Singapore, a central financial hub in the Asia Pacific, is one of the world’s most prosperous countries, given the relative simplicity of doing business here. As per the Heritage Foundation's Index of Economic Freedom and World Bank’s Doing Business report, Singapore ranks as the world’s second most open and pro-business economy in the world.
Apart from the ease of setting up and operating a business in Singapore, investors are also attracted to Singapore’s tax regime. It can be slightly tricky to understand the basic HR employment laws and regulations that govern it. Here's a Skuad guide underlining the statutory requirements as per the Singapore employment law and salient points around doing business in Singapore.
Singapore Dollar (S$) 1 SGD = 0.72 USD
3.1% growth rate (2018)
Locally, Singapore follows SGT (Singapore Time) & falls in the GMT +8:00 time zone. Further, SGT is not adjusted for daylight saving & remains the same throughout the year.
English, Mandarin, Malay & Tamil
Full-time, Contract, and Freelance
In Singapore, freelancing communities fall entirely outside the ambit of the Employment Act (EA) and cannot avail of any employment protections set out therein. For a contractual employee, any benefits enjoyed are visible in their relevant contract for the services.
Singapore's tech ecosystem has rapidly accelerated in the past five years. Be it tech giants like Google, Facebook or ambitious tech startups like GoJek and Grab, most organizations have set up their engineering operations. They are soaring high with Singaporean tech talent.
Technology talent in Singapore is known for its engineering abilities at world-ranked institutes. These institutes include the National University Singapore, Nanyang Technological University, and the Singapore University of Technology and Design. The top technology roles in Singapore include DevOps, Data Science, and Mobile Developers.
The minimum median hourly wage for a full-time & contract technology professional in Singapore is S$48-60 ($35-45) and for a freelancer is S$60-70 ($45-50). These hourly rates can vary depending on the employee’s years of experience and the technology profile of the employee.
In general, a workweek in Singapore for a full-time technology employee has 40-50 hours (including 30 minutes of lunch break) made with five days/week and less than 35 hours/week for contract employees. Since a freelancer is not committed to your organization, no such clause applies to them.
There is no provision of overtime payments to full-time & contract technology employees for time exceeded beyond the defined working hours.
Employers must provide 11 days of public holidays each year to all full-time employees. In practice, all employees can take 14 days off after serving the organization for a minimum of 3 months. In the case of contract employees, leaves are usually prorated.
Employers are liable to provide a min of 14 days of sick leave annually to each full-time employee. Where hospitalization is necessary, your 14 sick leave days can extend up to 60 days by providing a medical certificate to the organization.
Employers must provide paid maternity leave to all their full-time employees.
For contractors, leaves either extend till the time contract ends or depends on pre-defined terms.
Note: Some generous tech giants are going the extra mile to assist employees during their significant life events by providing 100% paid maternity leave of up to 26 weeks.
Full-time & contractual male employees with newborns or adopting a child under one year of age are eligible for 10-15 days of paid paternity leave.
Shared Parental Leave & Childcare Leaves
Employers in Singapore provide shared parental leave to full-time employees with less than 12 months old children. Working fathers can share up to 4 weeks of their spouses 16 weeks statutory maternity leave, subject to the agreement. In the case of a contract employee, the applicability of this clause will follow the contract between the two parties.
Some employers offer additional 2-3 days of paid compassionate leave to their full-time and contractual employees.
Now employers have started offering 6-12 months sabbatical to full-time senior employees. They are usually unpaid or given a defined percentage of their current salary. The final terms are purely based on the employment agreement.
Employers usually keep a 3-6 months probationary period during which they can terminate the employment by giving a notice or paying salary as mentioned in the agreement.
Note: Generally, employers cannot provide the leaves mentioned above to freelancers since there is no employee-employer relationship.
Payroll and Taxes in Singapore
Payroll for full-time and contract employees is run at least once per month. Payment is made in the first week of the following month. For freelancers, their fees are either processed on a half-and-half basis or post-completion of the project.
Employers must generate a soft or hard copy of the monthly payslip for each full-time & contract employee. These are in a fixed format containing the entire salary breakup and deductions made in that month. For freelancers, invoices are generated by them for which payments are made. In the case of freelancers, they create invoices, and organizations make payments for the same.
In Singapore, the legal status is different for resident and non-resident employees. For resident full-time, contract, or freelance employees, the net taxable income after the standard deduction is subject to the progressive tax rate starting from 2% to 22% on income above S$20,000. For non-resident employees, a flat tax rate of 15% or the resident rate, whichever is higher, is applicable.
Note: most businesses run from 1st January to 31st December.
Income Tax Returns (ITR)
Besides deducting taxes for each employee, an employer has to facilitate the process of ITR. Each full-time, contract, resident, or non-resident employee, should get Form IR8A, Appendix 8A, Appendix 8B, and Form IR8S (if applicable). These forms contain a summary of the taxes deducted and the total amount paid by the employer to the employee for that financial year. For freelancers, IRAS will send them a notification or an individual income tax return (Form B/B1) by usually 15th March to report their income.
Employers registered with Auto-Inclusion Scheme for Employment Income will submit the information about employee earnings electronically. This information is later used in personal income tax assessmentsEmployers who are not under the AIS for Employment Income need to complete & provide the forms mentioned above digitally or manually and then hand them to employees by 1st March following year will further fill the ITR by themselves.
