SINGAPORE - PayrollServe

PayrollServe ® A Stone Forest Company

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International

2014 EDITION

SINGAPORE

Contents

Overview....................................................................................................................... 4 • Disclaimer............................................................................................................ 4 • Human Resource & Payroll Administration................................................. 5 Payroll Processing Cycle........................................................................................... 8 • Step 1: Collecting Information......................................................................... 9 • Step 2: Information Cut-off............................................................................10 • Step 3: Process Payroll..................................................................................... 11 • Steps 4 & 5: Generate Payroll Reports and Approval.............................. 13 • Step 6: Processing Salary Credit and Bank Processing ..........................14 • Step 7: Month-end Reporting......................................................................... 17 Employment Act........................................................................................................20 • Contract of Service.......................................................................................... 21 • Salaries.............................................................................................................. 22 –– Definition of Salary................................................................................. 22 –– Frequency of Salary Payment............................................................... 23 –– Authorised Salary Deductions.............................................................. 23 –– Maximum Amount of Deduction.......................................................... 24 –– Deduction during Termination.............................................................. 24 –– Monthly Variable Component (MVC)...................................................25 • Wage Definition................................................................................................26 –– Monthly Basic Rate of Pay.....................................................................26 –– Monthly Gross Rate of Pay.................................................................... 27 –– Incomplete Monthly Wages................................................................... 27

© Copyright 2014 Stone Forest Accountserve Pte Ltd

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Contents

• Hours of Work...................................................................................................29 –– Contractual Hours of Work....................................................................29 –– Maximum Hours Allowed ......................................................................29 • Overtime ...........................................................................................................30 –– Overtime Computation............................................................................ 31 • Leave & Holidays.............................................................................................35 –– Public Holidays.........................................................................................35 –– Annual Leave............................................................................................ 37 –– Unpaid Leave........................................................................................... 40 –– Sick Leave................................................................................................. 40 –– Government-paid Leave Schemes.......................................................42 • Termination.......................................................................................................43 –– Termination Process...............................................................................43 –– Notice Period & Payments.....................................................................43 –– Annual Leave & Payments.....................................................................43 –– Commission Payments.......................................................................... 44 –– Dismissal................................................................................................... 44 –– Misconduct............................................................................................... 44 Central Provident Fund (CPF)................................................................................49 • Calculation of CPF Contributions................................................................49 • Definition of Wages in CPF Contributions.................................................49 • Types of Wages in CPF Contributions........................................................ 50 • Limits on CPF Contributions..........................................................................51 • A General Guide to Payments that Attract CPF Contributions.............53

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The HR Practitioners’ Guide to Key Employment Legislation

• Common CPF Reporting Mistakes Made by Employers..........................59 Statutory Donations.................................................................................................67 • Chinese Development Assistance Council (CDAC) Fund........................67 • Singapore Indian Development Association (SINDA) Fund...................67 • Mosque Building and Mendaki Fund (MBMF)............................................67 • Eurasian Community Fund (ECF)................................................................ 68 • SHARE Programme Donations ................................................................... 68 Employment of Foreign Manpower........................................................................ 71 • Types of Employment Passes (Accurate as at 1 January 2014)............. 71 • Foreign Worker Levy (FWL)........................................................................... 72 • Table of Changes from 1 July 2013.............................................................. 73 Other Regulations..................................................................................................... 77 • Skills Development Levy (SDL).................................................................... 77 • National Service Make Up Pay (MUP)......................................................... 77 Tax Reporting for Employee’s Remuneration.....................................................81 • Year-end Reporting..........................................................................................81 –– Forms of Submission................................................................................81 –– Types of Tax Forms...................................................................................81 –– Common Mistakes Made by Employers..............................................82 • Tax Clearance...................................................................................................85 –– What is Tax Clearance?...........................................................................85 –– When to Seek Tax Clearance.................................................................85 –– What to Do pending Tax Clearance..................................................... 86 –– FAQs on Tax Clearance.......................................................................... 86


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Overview

Overview Disclaimer This Guide is only intended to provide a general understanding of Singapore’s human resource and payroll processes and policies. Singapore regularly updates its legislation, judicial decisions and administrative guidelines. Because this presentation is based on laws and regulations in Singapore that are subject to change at any time, possibly even on a retroactive basis, any such change could adversely affect the contents of this Guide. No reader should act solely upon any information contained in this Guide in their fulfilment of regulatory obligations whether within or outside Singapore. Nothing mentioned in these pages are binding on Singapore government authorities. Professional advice should always be sought before taking any action on specific issues and making any significant payroll decisions. While every effort has been made to ensure the accuracy of the information contained herein, PayrollServe shall not be responsible for any errors, inaccuracies or omissions. The information provided in this Guide is accurate as of 1 January 2014, though some details may have changed since then. For additional and more current information, please refer to www.PayrollServe.com.sg.

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Human Resource & Payroll Administration What is Human Resource? Human Resource is the management process of an organisation’s workforce, or human resources. It is responsible for the attraction, selection, training, assessment, and rewarding of employees, as well as overseeing organisational leadership and culture and ensuring compliance with employment and labour laws.

What is Payroll? In a company, payroll accounting is the sum of money paid to employees, e.g. wages, bonuses and deductions, for the services they provided during a certain period of time. Payroll plays a major role in a company for several reasons. From an accounting point of view, payroll is crucial because payroll and payroll taxes considerably affect the net income of most companies and they are subject to laws and regulations. From an ethics-in-business viewpoint, payroll is a critical department as employees are responsive to payroll errors and irregularities: good employee morale requires timely and accurate payroll processing.

Objective of this Guide This Guide is a compilation of information extracted/adapted from the CPF Board, IRAS, NS and MOM websites. Its purpose is to serve as a handy and easy reference for Business Executives who are unfamiliar with Payroll Regulations in Singapore.

Who is PayrollServe? We specialise in meeting basic to complex payroll and HR administration needs of hundreds of MNCs, SMEs and small businesses in Asia. We are the Payroll Outsourcing Firm of Choice for SMEs in Asia and beyond.


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PayrollServe ®

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A Stone Forest Company

International

PAYROLL & BENEFITS ADMINISTRATION OUTSOURCING Leave Management

Expense Claims Management

De Ne tails xt Pag on e

Payroll Management

PayrollServe ®

Globally Connected


International

PAYROLL & BENEFITS ADMINISTRATION OUTSOURCING Payroll Management Outsourcing payroll administration lets your HR team focus on improving business operations rather than managing existing ones.

