Have you recently established your company in Singapore and wondered about the next step? Well, hiring employees is a major step that comes after incorporating a company. It mandates specific legal protocols that employers and employees must adhere to. As an employer, you must know the dos and don’ts while hiring employees in Singapore.
This guide will provide you with an overview of the things to note when hiring employees in Singapore.
Employment Act 1968
Being well-versed in the Employment Act is essential for any business owner. This legislation, implemented in 1968, serves as Singapore’s primary labour law and covers all aspects of employment in the country. It provides a comprehensive framework for the terms and conditions of employment under a service contract. Outlining specific regulations ensures employers and employees understand their rights, duties, and responsibilities, creating a fair working environment.
The Employment Act 1968 covers local and foreign employees, for employees who are working full-time, part-time, temporary or contract employees. If the Employment Act covers your employee, the terms in the employment contract must not be less favourable than in the Employment Act.
The Employment Act covers ALL employees except for the following:
- Domestic Workers
- Seafarer
- Statutory board employees or civil servants
If the Act does not cover your employees, you may negotiate the terms and conditions of employment with your employees. These terms and conditions must be clearly stated in the employment contract.
Employment of Foreign Manpower Act
This legislation clearly outlines the duties and obligations of hiring foreign employees. Employers must understand and adhere to these guidelines to ensure a smooth and compliant workforce.
Who is Covered Under the Employment of Foreign Manpower Act?
The EFMA provides coverage for employers who hire foreign employees and individuals granted a work pass by the Ministry of Manpower. These work passes include the Employment Pass, S Pass, and Work Permit.
Signing Contract of Service
The service contract is pivotal in clearly understanding employers and employees. This agreement not only defines the employer-employee relationship but also outlines the terms and conditions of employment. The contract must include key employment terms (KETs) and essential clauses. Employers are responsible for issuing written KETs to all employees covered under the Employment Act who have entered a contract of service on or after 1 April 2016 and are employed for a minimum of 14 days. Refer here to learn more on the KETS, as laid out by the Ministry of Manpower.
What Must You Do as an Employer Who Are Hiring Employees in Singapore?
The following are the key things employers must cover when hiring employees:
Monthly Central Provident Fund (CPF) Contributions
When hiring a Singaporean or a PR, obtaining a CPF Submission Number (CSN) is imperative as it allows you to fulfil your duties as an employer by making CPF contributions. The CPF contributions for Singapore Citizens or PRs include the employees’ and employers’ contributions, which are deducted automatically from the employees’ salaries. Additionally, employers will further support the CPF contributions by contributing up to 17% of the employee’s salary to their CPF accounts.
Be sure to mark your calendars! The deadline for CPF contributions is always on the last day of the month. If employers have failed to pay by the 14th of the following month (or the next working day if the 14th falls on a weekend or public holiday), they will receive a monthly overdue payment interest rate of 1.5%, starting from the day after the due date.
Get Work Injury Compensation Insurance
Employers are mandated to procure work injury compensation insurance to ensure the safety and protection of their employees. This rule applies to local and foreign employees engaged in manual work and those earning $2,600 or less monthly. However, if your employee does not fall into these categories, you can choose whether to obtain insurance for them. It is essential to adhere to MOM’s terms and purchase the insurance from the designated insurers listed.
Skills Development Levy (SDL) Contributions
Employers are not only responsible for CPF contributions but also for SDL contributions for all employees, including foreign employees. The collected SDL goes towards the Skills Development Fund, which supports workforce upgrading programs and provides training grants. You can utilise these grants when you send your employees for training under the National Continuing Education Training system.
When determining the levy for each employee, it is important to remember that it is calculated at 0.25% of their total monthly wages. However, there are certain thresholds to consider. If an employee earns less than $800 a month, the minimum payable is $2; if an employee makes more than $4,500 a month, the maximum payable is $11.25. If you find this confusing, you can always use the SDL calculator, a handy tool that simplifies the process and ensures you get the correct figures every time!
Issue Itemised Pay Slips
Effective 1 April 2016, employers must provide itemised pay slips to employees protected under the Employment Act. These pay slips must come out alongside the salary payment to the employee; however, if it is impossible to issue both together, the employer must deliver the pay slip within 3 working days after the salary payment.
The following items must be included in the pay slip:
- Employer’s full name
- Employee’s full name
- Start and end date of salary period
- Date of payment
- Mode of payment
- Basic salary
- Total allowances with a breakdown shown
- Any additional payments such as bonuses, rest day pay, public holiday pay
- Fixed deductions (e.g., employee’s CPF contribution)
- Ad-hoc deductions (e.g., deductions for no-pay leave, absence from work)
- Overtime hours worked
- Overtime pays
- Start and end date of overtime payment period
- Net salary paid in total
- Employer’s CPF contributions
Additional Information: Hiring Foreign Employees in Singapore
There are other steps involved if you are hiring a foreign employee in Singapore:
Apply for Different Working Pass
Your prospective employees must possess a valid work visa before commencing their duties. The work pass encompasses various categories, catering to professionals, semi-skilled individuals, and even unskilled workers. To determine the most suitable work passes for your employees and ascertain their eligibility, refer to the comprehensive guidelines provided by MOM. Find out how to apply and ensure a smooth hiring process for your foreign workforce!
Foreign Worker Levy
In Singapore, employers are responsible for paying foreign worker levies for individuals holding work permits and S Passes. This levy by the Singaporean government aims to balance the requirements of foreign workers and the welfare of the domestic workforce. The actual amount of FWL to be paid depends on several factors, including the worker’s qualifications, the number of S Pass and work permit holders employed by the company, and the specific industry in which the company operates.