Note: The income tax return is due on 15th April the following year.
The retirement age in Singapore is 62 years for full-time employees (Retirement and Re-employment Act). Recent changes in the law dictate employers to offer re-employment to eligible employees up to 67. By 2030, the retirement and re-employment ages are likely to increase to 65 and 70, respectively.
Central Provident Fund (CPF)
The CPF is the statutory authority that administers Singapore's public pension system. It provides for retirement income security and is mandatory for full-time and contract employees. For freelancers, it’s optional, and contributions are made in a Medisave account if they earn a yearly net trade income of more than $6,000. CPF acts as an umbrella consisting of various schemes like healthcare, homeownership, etc. CPF contributions are made into three types of accounts, Ordinary Account (OA), Special Account (SA), Medisave account.
Bouquet of Benefits
Healthcare and Social Security
Employers have to provide medical insurance to employees called Medishield. It's a basic tier of insurance protection for which premium gets deducted from Medisave accounts.
Note: Many tech giants go the extra mile & also provide medical cover for dependents or even provide personal, accidental, vision, and dental coverages as well.
Generally, employers provide each employee with a month’s salary as a bonus, also called the 13th-month payment. Details of compensation are usually stated in employment contracts, and the amount of bonus generally depends on the performance of both company and individuals. During good profit quarters, employees can even earn 2x/3x of their salary as a bonus.
An employment contract can terminate with/without notice or on the grounds of misconduct. Usually, employment contracts terminate with a written notice unless either employee or employer breaches any terms of the agreement, absence without notice, etc. Notification can waive off by mutual consent.
What it takes to set up an office in Singapore
This section would answer all your questions on how to register a business in Singapore. Business opportunities in Singapore are plenty. Permanent Residents, holders of Employment Pass, EntrePass, Dependant's Pass can register a company and become its shareholders.
However, Employment and Dependent Pass holders cannot become local or resident directors by themselves. A nominee director or a regional director (a Singaporean, Permanent Resident, or EntrePass holder) gets appointed in such cases. The incorporation process is online and involves selecting a filing agent who can submit documents on the online portal BizFile+.
As per ACRA, it costs S$15 ($11) for company name application and S$300 ($216) for registration. An incorporation mail from ACRA serves as a certificate of incorporation. One can collect a hard copy of this by paying a nominal fee.
Private Limited Company
Private Limited Company with 1-50 shareholders is the most preferred form of incorporation in Singapore due to its ease in raising funds for expansion. Minimum requirements include one local director, and the tax rate ranges from 0-17%.
A sole proprietorship is best when there is no risk/low risk. An owner pays personal income tax ranging from 0-22% on income.
Limited Liability Partnership (LLP)
LLP allows owners to combine the benefits of company and proprietorship. Partners pay personal income tax ranging from 0-22% on their income.
A subsidiary company is the most beneficial form of incorporation. In setting up a subsidiary company, the parent company enjoys 100% ownership with liability limited to its share capital. Setting up a subsidiary company is mandatory to have one director who is a Singapore citizen while others can hold an employment pass.
Small and Microenterprises prefer to open up branch offices, an extension of the parent company. Branch offices acquire legal existence post-registration & must hire a minimum of 1 Singaporean resident.
A company established for over three years with turnover exceeding S$250000 can appoint a representative office to conduct business research. A RO can hire a maximum of 5 employees. The legal existence of a RO is not separate from its parent company.
Central Business District (CBD) is a popular spot for major co-working spaces. A hot desk for each person costs around S$400/month, whereas a dedicated desk costs around S$ 600/month. Serviced office spaces can cost around S$700-1000 per person/month. Low-cost co-working spaces are accessible if we travel away from the CBD. Co-working space costs can also cover 24/7 office access, member-only mentor programs, meeting rooms, and the complimentary cost of parking. Virtual offices in Singapore start from S$ 9-10 per month. The cost includes an office address, free daily mail alerts via email, or self-collection, whichever is feasible.
Goods and Services Tax (GST)
GST rate is at 7% on the supply of goods and services and is likely to increase to 9% between 2021-2025. Companies with turnover exceeding 1 million/year have to get a ten-digit GST number registrations & file returns monthly/quarterly. Zero rate GST gets levied on the export of goods and international services. Foreign companies must appoint local agents to register and take care of GST formalities via myTax Portal. Penalties for GST can range from 100% to 300% of tax, along with jail sentences. IRAS may levy a penalty of 5% tax for late payments.
Corporate Income Tax (CIT)
Both resident and non-resident companies get taxed on income generated from Singapore and on revenue generated worldwide when remitted to Singapore. While a flat tax rate of 17% gets levied on corporate income, startups, if qualified, can enjoy the following exemptions:
Employment Visas for Singapore
Foreign professionals earning at least S$3900 are eligible to work and travel in Singapore. An employment pass gets issued for 1-2 years based on their age, salary, qualifications, roles, and responsibilities of the applicant. High-earning employment pass holders can also apply for a personalized employment pass that offers greater flexibility—starting a business in Singapore as a foreigner requires you to apply for an EntrePass.