Leave Management Our online leave management solution enables your organisation to stay on top of all leave requests and lets you effectively manage leave approvals from wherever you are.

Expense Claims Management Our expense claims management solution streamlines your entire claim process and provides in-depth visibility of global spending.

Learn More

www.PayrollServe.com.sg Or call us at +65 6336 0600

Payroll Processing Cycle


Step 1: Collecting Information Step 7: Month-end Reports

Step 2: Information Cut-off

Step 3: Process Payroll

PAY DAY

Step 6: Process Salary Credit & Pay Slips

Step 5: Payroll Approval

Step 4: Generate Payroll Reports

There are usually eight steps in a normal payroll cycle. In this chapter, we will take a closer look at some of the steps in detail and their implications for the company. To ensure punctuality of the payday, the company has to find the appropriate cut-off date for each step. We will explore more on how to derive a proper time frame later in this chapter.

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Step 1: Collecting Information A payroll professional will usually need to collect and compile all data to process the following payments/deductions during a payroll cycle: • Overtime / Undertime In order to keep track of hours worked, companies either purchase a time management system where the employees can clock in and out, or keep a manual timesheet. The timesheets collated are usually verified or approved by the employees’ respective supervisors before they are sent to the payroll department for processing. (More information regarding the Employment Act regulation on Overtime Payment and Calculation can be found on Page 30.)

• Attendance / Leave To track leave taken, the company can choose to either use a leave management system or manual leave application form. The payroll administrator will check for unpaid leave deductions or annual leave payments when processing the payroll. (More information regarding the Employment Act regulation on Leave Entitlements and Calculations can be found on Page 37.)

• Reimbursements / Claims Reimbursements may refer to expenses borne by the employee for business purposes, e.g. clients’ entertainment, office stationery, travelling claims, transport claims, etc. Reimbursements have to be supported by both receipts and the supervisor’s approval before payroll processing. Companies are required to keep 7 years of reimbursement records in case of a Statutory Board audit.


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Claims usually refer to staff benefits, e.g. medical and dental expense, gymnasium memberships, etc. A company may choose to tie up with an insurance company to offer the above benefits. • Commissions / Incentives The payment depends on the employee’s employment contract or company policies. (More information regarding the Employment Act regulation on Commission Payment after Termination can be found on Page 44.)

Step 2: Information Cut-off To work out the appropriate time frame, the company will estimate the time needed for each step. This is illustrated in the example below: Steps

Days Needed

Date

Information Cut-off Process Payroll Generate Payroll Reports Approval Process Process Salary Credit & Payslips Bank Processing Date

2-3 Working Days 1 Working Day 1-2 Working Days 1 Working Day 2 Working Days

Payday

10


28th

After determining the time needed for each step, the company will be able to set the information cut-off date. For planning, it is recommended that the company should take into consideration weekends and public holidays. This is illustrated in the example below: Steps

Days Needed

Date

Information Cut-off

12th

Process Payroll Generate Payroll Reports Approval Process Process Salary Credit & Payslips Bank Processing Date

2-3 Working Days

17th

1 Working Day

18th

1-2 Working Days

20th

1 Working Day

24th

2 Working Days

25th

Payday

28th

Step 3: Process Payroll There are 3 common methods by which the company can handle its payroll processes.

Types Methods

Manual Payroll Processing

System Payroll Processing

Outsourcing Payroll

Payroll is usually calculated with Microsoft Excel.

Payroll is done in-house using payroll software.

Payroll is done by an external party.


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Types Benefits

Manual Payroll Processing

System Payroll Processing

Outsourcing Payroll

Money saved on purchasing payroll system and maintenance.

Payroll calculations — such as CPF deductions and prorated salaries — can be completed in a fraction of the time required for manual payroll processing.

Compliance with tax rules and government regulations is the responsibility of your vendor. Punctual and accurate payroll processing gives employer peace of mind.

Year-end reporting is also usually automated, and both payslips and annual reports are archived in case copies are needed later. Challenges Faced

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Company is usually heavily reliant on a single individual’s expertise and diligence for calculation and Statutory Board compliance.

The person who is in charge of payroll will have to ensure that the system is updated regularly in accordance with any Statutory Board changes.


The company’s payroll will not be affected should its payroll personnel decide to leave the company.

Finding a reliable Payroll Vendor that can ensure privacy and security.

Steps 4 & 5: Generate Payroll Reports and Approval In order to ensure accountability and accuracy, most companies will assign a different person to check and approve the payroll. This is usually the Human Resource Manager or Company Director. Common reports generated for checking and approval include: • Payroll Register; • Timecard Reports (For Overtime/Undertime/Leave); • Payments and Deductions Report; • CPF Contribution Report; • Payment Breakdown Reports (Bank Transfer, Cheque); and • Variance Reports


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Step 6: Processing Salary Credit and Bank Processing There are two common methods for salary credit. One is by cheque payment. The other method, which is highly encouraged by the Singapore Government, is by bank transfer or GIRO. The table below is a list of banks commonly used in Singapore and their bank details for transfer. Bank Name

Bank Code

Bank Code

Account No. (E.g.)

UOB

7375

030

9102031012

• 10-digit Account No. • Use first 3 digits of Account No. and refer to http://www.uob. com.sg/assets/ pdfs/global/ achcode.pdf to retrieve the corresponding Branch Code

FEB

7199

004

5041920123

• 10-digit Account No. • Use first 3 digits of Account No. and refer to http://www.uob. com.sg/assets/ pdfs/global/ achcode.pdf to retrieve the corresponding Branch Code

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Remarks

Bank Name

Bank Code

Bank Code

Account No. (E.g.)

DBS

7171

005

0052312891

Remarks • 10-digit Account No. • Use first 3 digits of Account No. as the Branch Code e.g. For account 0052312891, the Branch Code will be 005. (Account No. will remain as 0052312891.)

POSBank

7171

081

084102395

• 9-digit Account No. • Use 081 as Branch Code for all POSBank accounts

OCBC

7339

550

1089550

• Length of Account No. varies • Use first 3 digits of Account No. as Branch Code • Drop first 3 digits of Account No. for the Account No. field e.g. for account 5501089550, the Branch Code will be 550 and the Account No. will be 1089550.


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Bank Name

Bank Code

Bank Code

Account No. (E.g.)

