How To Hire And Pay Employees In Singapore

Singapore currently ranks second in the World Bank’s Ease of Doing Business index as a result of its investment-oriented business environment and its strong and stable economy. The government is focused on supporting start-ups and small businesses, with several grants and incentives specifically designated to this category. Corporate tax for all businesses also remains lower than neighbouring countries, at 17%. Despite its relatively small population, Singapore’s talent pool is diverse and productive.

However, Singapore has one of the highest costs of living in Southeast Asia and, as a result can generate high costs for businesses. As well as this, the myriad of government schemes to help businesses can be inefficient, as assistance offered is primarily monetary and the sheer number of schemes can make it difficult to receive the appropriate aid.

The legal requirement for annual leave is a minimum of seven days; however, it is common practice in Singapore to grant employees a minimum of 14 days of annual leave. An additional one day of annual leave will be granted for each full year of service.

There are 11 public holidays

January 1st: New Year's Day 

February 1st: Chinese New Year

February 2nd: Chinese New Year 

Though not legally stipulated, the standard probation (or assessment) period in Singapore ranges between three and six months, serving as an opportunity to gauge the performance level of the new employee.

In the event of resignation, if the employment contract specifies a notice period, the employee must either serve the notice or pay compensation in lieu of notice. Notice can be waived by mutual consent of the employer and employee. If the employment contract does not specify the notice period, it is based on length of service as follows:

• Less than 26 weeks’ employment: 1 day’s notice
• 26 weeks to 2 years’ employment: 1 week’s notice
• 2-5 years’ employment: 2 weeks’ notice
• 5+ years’ employment: 4 weeks’ notice

In the event of redundancy, it is common practice for employers to pay between 2 weeks' and one month's salary per year of service as a severance payment. Employees with less three years’ service in a company are not entitled to retrenchment benefits under the Employment Act.

Covenants in restraint of trade, such as non-competes and non-solicits, are usually null and void in Singapore. They are only considered enforceable if they can be shown to be reasonable, such as by proving that they are required to protect the legitimate proprietary interests of the employer, and go no further than is reasonably necessary to protect those interests (especially in terms of duration, scope and geographic coverage). The courts have recognised three legitimate proprietary interests thus far: an employer's trade secrets and confidential information, the protection of trade connections, and the maintenance of a stable trained workforce.

All employers are required to issue key employment terms (KETs) in writing, as well as itemised payslips, to employees who will be employed for a continuous period of 14 days or more. KETs should be provided within 14 days from the start of employment and may be in soft or hard copy. Other than as set out above, there are no legal requirements for employers to have employment contracts in writing with employees, and there are no formalities that need to be complied with, although written contracts are recommended.

If her child is a Singapore citizen, a pregnant employee is entitled to 16 weeks of government-paid maternity leave. If her child is not a Singapore citizen, the employee is entitled to 12 weeks of maternity leave (provided she is covered by the Employment Act). In the latter case, only the first 8 weeks of maternity leave are paid by the government. All working fathers are eligible for two weeks of paid paternity leave, as long as they have been married to a Singapore citizen between conception and birth, and the baby is a Singapore citizen.

Employees are generally entitled to sick leave if:

• they have completed at least three months’ continuous service
• they have informed their employer within 48 hours of their absence
• their sick leave is certified by the company’s doctor, a company-approved doctor, or a government doctor

The number of days of paid sick leave is dependent on length of service. Employees who have worked for at least six months are eligible for 14 days of outpatient, non-hospitalisation leave and 60 days of hospitalisation leave, which includes the 14 days of outpatient leave.

The Central Provident Fund (CPF) is Singapore's national pension scheme. Contributions are payable to Singapore citizens and permanent residents only, aged 55 years and below. Employers and employees contribute 17% and 20%, respectively, of ordinary monthly wages, up to an income ceiling of SGD 6,000. Reduced rates apply for employees who are earning less than SGD 750 per month, as well as for those above 55 years of age, although these rates are being gradually increased.

The Supplementary Retirement Scheme (SRS) is a voluntary scheme to encourage employees and the self-employed to save for retirement over and above their CPF savings. The maximum amount to be contributed is subject to an income cap of SGD 102,000. Employers are allowed to contribute to their employees’ SRS accounts, subject to contribution limits of 15% for Singapore citizens or permanent residents and 35% for foreign citizens. Employees will be taxed on these employer contributions, but are entitled to corresponding tax relief.

Providing medical insurance is not a requirement for employing Singapore citizens or Employment Pass (EP) holders; however, employee health insurance is a common inclusion in most, if not all, benefits and compensation packages offered by companies in Singapore.

Singapore has no minimum wage laws or regulations, apart from for cleaners and security guards.

The payroll cycle in Singapore is generally monthly, with wages paid before the last working day of each month. It is common for employees to receive an end of year bonus, which - in good economic times - could be two or three times their monthly salary.