PAYROLL MANAGEMENT SERVICES

Transcription

1 PAYROLL MANAGEMENT SERVICES

2 SINGAPORE PAYROLL MANAGEMENT Payroll Services Managing your payroll can become a rather onerous process, especially when your employee head count begins to grow, along with your business. To ensure compliance with the regulatory requirements, computing and disbursing salaries, as well as calculating, processing and reporting payroll components such as government remittances, benefits, allowances and deductions must be done with care. This article provides information on the key elements involved in the payroll process and discusses the various statutory requirements companies are required to align with. To ensure compliance with the regulatory requirements and keep your staff at ease, care needs to be taken when computing and disbursing salaries, as well as in calculating, processing and reporting components such as government remittances, benefits, allowances and deductions. Salary/Wage The Employment Act defines salary or wage as all remuneration payable to an employee with respect to his employment, including allowances and bonuses. However, it excludes:: The value of accommodation or quarters, supply of light, water, medical attendance or other amenities Pension or provident fund contributions paid by the employer Travelling allowance Payments to defray special expenses incurred in the course of duty; and Gratuity paid on discharge or retirement or any retrenchment benefit payable. Salary is subject to negotiation and mutual agreement between the employer and the employee. There is no minimum salary or wage in Singapore. However, an employer who intends on hiring foreign employees must consider the minimum salary requirements applicable to qualify for the various employment passes.

3 SINGAPORE PAYROLL MANAGEMENT Salary Computation If an employee works for an incomplete month, he is only entitled to the pro-rata portion of his salary for that part of the month he worked. An incomplete month is a month in which the employee: Commenced employment after the first working day of the month; Takes any unpaid leave during the month; Leaves before the end of the month; or Is on national service reservist training during the month. Note that month refers to any calendar month in the calendar year. When calculating the pro-rata portion of the salary for an incomplete month, the following formula must be used: Monthly Gross Rate of Pay x No. of days the employee worked in the month No. of working days in the month Gross Rate of Pay is defined as the total amount of money including allowances to which an employee is entitled under his contract of service either for working for a period of time, that is, for one hour, one day, one week, one month, or for such other period as stated or implied in his contract of service, but does not include: additional payments by way of overtime payments; additional payments by way of bonus payments or annual wage supplements; any sum paid to the employee to reimburse her for special expenses incurred by her in the course of her employment; productivity incentive payments; and travelling, food or housing allowances. For example, if an employee who earns a salary of $3000 per month plus a travel allowance of $500 per month took 3 days unpaid leave during the month of April, the employee s pro-rata salary for April would be $2591. This is computed as follows: $ x 19 = $

4 STATUTORY CONTRIBUTIONS Central Provident Fund The CPF enables working Singaporeans to set aside funds for retirement. CPF contributions are payable to Singapore Citizens and Permanent Residents, and the employer is required to pay the employer s and employee s share of CPF contributions monthly for all applicable employees. The CPF contribution is determined according to the rates set out in the CPF Act and are based on the employee s actual salary earned for that month. The employer may deduct the employee s share from his salary. The CPF Act defines salary/wages as remuneration in money due or granted to an employee with respect to his employment. This includes: overtime pay; allowances; cash awards; commissions; and bonuses. Wages are classified into 3 categories, namely Ordinary Wages (OW) and Additional Wages (AW). OW are wages due or granted wholly and exclusively in respect of an employee s employment in that month; while AW are wages which are not granted wholly and exclusively for the month. AW examples include annual bonus, leave pay, incentive and other payments made at intervals of more than a month. Total Wages (TW) is the total amount of an employee s wages for any calendar month, i.e. OW + AW. CPF contributions are computed based on the employee s total wages for a calendar month, subject to a maximum ceiling. The current OW Ceiling is $5000 and the AW Ceiling is computed on a per employer per year basis. Skills Development Levy The SDL is used to fund the Skills Development Fund which supports workforce upgrading programmes and provides training grants to employers. including casual, part-time and temporary employees. The SDL contribution rate is of 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 $ The SDL must be paid by the employer and cannot be deducted from the employee s salary. Community-related Funds Certain members of communities are required to contribute to respective funds. For example, all working Chinese Singapore Citizens and Permanent Residents contribute monthly to the Chinese Development Assistance Council Fund and all working Indians in Singapore who are Singapore citizens, PR or EP holders and from certain ethnic origins in the Indian sub-continents must contribute to the SINDA fund. These amounts may be deducted from the employee s salary. Foreign Workers Levy The Foreign Worker Levy (FWL) is a pricing mechanism implemented by the Government in order to regulate the number of basic skilled foreign workers in Singapore, and is applicable to all employees who hold Work Permits or S Passes. The Employer is required to pay the levy, and cannot deduct the amount from the employee s salary. When computing the levy, MOM will consider the employee s qualifications and the dependency ratio ceiling (DRC). National Service All male Singapore citizens and second-generation PRs from the age of 18 are liable for two years of national service (NS), unless they are exempt. Once this fulltime service has been completed, he will become an NS Reservist and may from time to time be called up to perform NS duties and undergo training. The employer is not required to pay the employee his salary during this period; however the employer must continue to make the CPF contributions. Employers are required to make SDL contributions for all employees i.e. all local and foreign employees,