HSBC

7232

146

172002492

Remarks • Length of Account No. varies • Use first 3 digits of Account No. as Branch Code • Drop first 3 digits of Account No. for the Account No. field e.g. for account 146172002492, the Branch Code will be 146 and the Account No. will be 172002492.

Standard Chartered

7144

018

1803645852 • 10-digit Account No. • Use ‘0’ + 1st two digits of Account No. as Branch Code • Account No.: the full 10-digit Account No.

Source: www.uob.com.sg/assets/pdfs/global/achcode.pdf

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Step 7: Month-end Reporting Month-end reports can be divided into 2 different types — Statutory and Company Reports. Examples of common month-end company reports are Payroll General Ledger and Fund Movements Reports. The month-end Statutory Report usually refers to the Central Provident Fund (CPF) Report. (More information on the Central Provident Fund can be found on Page 49.)


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PayrollServe ®

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PAYDAY! HRMS Leave

Expense Claims

Employee Self-Service (ESS)

Human Resource Information System (HRIS)


Payroll

PayrollServe ®

Globally Connected


International

PAYDAY! HRMS HRMS is a web-based application designed to allow HR/Payroll personnel to update employees’ details and perform payroll processing from anywhere, anytime. The standard Human Resource Management modules are: ■ Payroll Module ■ Leave Module ■ Expense Claims Module ■ Human Resource Information System Reports (HRIS) Module ■ Employee Self-Service (ESS) Module Payroll

The payroll, leave and claims management modules can each be adopted as a stand-alone system or partially/fully integrated with the other modules.

Cost Centre

ESS

Leave

HRMS HRIS

Alerts

Learn More


Expense Claims

Import Export

Employment Act

Employment Act The computations and regulations mentioned in this section apply to employees who are covered by the Employment Act. The Employment Act covers every employee (regardless of nationality) who is under a contract of service with an employer except: 1. Managers and executives (however, those earning basic monthly salaries of $4,500 and below are covered partially on payment of salaries only) 2. Seaman 3. Domestic worker

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4. Person employed by a Statutory Board or the Government

Effective from 1 April 2014 1. Managers and executives earning a basic monthly salary not exceeding $4,500 will be covered under the Employment Act, except for the provisions in Part IV. 2. Non-workmen employees earning a basic monthly salary not exceeding $2,500 will be covered under Part IV of the Employment Act. Information in this section is extracted/adapted from www.mom.gov.sg.

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Contract of Service A contract of service is defined by Ministry of Manpower (MOM) as any written or verbal agreement (expressed or implied) that establishes an employer-employee relationship. The employer under the law is not allowed to change the terms and conditions of employment unless the employee agrees to it. Terms or conditions that are less favourable than provisions under the Employment Act are illegal, null and void. Essential clauses of contracts of service are: • Commencement of employment; • Appointment – job title and job scope; • Hours of work; • Probation period (if any); • Remuneration; • Employee’s benefits (e.g. sick leave, annual leave, maternity leave); • Termination of contract – notice period; and • Code of conduct

Types of Contract of Service • Full-time

: Not less than 35 hours per week

• Part-time

: Less than 35 hours per week

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• Casual or Relief: Ad hoc work arrangements

Itemised Payslips and Employment Records A set of Tripartite Guidelines has been released to encourage and guide employers to issue itemised payslips for all their employees. The Government will closely monitor the adoption of the guidelines, before phasing in the requirements over time. Since 1 April 2014, a range of user-friendly tools, for example, simple payslip booklets, download templates and funding support for customised solutions, has been made available on MOM’s website.


21

Employment Act

Salaries Definition of Salary Salary refers to all remuneration, e.g. base salary, allowances, bonuses, commissions and incentives, payable to an employee with respect to work done under the contract of service. It does not include: • Allowances for travelling, housing, utilities, medical and other amenities • Pension or CPF funds contributed by employer • Reimbursements to employee for expenses incurred by him/her in the course of employment • Retrenchment benefits • Goodwill payment or gratuity payable on discharge or retirement There is no minimum wage law in Singapore. However, there may be certain wage criteria that must be fulfilled in some situations.

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Salary is subject to negotiation and mutual agreement between the employer and employee.

New Wage Rules under Environmental Public Health Bill Companies in the cleaning and security sectors will soon be subject to new rules that require them to set basic salaries for workers. • Under the Environmental Public Health Bill, from September 2014, the entry-level pay for cleaners will be set at S$1,000 monthly, 20 per cent higher than today’s median basic wage for the sector. • Details for the security sector are still being worked out.

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Frequency of Salary Payment An employee must be paid a minimum frequency of once a month. In general, all salary components must be paid within 7 days after the end of the salary period. The following are exceptions: Situation

Salary must be paid

Overtime work

Within 14 days after the end of the salary period

Dismissal/Termination by Employer

On the last day of employment or within 3 working days from the date of dismissal/termination

The employee terminates the contract by resigning and has served the required notice period.

On the last day of employment

The employee terminates the contract by leaving employment without notice or without serving the required notice period.

Within 7 working days of the last day of employment

Authorised Salary Deductions 1. Absence from work. 2. For damage to or loss of goods/money that an employee is accountable for. No deductions are to be made until an inquiry is held by the employer. The total amount of such deductions must not exceed 25% of the employee’s one month’s salary, and may only be made on a once-off basis. 3. Cost of meals supplied by the employer at the request of the employee. 4. Accommodation or for amenities and services supplied by the employer and accepted by the employee.


23

Employment Act

5. Recovery of advances, loans or adjustment of overpayments of salary. Advances may be recovered in instalments not exceeding 25% of the salary due for the period and spread over not more than twelve months. 6. Income tax payment and CPF contributions. 7. Contributions to superannuation scheme or provident fund or any other scheme, approved by the Commissioner of Labour, at the request of the employee in writing. 8. Payments to any registered co-operative society with the written consent of the employee. 9. For any other purpose that may be approved upon application from time to time by the Minister for Manpower.

Maximum Amount of Deduction The maximum deduction amount in respect of any one salary period is 50% of the total salary. IT DOES NOT INCLUDE deductions made for: 1. Absence from work; 2. Payment of income tax; 3. Recovery of advances/loans; and 4. Payments with the consent of the employee to registered co-operative society in respect of subscriptions, entrance fees, instalment of loans, interest and other dues payable.

