workforce Training
Through SDL, employers fund training for their employees, and this amount is collected in a central fund by the Singapore government. You can tap into this fund to train yourself or your employees as a business owner. Government-funded courses are designed to upgrade skills in various areas, such as communication, leadership, and technical competencies. You can also access other training programs offered by private organizations and still claim the funds from the SDL-funded account. This means you can upskill your employees and improve productivity at a lower cost.
Boost Customer Satisfaction and Loyalty
One of the benefits of SDL for businesses is that it enhances employee skills and thus improves the quality of service delivery. Customers appreciate good service, and when they receive it from your employees, they are more likely to return and even recommend your business to others. Employees who have undergone relevant training become more confident, efficient, and effective. Besides, the training promotes a positive company culture, making employees feel valued and motivated.
Stay Competitive
SDL is essential in Singapore's competitive business environment. A skilled workforce is a strategic edge that can help your business remain relevant and competitive. When you invest in employee training, your workforce becomes more efficient, effective, and innovative, enabling you to scale up your operations and enhance profitability. Moreover, SDL funds are available to businesses in various industries, making the levy useful in promoting growth and sustainability.
Improves Workplace Safety
Employers have a moral and legal obligation to provide a safe working environment for employees. One of the benefits of SDL is that it can be used to fund statutory workplace safety and health training programs. Training your employees on occupational safety and health hazards can reduce the risk of injuries and accidents that can cause downtime and lower productivity. Your employees become more knowledgeable about preventing workplace hazards and fostering a safety culture.
Tax Deductions and Rebates
Singaporean employers who pay SDL are eligible for tax deductions and rebates. You can claim up to 400% tax deductions or 40% cash payout for incomes up to $400,000 per year for SkillsFuture Enterprise Credit (SFEC) or Enhanced Training Support for SMEs (ETSS) qualified courses. Additionally, if you pay SDL and are a Small and Medium Enterprise (SME), you can access a $10,000 grant for business transformation and automation.
You can read more about the Singapore Skills Development Levy here.
In-House Payroll vs Payroll Outsourcing
Employee payroll is an important function that directly impacts the financial well-being of any business. As a business owner, you need to make a crucial decision regarding managing payroll – whether to handle it in-house or outsource it to a third-party service provider. This decision can affect your business’s bottom line and the satisfaction of your employees. In this blog post, we will discuss the pros and cons of each method to help you make an informed decision.
In-house Payroll
In-house payroll refers to processing employee payroll through your company’s HR or accounting department. This method can be beneficial if you have a small workforce and a simple pay structure. Doing payroll in-house gives you direct control over the entire process.
You can customize payroll processes according to your business needs, maintain confidentiality, and reduce processing time.
Moreover, an in-house payroll system can be less expensive than outsourcing, significantly reducing your business costs. However, doing payroll in-house can be challenging if your business has a complex pay structure, especially if there are frequent changes and updates.
Outsourced Payroll
Outsourcing payroll refers to hiring a third-party company to handle your business’s payroll. This method can benefit your business with a large workforce or a complex pay structure.
Outsourcing payroll allows you to benefit from the expertise of payroll professionals, who can help manage time-consuming processes like tax filing, reporting, and compliance.
Moreover, outsourcing can reduce your risk of penalties for payroll errors and significantly save your business time. However, outsourcing can be expensive and may require your company to share sensitive data with a third-party provider.
Why Is Outsourcing A Better Choice?
Compliance
Compliance with employment laws is essential for every business, and payroll obligations must be met. Singapore has strict labor laws that all businesses must comply with.
Handling payroll in-house can be challenging if you are not well-versed with employment laws and regulations. In contrast, outsourcing payroll to a third-party provider can ensure compliance with all employment regulations.
Outsourcing payroll in Singapore may help you avoid costly mistakes, which could otherwise attract heavy penalties or legal action. For example, an experienced payroll service provider in Singapore can help you navigate the progressive income tax system that would affect the net monthly salary of your employees.
Confidentiality
Employee payroll data is confidential and must be treated as such. Handling this information in-house can create unnecessary risks, especially if proper security measures are not in place. w
An outsourced payroll provider has strict protocols to keep your employees’ sensitive data secure, and they have advanced technology to secure the data. This ensures protection against data loss, breaches, or any other type of unauthorized access.
The Wrap Up
In conclusion, Singapore payroll regulations are essential for business owners to understand and comply with to ensure smooth operations and avoid legal troubles. CPF contributions, leave entitlements, income tax, foreign employee regulations, and data protection are all important areas to focus on. Business owners should ensure they have the necessary knowledge and systems to avoid any complications or penalties related to these regulations. Business owners can maintain compliance and a healthy working environment with a thorough understanding and preparation.
Frequently Asked Questions
What are the statutory deductions for payroll in Singapore?
As an employer in Singapore, you must make certain statutory deductions from your employees' salaries. These deductions include Central Provident Fund (CPF) contributions, mandatory for all Singapore Citizens and Permanent Resident (PR) employees. Employers must also contribute the Skills Development Levy (SDL), which applies to all employees (both local and foreign) working in Singapore. SDL funds training and development programs for the workforce.
What is the timeline for salary payment in Singapore?
According to the Employment Act, employers must pay their employees' salaries at least once a month within seven days after the end of the salary period. For example, if your salary period ends on the last day of the month, you should receive your salary by the 7th of the following month.
What are the common components of a Singaporean employee's salary?
A Singaporean employee's salary typically consists of several components: basic salary, bonuses, allowances, and benefits. Basic salary is the fixed amount an employee receives for their work, while bonuses are additional payments based on individual or company performance. Allowances are payments made to cover expenses related to their job, such as transportation or housing. Benefits can include health insurance, retirement plans, and other employee perks.
What are the payroll tax regulations in Singapore?
In Singapore, employees generally pay their income taxes directly to the Inland Revenue Authority of Singapore (IRAS); employers typically do not deduct income tax monthly unless specifically required, such as in tax clearance cases for foreign employees leaving Singapore. Employers are, however, required to contribute to the Skills Development Levy (SDL) for all employees and the Central Provident Fund (CPF) for Singapore Citizens and Permanent Residents.
What is the process for calculating payroll deductions in Singapore?
To calculate payroll deductions in Singapore, you must first determine the employee's gross salary, including basic salary, allowances, bonuses, and benefits. From this total, deduct relevant statutory contributions such as CPF (for Singapore Citizens and PRs) and SDL (0.25% of monthly wages, capped at S$11.25 per employee per month). You will also need to deduct any voluntary deductions the employee has requested, such as insurance premiums or retirement contributions.
What are the legal requirements for payroll processing in Singapore?
In Singapore, employers must comply with various legal requirements when processing payroll. This includes ensuring all statutory contributions like CPF and SDL are made on time, maintaining accurate payroll records, and providing payslips to employees. Employers must also comply with the Employment Act, which sets out minimum requirements for employment contracts, working hours, leave entitlements, and salary payments.
Payroll management can be done in-house or you can work with a payroll service provider in Singapore.