5 STATUTORY FILING AND REPORTING REQUIREMENTS Inland Revenue Authority of Singapore (IRAS) - Income Reporting The IRAS requires employers to report employee earnings by March 1st of each year by submitting the applicable forms, namely Form IR8A and Appendix 8A, Appendix 8B or Form IR8S. Employers who have 15 or more employees for the entire calendar year or who have received the Notice to File Employment Income of Employees Electronically will fall within the scope of the Auto-Inclusion Scheme (AIS) for Employment Income and must submit their employees income information to IRAS electronically by 01 March of each year. Companies which don t fall within the aforementioned scope are still encouraged to join the AIS and submit the information electronically. Withholding Tax for Tax Clearing Purposes Tax clearance is a process of ensuring that noncitizen foreign employees have paid all outstanding taxes. The employer is required to notify the IRAS via FormIR21 and at least 1 month in advance if a non-citizen foreign employee will cease employment with the employer, be placed on an overseas posting, or intends to leave Singapore for more than 3 months. Note that this obligation applies to all work pass holders including PEP holders. Proper Records From Year of Assessment 2008 onwards, employers are required to keep proper records of all employees income and deductions submitted to IRAS for 5 years. Income Tax Returns It is the employee s responsibility to file their own personal income tax return. Employees will receive a notification from the IRAS to file an income tax return for the Year of Assessment (based on income earned in the previous year). The employer must withhold all monies, including salary, bonus, overtime pay, leave pay, allowances, and gratuities etc. due to the employee. The monies should be withheld for a period of 30 days from the day the employer notified the IRAS, or until the tax clearance directive is issued, whichever is earlier.

6 OTHER PAYROLL ELEMENTS TO CONSIDER Unpaid Leave If an employee takes any unpaid leave during the month, the salary will need to be calculated using the aforementioned formula. Overtime Payment of overtime is only a statutory requirement if the employee falls within the scope of the Employment Act. For all other employees, payment for overtime will depend on the Employer s policy and any agreement between the employee and the employer. at one and a half times the hourly rate. The hourly rate is determined as follows: 12 x Monthly Basic Rate of Pay x 44 Public Holidays Public holidays are typically considered to be paid holidays. If the employee is requested to work on a public holiday by the employer, the employee should be paid an additional days pay on top of the monthly salary. The Employment Act provides that any time worked in excess of 44 hours a week shall be paid In Conclusion: Managing your payroll can become a time-consuming and complicated process. By outsourcing your payroll management to Rikvin, you can be assured of an unparalleled service experience. Have some peace of mind, knowing that your company s payroll is managed in the most efficient manner. Contact us: With Rikvin s Singapore Payroll Service, your dedicated experts will take care of all your payroll needs, from initial set-up to ongoing support. Call us to discuss how we can help you manage your payroll in compliance with Singapore laws. Contact us at or info@rikvin.com to get started.

7 RIKVIN PTE LTD 30 Cecil Street, #19-08 Prudential Tower, Singapore Main Line : (+65) Fax : (+65) info@rikvin.com Website : Reg No K EA License No 11C3030 The information contained herein is intended for general information purposes only and shall not be regarded as professional advice. Readers are therefore advised that before acting on any matter arising from these notes, they should discuss their particular situation with the Firm. No liability can be accepted for any action taken as result of reading the notes without prior consultation with regard to all relevant factors. DOWNLOAD THE RIKVIN MOBILE APP FOLLOW US ON: Copyright 2015 Rikvin Pte Ltd