Deduction during Termination However, when the contract of service is terminated, the deduction from the employee’s last payment of salary may exceed 50%. This is to enable the employer to recover any sum of money owed by an employee to him.

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Effective from 1 April 2014 25% sub-cap will be imposed for deductions for accommodation, amenity and services (Within the existing 50% total cap)

T O T A L

SA L A R Y

Authorised Deductions (50% of total salary)

Monthly Variable Component (MVC) MVC is a flexible and performance-based wage system. It is part of monthly basic salary and should be included in computing overtime payment and CPF contribution. For MVC to be an effective mechanism for wage adjustment, it is recommended that MVC should form 10% of monthly basic salary. The percentage of MVC should be the same for all levels of employees.

Purpose of MVC • When the company is doing well, it enables the company to reward its employees by enhancing their monthly salaries. • During severe business downturns, it serves as a “standby” component that can be used to bring down wage costs in order for the company to survive and save jobs.


25

Employment Act

Wage Definition Monthly Basic Rate of Pay 1. The basic rate of pay includes wage adjustments and increments that an employee is entitled to under his/her contract of service, but excludes: • Additional payments, e.g., Overtime, Bonus, Annual Wage Supplements; • Any sum paid to the employee for reimbursement of special expenses incurred by him/her in the course of employment; • Productivity incentive payments; and • Any allowance however described 2. Basic rate of pay is used to calculate: • Pay for work on a Rest Day or Public Holiday • Overtime Pay 3. For a monthly-rated employee, the basic rate of pay for one day is calculated as follows: 12 x Monthly Basic Rate of Pay 52 x Average number of days an employee is required to work in a week

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Monthly Gross Rate of Pay 1. Refers to the total amount of money including allowances payable to an employee for working for one month, but excludes: • Additional payments, e.g. Overtime, Bonus, Annual Wage Supplements; • Any sum paid to the employee for reimbursement of special expenses incurred by him/her in the course of employment; • Productivity incentive payments; and • Travelling, food or housing allowances

2. The “Gross Rate of Pay” is used to calculate payment of: • Salary in lieu of notice of termination; • Deduction of pay for absence from work; • Paid holidays; and • Paid leave

Incomplete Monthly Wages For the purpose of calculating salary, a ‘month’ or ‘complete month’ refers to any month in the calendar year.

When to prorate? • Starts work after the first day of the month • Leaves employment before the last day of the month • Takes no-pay leave of one day or more during the month


27

Employment Act

How to prorate? Salary payable to a monthly-rated employee for an incomplete month of work is calculated using the formula below:

Salary payable for incomplete month of work

Monthly gross rate of pay =

Total number of working days in that month*

x

Actual days worked

* Excludes rest days and non-working days but includes public holidays

Example: Sharon joined Company ABC Ltd on 8 August 2011. Her monthly basic salary is $2,000, and her fixed monthly transport allowance is $300. She is working on a 5-day week. What is her monthly wage for August 2011? Solution Monthly Gross Rate of Pay: Basic Salary ($2,000) + Fixed Monthly Allowance ($300) = $2,300 Working days in August*: 23 working days Actual Working Days

: 18 days

August 2011 Monthly Wage: ($2,300/23 days) x 18 days = $1,800 * Excludes rest days and non-working days but includes public holidays

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Hours of Work Contractual Hours of Work MOM defines “hours of work” as the period during which the employee is expected to carry out duties assigned by the employer, excluding rest and meal breaks. Under the Employment Act, an employee is not allowed to work more than 12 hours a day or more than 44 hours a week.

Lunch

Hours Worked for the Day

Hours Worked for the Week (assuming 5.5-day week)

1 hour

8 hours

8 x 5.5 = 44 hours

If the number of hours worked is less than 44 hours every alternate week, the limit of 44 hours a week may be exceeded in the other week. However, this must be stated in the contract of service and is subject to a maximum of 48 hours in one week or 88 hours in any continuous two-week period. Generally, employees are not required to work more than 6 consecutive hours without a break, up to a maximum of 8 consecutive hours. As stipulated by MOM, breaks should be no less than 45 minutes.

Maximum Hours Allowed An employee is not allowed to work: 1. More than 12 hours within a day except in the following circumstances: a. Accident or threat of accident; b. Work that is essential to the life of the community, national defence or security; c. Urgent work to be done to machinery or plant; or d. An interruption of work that was impossible to foresee.


29

Employment Act

2. More than 72 hours of overtime in a month. For work done on rest days or public holidays, it is not included in the 72 hours’ limit for overtime. However, if an employee works beyond his normal daily working hours on his rest day or public holiday, the extra hours of work will be included in the 72 hours’ limit. 3. Employers that require their employees to work more than the stipulated overtime hours are to apply for overtime exemption from the Ministry of Manpower. The forms can be downloaded from the MOM website: www.mom.gov.sg/services-forms/labour-relations/Pages/employmentstandards.aspx

Overtime Who is entitled? In accordance with the Employment Act, the following employees are entitled to overtime pay. 1. Workmen earning not more than $4,500 basic monthly salaries; and 2. Other employees (other than workmen) covered under the Employment Act earning not more than $2,500 basic monthly salaries.

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Overtime allowance is payable only if the employee is required to work more than an average of 44 hours a week over any continuous period of three weeks.

Effective from 1 April 2014 The salary threshold of non-workmen has been raised from $2,000 to $2,500 for them to enjoy working hours-related protection, including overtime payment. The overtime rate payable for non-workmen will be capped at the salary level of $2,250 or $17.70/hour to help employers manage costs. Currently, there is no change in salary threshold for workmen at $4,500.

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Overtime Computation • For a monthly-rated employee, his hourly basic rate of pay is computed as follows: 12 x Monthly Basic Rate of Pay 52 x 44 • For a daily-rated employee, his hourly basic rate of pay is computed as follows: Daily Pay at the Basic Rate Working Hours Per Day • For a piece-rated employee, his hourly basic rate of pay is computed as follows: Total Weekly Pay at the Basic Rate of Pay Total Number of Hours Worked in the Week

Based on the hourly basic rate of pay, the overtime pay for the 3 categories of employees is to be calculated as follows: Hourly Basic Rate of Pay x 1.5 x Number of Hours of Overtime Worked


31

Employment Act

Example 1: In September, Alicia clocked 30 hours of overtime work. Her monthly basic salary is $2,000. How much should she receive for her overtime? Solution Basic Rate of Pay

: $2,000

Hourly Basic Rate of Pay: ($2,000 x 12) / (52 x 44) = $10.4895 OT Payable

: $10.4895 x 1.5 x 30 = $472.03

Example 2: Brenda clocked 20 hours of overtime work. Her monthly basic salary is $1,800 and her fixed monthly transport allowance is $400. How much should she receive for her overtime? Solution Basic Rate of Pay*

: $1,800

Hourly Basic Rate of Pay: ($1,800 x 12) / (52 x 44) = $9.4406 OT Payable

: $9.4406 x 1.5 x 20 = $283.22

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* Basic Rate of Pay does not include fixed monthly allowances

Effective from 1 April 2014 The overtime rate payable to non-workmen earning up to $2,500 basic monthly salary will be capped at the basic monthly salary level of $2,250.

