Guide to Hiring Staff in Singapore

Now that you have successfully been able to incorporate a Singapore company, you are ready to begin hiring employees. Singapore workers are loyal, well-educated and hard-working. The enlightened Government of Singapore has created laws to protect the interests of both employers and employees in our island country. The Singapore Employment Act has many provisions that all employers and workers should understand. Employers will avoid problems by understanding the right way to hire staff.
Here are some “big picture” items to keep in mind as you begin to hire employees:

The revered Singapore Employment Act rules over all employers and employees. Its supremacy cannot be questioned.

• You must follow the rules for hiring local employee and the additional rules for hiring foreign staff.
• You must understand the different hiring procedures for full-time, part-time and contract staff.
• You must be aware of the levies, Provident Fund contributions and other costs you will have to pay.
• You will avoid trouble if you follow the common practices and customs of Singapore

If your knowledge of Singapore hiring practices is a little fuzzy, you’ve come to the right place. 3E Accounting is an expert in this field and offers valuable services and support. This guide will help you comprehend the key labor laws and the ways to go about hiring local and foreign employees the Singaporean way. We target an audience of new Singapore businesses that are hiring employees for the first time, as you are the folks most likely to make costly and time-consuming mistakes. We present general information that you should not be confused with professional advice.

Employment Act Overview
The Singapore Employment Act is the supreme law of the land that specifies basic employment terms and conditions.
With effect from 1 April 2014, the penalty for failure to pay salary in accordance with the EA will be raised. A first-time offence will be liable to a fine of between $3,000 and $15,000 and/or 6 months’ jail. A subsequent offence will be liable to a fine of between $6,000 and $30,000 and/or 12 months’ jail.

What is the Singapore Employment Act?

• The Singapore Employee Act is the all-powerful and all-seeing legislation that regulates labor and employment issues. You must strictly adhere to the rights, duties and responsibilities carefully crafted into the legislation. You must never contradict the Act’s basic terms and conditions of employment.
• You must determine whether an employee is covered by the Act. If so, any contract you make with the employee must be at least as favorable as the terms specified in the Act.
• Employees not covered by the Act should try to win the best terms and conditions an employer will permit. The contract must spell out all negotiated terms and, once signed by both parties, is legally binding.

To Whom Does the Employment Act Apply?
Most employees are covered by the Employment Act, no matter their nationalities. However, you should be aware of the following exceptions:

• Managers and executives. You are a manager or executive if you have direct authority or can influence the following activities with respect to employees:
  • Hiring
  • Firing
  • Promotion
  • Transfer
  • Reward
  • Discipline
  • Punishment
  • Other primary duties involved in managing and running a business
• Professionals possessing tertiary education, specialized skill or knowledge, and managerial responsibilities. Examples of such professionals include:
  • Physicians
  • Dentists
  • Accountants
  • Lawyers
• Domestic workers
• Seamen
• Most of the Government and all Statutory Board staff

Part IV of the Employment Act extends additional protections to certain low-paid persons, defined as

• Employees earning up to S$2,000 (Revised to $2,500 with effect from 1 April 2014) basic monthly salaries
• Workers earning up to S$4,500 basic monthly salaries

These additional protections cover the following areas:

• Rest days
• Hours of work and overtime
• Public holidays
• Annual leave
• Sick leave
• Retrenchment benefits
• Retirement benefits
• Annual wage supplements and other variable payments

Key Features of Employment Act
 

@ With effect from 1 April 2014, Managerial and Executive (“PMEs”) earning a basic monthly salary of up to $4,500 will be covered under the general provisions of the EA, including sick leave benefits and protection against unfair dismissal.
For more detailed information on the Employment Act, please visit the MOM website.

