Now, this may not exactly be a priority for sole proprietors with no or very few people to pay for helping them out. But once the business takes off and you have to hire more employees, you’ll discover that paying your staff isn’t as straightforward as simply handing them their pay cheque every month.
Business advisors recommend outsourcing your payroll processes once your organisation reaches a staff size of 25 or more employees.
Not As Simple As It Seems
There is actually some financial planning involved in making sure that the payroll and everything that comes with it, such as taxes and benefits, is processed correctly or in accordance with Singapore law. There may even be some statutory payroll processing requirements that you may not have been aware of, including
– Paying exact salaries within seven days following each salary period according to the Singapore Employment Act, which also stipulates penalties for non-compliance.
– Correct calculation of overtime pay, which is defined as any work done outside normal working hours (but not counting breaks). Overtime rates should be at least 1.5 times the basic rate per hour, and should be paid within 14 days after the last payment period. Note that an employee is only allowed to render up to 72 hours of overtime.
– Pro-rating an employee’s salary for work rendered during an incomplete payment period.
– Itemised payslips, whether hard or soft copies, must be issued to employees and indicate details including payment period, basic salary, overtime pay, allowances and deductions. Non-issuance of these slips to the employees covered by the Employment Act will be fined.
– Employment and salary records must be kept for at least two years, with records for former staff kept on file for at least one year after leaving your employ.
You will also be required to pay the following monthly contributions:
– Central Provident Fund (CPF) contributions, including for National Servicemen who take time off for training (although employers are not required to pay Servicemen for days away from work).
– Ethnic Funds
– Skills Development Levy (SDL)
– Foreign Work Permit or S-Pass Holder Levies
Not to mention other expenses that are not included in an employee’s basic salary, but form part of the payroll just the same:
– Travel expenses to and from work
– Meal allowance
– Housing allowance
– Work-related expenses
– Maternity and child care benefit
– Retrenchment benefits
– Retirement benefits
On top of all these requirements and expenses, the Singapore Income Tax Act requires you to file regular reports with the Inland Revenue Authority of Singapore (IRAS). This requirement applies to you if you have 10 or more employees or if you have received the pertinent notice.
Due every year before 1st March, these IRAS reports may be filed online or using hard copies:
– Form IR8A
– Form IR8S
– Appendix 8A
– Appendix 8B
If your company participates in the Auto-Inclusion Scheme (AIS) for Employment Income, the IRAS automatically includes the necessary information in their respective tax assessments and returns. This means that as their employer, you won’t have to give your employees hard copies of the forms.
If necessary, you will also need to get tax clearance for your foreign employees by filing Form IR21 at least one month before they resign or leave Singapore for three or more months. And if you should hire Singaporeans over 50 years old or with disabilities, you may be able to benefit from Special Employment Credit (SEC).
The Nitty-Gritty of Payroll Processing
Now let’s take a detailed look at everything that goes into proper payroll processing, which includes ensuring compliance with Singapore’s labour laws.
1. Managing payrolls according to determined payment periods, which includes disbursing via bank transfer and preparing Giro bank files where necessary
2. Keeping payroll records for each employee, which includes tracking and calculating
– Benefits, e.g.maternity/paternityy benefits, child care
– Claims, e.g. National Servicemen
– Leaves, e.g. sick leave, annual leave
– Separation pay
3. Issuing itemised payslips (digital or hard copy)
4. Paying the required monthly contributions
5. Calculating and paying payroll tax
6. Preparing and distributing annual income tax forms for employees
7. Filing payroll reports and other IRAS forms
How Outsourced Payroll Services Can Help
Having seen just how much actually goes into managing your payroll, and how important it is to get it all done on time, it becomes much easier to appreciate just how helpful it is to outsource your payroll processing. Here’s exactly how a reliable and experienced payroll services provider can help.
– You will be able to free up your own time and focus on your other business operations.
– In the same way, you will be able to free up your own staff and increase productivity.
– You lessen manpower costs by not engaging full-time, in-house staff for these processes.
– Your payroll will be processed using the latest digital accounting software, which greatly reduces the chances of errors from manual calculations.
– You lessen operation costs by not having to purchase accounting software for your own business or train your staff to use it.
– You ensure timely and compliant financial reporting.
– You stay up to date with the latest changes in statutory filing requirements.
– You are assured of the confidentiality of your payroll information.
– You can view the latest updated payroll records at any given time, which can help you in managing overall operation costs and in career planning for employees.
– You are assured of having backups of all your payroll files.
Having run several businesses ourselves, we at U Ventures know only too well what it’s like to have to stay on top of payroll processing along with all the other aspects of business management. And as expert accountants with years of hands-on experience, we assist several Singapore-based businesses like yours with their payroll and other accounting requirements.
We’ll be working closely with you and your staff to make sure your payroll is rolled out punctually and compliantly from payment period to payment period.