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Hourly Rate (Before 1 April 2014)

Hourly Rate (From 1 April 2014)

Salary per Month

Formula for Hourly Rate

$1,600

12 x Monthly Basic Rate of Pay 52 x 44

8.40 x 1.5 = $12.59 (No Change)

$2,000


10.485 x 1.5 = $15.73 (No Change)

$2,100


$2,250


$2,500


11.01 x 1.5 = $16.52 Not covered for Overtime Pay

11.80 x 1.5 = $17.70 $17.70 (OT Capped)

Rest Day Work The rest day can be on a Sunday or any other day. The employer must inform the employee before the beginning of each month. It is not a paid day. The longest allowable interval between two rest days is 12 days. How is payment for work done on a rest day calculated? 1. Work done at employer’s request: • One day’s salary when the employee works up to half the normal daily working hours • Two days’ salary when the employee works more than half the normal daily working hours


33

Employment Act

2. Work done at employee’s request: • Half day’s salary when the employee works up to half the normal daily working hours • One day’s salary when the employee works more than half the normal daily working hours If an employee works beyond the normal daily working hours on a rest day, he/she should be paid at least 1.5 times the hourly basic rate of pay. Example: Gwen’s monthly basic salary is $2,000, and her fixed monthly transport allowance is $300. She works a 5-day week, 8 hours each day. She was asked by her boss to work 10 hours on her rest day. How much should she receive for her overtime? Solution Rest Day Pay

: [($2,000 x 12) / (52 x 5)] x 2 = $184.62

Extra OT Hours

: 10 – 8 = 2

OT Payable

: [($2,000 x 12) / (52 x 44)] x 1.5 x 2 = $31.47

Total Rest Day Work Payable: $184.62 + $31.47 = $216.09

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Leave & Holidays Public Holidays All employees covered by the Employment Act are entitled to 11 paid public holidays in a year. The 11 gazetted public holidays are: 1. New Year’s Day 2. 1st Day of Chinese New Year 3. 2nd Day of Chinese New Year 4. Hari Raya Puasa 5. Hari Raya Haji 6. Good Friday 7. Labour Day 8. Vesak Day 9. National Day 10. Deepavali 11. Christmas Day The employer and employee may mutually agree to substitute a public holiday for any other day.

Unpaid public holiday The employee is not entitled to Public Holiday pay if he is on: • Unauthorised leave on the day immediately before or after a holiday • Approved no pay leave immediately before and after a holiday


35

Employment Act

Public holiday work Employers may sometimes require an employee to work on a public holiday. If so, the employee should be paid: • An extra day’s salary at the basic rate of pay for working on the public holiday; and • The gross rate of pay for that holiday. If the employee works beyond normal working hours on a public holiday, the rate of overtime payment must be at least 1.5 times the employee’s hourly basic rate of pay.

Absence before or after a public holiday A monthly-rated employee who works on a public holiday but absents without reason on the working day immediately before or after the holiday is not entitled to the holiday pay that is already included in his monthly gross salary. His employer can therefore deduct one day’s pay at the gross rate for the holiday pay from his monthly gross salary. However, his employer has to pay him one day’s pay at the basic rate of pay for working on the public holiday. Example: Aaron’s monthly basic salary is $2,000 and his fixed monthly transport allowance is $300. He works a 5-day week, 8 hours each day. He was asked by his boss to work 10 hours on a public holiday. How much should he receive for his public holiday work?

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Solution Public Holiday Pay: Gross Rate of Pay ($2,000 x 12) / (52 x 5) = $92.31 Extra OT Hours

: 10 – 8 = 2

OT Payable

: [($2,000 x 12) / (52 x 44)] x 1.5 x 2 = $31.47

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Total Public Holiday Work Payable: $92.31 + $31.47 = $123.78

Effective from 1 April 2014 Professionals, Managers and Executives earning a basic monthly salary of up to $4,500 will receive the following protection. Before 1 April 2014

Effective 1 April 2014

Not covered under Employment Act

Entitled to 11 paid public holidays in a year

Not covered under Employment Act

Employers will be allowed to grant time off in-lieu for those who are required to work on public holidays, subject to mutual agreement. At least 1/2 day off in-lieu has to be granted in the absence of mutual agreement.

Annual Leave Entitlement An employee is entitled to annual leave if he/she has worked for at least three months.


37

Employment Act

An employee’s annual leave entitlement under Part IV of the Employment Act is as follows: Years of Service

Annual Leave Entitlement

1

7

2

8

3

9

4

10

5

11

6

12

7

13

8 and above

14

An employee’s year of service begins from the day he/she started work with the employer. The following applies to employees who have worked less than a year: 1. His/her annual leave should be prorated using the following formula: (No. of months in service/12) x 7 2. Periods of no-pay leave should not be included when computing annual leave entitlement.