Important Duties and Obligations of Employers in Singapore
Formalizing the Employment Contract

Listen up, employers. It is important that you abide by the term and conditions specified in the employment contract. Maybe you think you can draw up a contract by yourself, but its smarter to use a lawyer or HR consultant who know what they’re doing. If you have employees covered by the Singapore Employment Act, you must, at minimum, meet the requirements set forth in the Act. Here is a sampling of the areas to be covered by the contract:

• Appointment position
• Duration of employment contract, if applicable
• Date of employment commencement
• Remuneration package
• Hours of work
• Employee benefits
• Probation clause, if applicable
• Code of conduct
• Termination

Reporting Employee Earnings
Employers must prepare tax forms for all Singapore employees. These forms allow you to tell the Government how much each employee was paid, as required under the Singapore Income Tax Act. See the Personal Income Tax section for more information.

Tax issues for Foreign Employees
This pertains to foreign employees who are:

• Fired or otherwise leaving the job
• Going overseas on a job-related posting
• Skipping the country for at least three months

These employees must get tax clearance, which proves that they have coughed up all the taxes they owe. Employers must notify the IRAS tax authority and immediately withhold all further payments to any employee who fits the descriptions listed above. IRAS will scour the records and assess the proper amount of tax. Thereafter, IRAS will issue a Tax Clearance Certificate that confirms payment of taxes due. Don’t release the remaining money to your employee until you receive a copy of the Certificate.

Making Central Provident Fund (CPF) Contributions

• For any local employees (citizens and PRs) that you pay more than S$50 per month, you must fork over contributions to the CPF. You must shell out 16 percent and the employee must pay 20 percent. However, you might be able to save some money depending on various factors, including the age of the employee and residential status. Be sure to activate your CPF account right away so that you don’t miss any payments. For more information, please see the Payroll Services section.
• You don’t make CPF contributions for foreign employees.

Paying the Foreign Worker Levy
You can hire foreign workers with little or no skills, but the Government will then collect a Foreign Worker Levy (FWL). If you surmise that the Government is discouraging you from bringing low-skilled foreign workers to Singapore, you are correct. If you’d like more information on how much the Government will siphon off through the levy, refer to the MOM web site.

Paying the Skills Development Levy

• Here’s another levy. It’s called the Skills Development Levy and it’s equal to 0.25 percent of the first $4,500 of monthly gross remuneration, but at least $2, for all employees, including:
  • full-time
  • casual
  • part-time
  • temporary
  • foreign workers rendering services wholly or partly in Singapore
• Gross remuneration includes the following:
  • wages
  • salary
  • commission
  • bonus
  • paid leave
  • overtime pay
  • housing and other allowances
  • other cash payments
• The Skills Development Levy collected by the CPF Board ends up in the accounts of the Singapore Workforce Development Agency. This money augments the Skills Development Fund, which puts up grant money for companies to get their workers trained.
• For details, read these FAQs provided by the Workforce Development Agency.

Hiring Students

• Students who are citizens or permanent residents of Singapore are unrestricted full-time and part-time hire. Unless they receive an exemption, students are entitled to CPF contributions. This doesn’t apply to interns you bring on for training as part of the student’s course of study. You normally pay these interns a monthly allowance, nothing more.
  
• You can’t put foreign students to work in Singapore during the school term or during vacation time unless they receive a Work Pass Exemption through the Employment of Foreign Manpower (Work Pass Exemptions) Notification Program. You can accept interns and members of an industrial attachment program, but you must first apply for and receive either a Training Employment Pass or a Training Work Permit for them. You don’t have to pay the Foreign Worker Levy for these students. You normally pay these foreign students a monthly allowance, nothing more.

Hiring Part Time Employees and Contractual Staff

• You just might be a part-time employee if you work for less than 35 hours a week.
• You are considered a contract worker if you have a fixed-term employment contract or a casual ad hoc relationship in which the company brings you in when needed. The contract expires at the end of its well-defined term when the specified work is finished.
• Here in Singapore, we protect our part-timers and contractors almost as well as we do our permanent full-time employees. Employers and employees have some latitude in negotiating various terms, including:
  • Proration of employee benefits
  • Annual leave
  • Rest days
• It is the Singaporean custom not lavish certain benefits on part-timers and contractors, including:
  • Bonuses
  • Medical coverage
  • Other perks reserved for real employees

Age Restrictions

You can put children as young as 13 to work in Singapore, although the legal work age is 17. However, be aware of certain types of work are off limits to young children workers. Old folks are normally turned out to pasture at age 62, but eligible employees can receive a reprieve up to age 65.