Encashing annual leave Annual leave may be encashed under the following circumstances: 1. Termination of employment by either the employer or the employee 2. At the discretion of the employer 3. Contractual agreement between employer and employee

38


Formula to calculate annual leave: 12 x Monthly Gross Rate of Pay x Annual Leave Balance 52 x Average number of days an employee is required to work in a week

Example: Michelle’s monthly basic salary is $2,000 and her fixed monthly shift allowance is $200. She works a 5-day week, 8 hours each day. Calculate how much the company needs to pay her if it allows her to encash 4 days of annual leave. Solution Gross Rate of Pay

: $2,000 + $200 = $2,200

Average working days in a week: 5 days Annual Leave (Encashed Amount)

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[(12 x $2,200) / (52 x 5)] x 4 days = $406.15

Effective from 1 April 2014 Professionals, Managers and Executives earning a basic monthly salary of up to $4,500 will receive the following protection. Before 1 April 2014 Not covered under Employment Act

Effective 1 April 2014 Entitled to annual leave


39

Employment Act

Unpaid Leave In the event where the employee has no annual leave left, the employer may allow him to take unpaid leave. The formula for deducting unpaid leave for a monthly-rated worker is: Monthly Gross Rate of Pay x Number of Unpaid Leave Taken Number of Working Days in a Month Example: Sherry’s monthly basic salary is $2,000 and her fixed shift transport allowance is $200. She works a 5-day week, 8 hours each day. Calculate how much the company needs to deduct if she goes on 4 days of unpaid leave in August 2011. Solution Gross Rate of Pay

: $2,000 + $200 = $2,200

Number of working days in August 2011: 23 (inclusive of paid public holidays) Unpaid Leave Deduction: ($2,200 / 23) x 4 days = $382.61

Sick Leave An employee covered by the Employment Act is entitled to paid sick leave, including medical leave issued by a dentist if: • The employee has served the employer for at least three months. • The employee has informed or attempted to inform the employer of his/ her absence within 48 hours. Otherwise, the employee will be deemed to be absent from work without permission or reasonable excuse. • The sick leave is certified by the company’s doctor, or by a government doctor (including doctors from approved public medical institutions).

40


The number of days of paid sick leave a new employee is entitled to depend on his service period: Months of service completed by a new employee

Paid outpatient non-hospitalisation leave (days)

Paid hospitalisation leave (days)

3 months

5

15

4 months

5+3=8

15 + 15 = 30

5 months

8 + 3 = 11

30 + 15 = 45

6 months

11 + 3 = 14

45 + 15 = 60

thereafter

14

60

If an employee has worked for at least three months, his employer is legally obliged to bear the medical consultation fee. For other medical costs, such as medication, treatment or ward charges, the employer is obliged to bear such costs depending on the medical benefits provided for in the employee’s employment contract or the collective agreement signed between the company and the union.

Sick leave taken on a half working day

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Sick leave taken on a half working day (e.g. Saturday) should be considered as one day’s sick leave.

Effective from 1 April 2014 • Employers will not be required to grant paid sick leave and bear the medical consultation fees for employees seeking or undergoing medical treatment for cosmetic purposes. • Professionals, Managers and Executives earning a basic monthly salary of up to $4,500 will be covered under the Employment Act for sick leave benefits.


41

Employment Act

Government-paid Leave Schemes Government-paid leave schemes were introduced under the Child Development Co-Savings Act to cover parents of Singapore Citizen children, including managerial, executive and confidential staff. This is to foster an overall pro-family environment in Singapore. An employee will be entitled to the following leave schemes if he/she is covered under the Child Co-Savings Act and fulfils all conditions required for each leave type.

Marriage & Parenthood package (Effective since 1 January 2009) Type

For

Must be Taken

Duration

Childcare Leave

Both

When child is below 7 years old

6 Days

Maternity Leave

Mother

Within 12 months after the birth of the child

16 Weeks

Unpaid Infant Care Leave

Both

When child is below 2 years old

6 Days

Enhanced Marriage & Parenthood package (Effective since 1 May 2013) Type

For

Must be Taken

Duration

Extended Childcare Leave

Both

When child is from 7 to 12 years old (inclusive)

2 Days

Paternity Leave

Father

Within 16 weeks from the birth of the child, or 12 months from the birth of the child (subject to mutual agreement between employer and employee)

1 Week

Shared Paternal Leave

Father

When child is below 1 year of age

1 Week

Adoption Leave

Mother

When child is below 1 year of age

4 Weeks

42


Termination Termination Process Termination of a contract of service can be effected either by the employer or employee. An employer cannot reject an employee’s resignation. Employees have the right to resign at any time by serving the required notice period or compensating the employer with salary in lieu of notice.

Notice Period & Payments • The party who intends to terminate the contract must give notice to the other party in writing. • The notice period to be given depends on what is agreed in the written contract. If there is no such period previously agreed upon, the following shall apply: Length of Service

Notice Period

Less than 26 weeks

1 day

26 weeks to less than 2 years

1 week

2 years to less than 5 years

2 weeks

5 years and above

4 weeks

• Formula to calculate short notice payment: 12 x Monthly Gross Rate of Pay x Short Notice Days 52 x Average number of days an employee is required to work in a week

Annual Leave & Payments • The employer cannot force the employee to go on leave during the period of notice, unless the employee consents to it. Any unconsumed annual leave can be encashed by the employee.


43

Employment Act

• An employee can use his annual leave to offset the notice period for termination of contract. By bringing forward his last day of employment with the company, he is no longer considered an employee of the company and can start work immediately with his new company after that date.

Commission Payments An employee’s entitlement to commission payment and the time of commission payment would depend on what is stated in the employment contract or existing policies/practices. If the contract is silent, it is subject to negotiation or mutual agreement between the employee and the employer.

Dismissal Dismissal is the termination of the contract of service of an employee by his employer, with or without notice. It may or may not be due to the employee’s misconduct.

Misconduct An employer may, after an inquiry, terminate an employee’s services without notice if the employee is found guilty of misconduct. Misconduct refers to a breach of duty or discipline that is inconsistent with the conditions of an employee’s contract of service. Examples of misconduct are theft or dishonesty, disorderly or immoral conduct at work, and wilful insubordination. If the employee has committed an act of misconduct, the employer should conduct an inquiry before deciding whether to dismiss the employee or to take other forms of disciplinary action. The entire process should be properly documented for possible Ministry of Manpower audits.

44


Example: Colin’s monthly basic salary is $1,800 and his fixed monthly transport allowance is $200. He works a 5-day week, 8 hours each day. Due to his poor performance, the company decides to terminate his service. The company is required to pay him 2 weeks’ notice pay and he has 5 days of annual leave balance. How much should he receive for his notice pay and annual leave encashment? Solution Gross Rate of Pay: $1,800 + $200 = $2,000 2 Weeks’ Notice : 5 days x 2 weeks = 10 days Notice Pay

: [($2,000 x 12) / (52 x 5)] x 10 = $923.08

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Annual Leave Encashed Amount: [($2,000 x 12) / (52 x 5)] x 5 = $461.54

Effective from 1 April 2014 Professionals, Managers and Executives earning a basic monthly salary of up to $4,500 will receive the following protection. Before 1 April 2014 Not covered under Employment Act

Effective 1 April 2014 Professionals, Managers and Executives can seek redress with Ministry of Manpower against unfair dismissal • Where no notice is given; • Or when notice is given, they must have served the same employer for at least 12 months.


45

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Employment Act

Effective from 1 April 2015 Before 1 April 2015

Effective 1 April 2015

Employees with less Employees with less than 2 years of service than 3 years of service with the same employer are not entitled to with the same employer retrenchment benefits. are not entitled to retrenchment benefits.

46


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CENTRAL PROVIDENT FUND (CPF)

Central Provident Fund (CPF) Information in this section is extracted/adapted from www.cpf.gov.sg. Employers are required to pay the employer’s and employee’s share of CPF contributions monthly for all employees (Singapore Citizens and Singapore Permanent Residents) at the rates set out in the CPF Act. Employers have a grace period of 14 days to make payment of CPF contributions after the end of the month for which CPF contributions are due. If the due date falls on a Saturday, Sunday or Public Holiday, CPF contributions must be paid by the next working day.

Calculation of CPF Contributions The CPF contribution depends on a few factors as shown below: 1. Age 2. Total wages 3. Residency ( Citizen / Permanent Resident )

Definition of Wages in CPF Contributions Under the CPF Act, wages are defined as the remuneration in money, including any bonus that is due or granted to a person in respect of his employment. Other than the common forms of remuneration in money such as salary and bonus, remuneration also includes the following: • Rewards in money for services rendered by an employee in the course of employment (e.g. overtime, allowances); • Cash payments that augment the employee’s wages (e.g. incentives, gratuity, bonuses); • Payments that are not reimbursements of expenses actually incurred and unconnected with services rendered (e.g. travelling expenses from home to office or vice versa); and


49


• Payments that are not genuine pre-estimates of expenses necessarily incurred on behalf of the employer (e.g. fixed amounts of broadband internet charges for home use). An employee may be rewarded with benefits other than salary. Such employee benefits may be in kind or in money. All remunerations given in money to an employee will require CPF contributions. Some common benefits given in money to an employee include provisions of meal/food allowances, commuted leave pay, commissions/incentives for meeting sales targets, and festive allowances. CPF contributions are not required for benefits given in kind. Some common benefits that are given in kind to employees include provision of a place of residence, a car, and free or subsidised medical/dental care.

Types of Wages in CPF Contributions • Ordinary Wages (OW) are wages due or granted wholly and exclusively in respect of an employee’s employment in that month and payable before the due date for payment of CPF contributions for that month. • Additional Wages (AW) are wages not granted wholly and exclusively for the month. Examples include annual bonus, leave pay, incentives and other payments made at intervals of more than a month. • Total Wages (TW) — The total amount of an employee’s wages for any calendar month is the sum of his OW for the month and the AW paid to him in that month.

OW

50

AW

TW


Limits on CPF Contributions Ordinary Wage (OW) Ceiling • From 1 January 2011 to 31 August 2011, the OW Ceiling was $4,500 monthly. • From 1 September 2011, the OW Ceiling has been revised to $5,000 monthly.

Additional Wage (AW) Ceiling • An employee’s AW Ceiling is computed on a per employer basis. • The formula for calculating the AW Ceiling for 2011 and 2012 is as follows: Scenarios

Additional Wage Ceiling

Employee whose last day of employment is before 1 Sep 2011

$76,500 – Total OW subject to CPF for 2011

Employee whose last day of employment falls within the period from 1 Sep to 31 Dec 2011


Employee in employment from 1 Jan 2012


Example 1: Marcus’s monthly basic salary is $5,500 and his fixed monthly transport allowance is $200. Calculate his AW ceiling for Y2013. Solution Jan 2013 — Dec 2013 Ordinary Wage Ceiling: ($5,500 + $200) > $5,000 Based on OW Ceiling of $5,000 Additional Wage Ceiling: $85,000 – ($5,000 x 12) = $25,000


51


Example 2: Jamie’s monthly basic salary is $2,300. Calculate her AW ceiling for Y2013. Solution Jan 2013 — Dec 2013 Ordinary Wage Ceiling: $2,300 < $5,000 Based on OW Ceiling of $5,000 Additional Wage Ceiling: $85,000 – ($2,300 x 12) = $57,400 Example 3: Mick’s monthly basic salary is $5,000, and his fixed monthly transport allowance is $300. Calculate his AW ceiling if his last day with the company is 30 September 2013. Solution Jan 2013 — Sep 2013 Ordinary Wage Ceiling: ($5,000 + $300) > $5,000 Based on OW Ceiling of $5,000 Additional Wage Ceiling: $85,000 – ($5,000 x 9) = $40,000

Example 4: Sam’s monthly basic salary is $2,000. His last day with the company is August 2013. Calculate his AW ceiling. Solution Jan 2013 — Aug 2013 Ordinary Wage Ceiling: $2,000 < $5,000 Based on OW Ceiling of $5,000 Additional Wage Ceiling: $85,000 – ($2,000 x 8) = $69,000

52


A General Guide to Payments that Attract CPF Contributions Type of Payment

Is CPF payable?

Attendance allowance Payment to employees for good work and attendance

Yes

Anniversary cash award Payment to employees on company’s anniversary

Yes

Annual wage supplement/bonus Payment to employees at the end of the financial year

Yes

Commission Payment to employees based on percentage of sales achieved

Yes

Cost of living allowance Payment to employees as part of employees’ wages

Yes

Dirt allowance Payment to employees for performing field duties

Yes

Education allowance Contractual payment for education of employee’s children.

Yes

Payment to employees for employees’ self-improvement programmes

No

Education/training reimbursement Reimbursement for course and examination fees as part of employee’s training programme

No

Entertainment expenses Reimbursement for entertaining company’s clients

No


53


Type of Payment

Is CPF payable?

Extra duty allowance Payment to employees for extra work done, e.g. night duty, overtime, public holiday, acting allowance, etc.

Yes

Festive allowance Cash gift (e.g. hongbao) given to employees during festive season

Yes

Flexi-benefit expenses Payments for expenses not necessarily incurred by employer, e.g. employee’s groceries, home renovations, etc.

Yes

Reimbursement for expenses necessarily incurred on behalf of the employer, e.g. holiday facilities, professional publications, etc.