Hiring Foreign Employees

You would not be out of step by hiring foreigners to supplement your local staff. You might need to pursue this course for several reasons, including:

• an ageing population
• declining birth rate
• unprecedented economic growth
• shortage of enough local talent for certain job sectors

You might need to look abroad if you have to fill jobs in IT, business and finance, and research and development. Certain other jobs are of little interest to locals, such as domestic help and construction, so you may be forced to import these kinds of people. Singapore is proud of it ability to attract foreign professionals for hire, as witnessed by the Government’s liberal immigration policies and adequate provisions for foreigners.

Don’t even think of hiring a foreigner without first securing a valid work visa, as required under the Singapore Employment Act. To bring a foreigner onboard, get them a valid work pass or work permit before work commences. You must observe any work pass restrictions on the number of foreigners you can import for work.
The Singaporean caste system distinguishes three levels of employees, in descending order:

*** Skilled professionals (e.g. software engineers, doctors, R&D specialists etc.) who are eligible for an Employment Pass or Personalised Employment Pass.
** Semi-skilled professionals (e.g. technicians, chefs, administrative professionals) who are eligible the S Pass.
* Unskilled professionals (e.g. construction workers, domestic help) who must settle for a work permit, also known as R Pass.

The following table tells you what you need to know to secure the correct pass for the type of foreigner you hire.

General Recruitment Guidelines

Singapore has them all: diverse ethnicities, various ages and sexual identities. The Government wants you use HR practices that are fair and progressive. This is especially true for recruiters. To curb abusive practices, the Ministry of Manpower, or MOM, has promulgated a series of edicts that we summarize here:

• Hire based on merit.
• Age, race, gender, religion, family status and disability are less important than the ability, experience and skills to do the job.
• Tell all job applicants about the job-related selection criteria, and make sure those criteria remain relevant.
• Age, race, gender, religion, family status, language and disability should not be the focus of job advertisements unless it’s important for the job.
• You can ask personal questions, but only for administrative purposes. Otherwise, your job application forms should limit questions to those relevant to weeding out the losers.
• Conduct interviews and tests that relate to the job requirements.

You can’t simply put a sign in the window and expect to fill your staffing needs. Here are some popular and more effective recruiting channels:

• Employment Agencies/Recruitment Firms — Headhunters often help large- and medium-sized companies hire the right candidates. You can save time and effort with this approach. However, play it safe by finding out in advance the recruiting firm’s policies and how much you’ll pay (commonly, it’s an amount equal to the candidate’s salary). You can use a local agency or one of the big international ones with a presence in Singapore, including Hudson, Hays, and Robert Walters, all of whom service a large MNC base.
• Newspaper Advertisements — You can place ads in The Straits Time, which is Singapore’s leading rag. Both recruiters and job seekers often take this approach. Before plunking down your cash, first find out how much you’ll pay and how well the ad will reach your target audience.
• Internet Websites — There are a handful of fee-based websites popular with the job-seeking crowd. These sites serve the Singapore market and are a good place to troll for regional positions and applicants. A couple of leading names are JobStreet and JobsDB.
• Job/Career Fairs — These venues have become popular here, attracting over 400,000 applicants per year. Employers can meet and interview applicants on the spot. You will do best if you use this method to recruit applicants with the specialized skills and talent to match the job.
• Campus Recruitment — When all else fails, you can sample the student population. You’ll find most of Singapore’s educational institutions will eagerly welcome your efforts to hire graduates and post-graduates through on-campus interviews and recruitment seminars.