No

Finder introduction fees Payment to employees for introducing workers to company

No

Gifts in kind Award in kind, e.g. token gifts

No

Gratuity Payment to employees for good service while still in employment

Yes

Payment to employees upon termination of employment, i.e. compensative in nature

No

Grooming and hair cut allowance Payment to employees for enhancement of appearance

54


Yes

Type of Payment

Is CPF payable?

Handphone and pager expenses Payment of handphone and pager allowances to employees

Yes

Payment of handphone and pager charges directly to third party, e.g. service provider

No

Reimbursement for actual handphone and pager expenses incurred for official purposes

No

Holiday expenses Fixed payment to employees for vacation

Yes

Variable sum given as reimbursement for holiday expenses incurred by employees

No

Housing/rental expenses Payment to employees for housing rent

Yes

Payment of rent directly to third party e.g. landlord

No

Incentive allowance Cash payment incentive

Yes

Incentive in kind, e.g. token gifts

No

Laundry expenses Payment to employees for laundry expenses of personal clothing

Yes

Reimbursement for laundry expenses to uniformed employees

No

Leave pay Payment in lieu of leave

Yes


55


Type of Payment

Is CPF payable?

Long-service award 1. Cash award given to employees with less than 5 years’ service and every subsequent period of less than 5 years’ service. 2. Cash award given to employees with at least 5 years’ service and every subsequent period of not less than 5 years’ service (i.e. 5, 10, 15 and so on), and the cash award exceeds the employee’s Ordinary Wages for the month in which it is given. CPF is payable on the amount in excess of the Ordinary Wages. Cash award given to employees with at least 5 years’ service and every subsequent period of not less than 5 years’ service (i.e. 5, 10, 15 and so on), and the cash award does not exceed the employee’s Ordinary Wages for the month in which it is given.

Yes

No

Maternity allowance Payment to female employees during confinement and in addition to monthly salaries

Yes

Maternity subsidy Reimbursement paid under company’s maternity expenses scheme

No

Meal expenses Monthly lump sum payment for meals to employees

Yes

Meal reimbursement for staying beyond working hours, i.e. overtime

No

Per diem allowance Daily allowance given as reimbursement for defraying the cost of an overseas (i.e. out of Singapore) assignment

56


No

Type of Payment

Is CPF payable?

Personal clothing allowance Payment to employees to enhance appearance

Yes

Probation period pay Wages for employees on probation

Yes

Productivity award Cash award for staff productivity

Yes

Sales performance award Payment to employees for attaining sales target

Yes

Service charge Collection by hotels/restaurants and distributed as part of wages to employees

Yes

Share option Cash proceeds for the share options given to the employee

Yes

Sales proceeds if the shares options have been exercised and the shares are held in the employee’s name Payments granted in kind to employees where no cash payments are payable to employees

No

Staff welfare benefits Gifts in kind to employees on their marriage or birth of their children

No

Stand-by duty allowance Payment to employees for stand-by duties

Yes


57


Type of Payment

Is CPF payable?

Retirement gratuity, retrenchment pay, ex-gratia payment, salary in lieu of notice, severance pay, compensation for loss of employment

No

Temporary lay-off benefits

Yes

Termination benefits

Tips Cash collected from customers to augment wages of hotel and restaurant employees

Yes

Transport expenses Payment to employees for transport subsidies

Yes

1. Reimbursement for travel in the line of official duty 2. Reimbursement for travel between home and workplace beyond normal working hours e.g. rest days and public holidays 3. Reimbursement for travel from home/office to the place of assignment (not the normal place of work)

No

4. Reimbursement for actual transport expenses where the employer is obliged to provide transport for employees and where the transport is not available Work injury compensation Payment to employees for injuries under the Work Injury Compensation Act.

No

Source: http://mycpf.cpf.gov.sg/Employers/Employers_Guide_to_CPF/ Existing_Employer/ee_Find_out_if_CPF_contributions_are_payable/ ExistingEmployer_Find_out_if_CPF_con_payable_which_allowances_and_ payments.htm

58


Modes of CPF Contribution Submission Mode of e-Submission

For Whom

CPF Auto-eXcel Plus

Employers without a payroll system

File Transfer Protocol (FTP) using payroll system (via CPF Auto-eXcel Plus)

Employers with a compatible payroll system

AXS

Employers with 10 or fewer employees

Provident and Tax (PAT)

Employers with or without a payroll system and want to submit CPF and IRAS returns using one system

Common CPF Reporting Mistakes Made by Employers Common Mistake

Correct Practice

Overpayment when Ordinary Wages are wrongly classified as Additional Wages

Employers should determine whether the wages paid are Ordinary Wages (OW) or Additional Wages (AW) before determining the CPF contributions payable.

Underpayment when CPF contributions are based on wages that are not paid monthly

When wages are not paid according to the calendar month, e.g. weekly or fortnightly, employers should not determine the CPF contributions based on the wages paid on the different days of the month individually. Instead, employers should apportion the wages according to the calendar month for which CPF contributions are paid. The apportionment is necessary to determine the Ordinary Wages for the calendar month on which CPF contributions are payable.


59


Common Mistake

Correct Practice

Underpayment/ Overpayment when wrong CPF contribution rates are applied

Employers should check the CPF contribution rates applicable for their employees before determining the CPF contributions payable, especially when: i. the employee’s total wage is less than $1,500 ii. the employee has crossed over to the next age group

Underpayment/ Overpayment when wrong CPF contribution rates for Singapore Permanent Residents are applied

Employers should check the date employees obtain their Singapore Permanent Resident (SPR) status at the point of employment before determining the CPF contributions payable. The first-year rate is payable from the day the employee obtains his SPR status. The day he obtains the SPR status refers to the date indicated on the entry permit (Form 5/5A) that is issued by the Immigration and Checkpoints Authority of Singapore. The second- and third-year rates are payable from the month following the anniversary of the employee’s conversion to a SPR.

Overpayment when CPF contributions for Ordinary Wages (OW) are paid above the OW Ceiling

60

Employers should pay CPF contributions for Ordinary Wages (OW) up to the OW Ceiling of $5,000.


Common Mistake

Correct Practice

Overpayment to employees who: a. resign in mid-month b. go on no pay leave in mid-month

Employers should use the prorated salary to determine the CPF contributions payable to employees who resign or go on no pay leave in mid-month.

Non-payment to employees: a. on probation b. on the last month of employment

Employers should ensure that CPF contributions are paid on wages received by employees on probation or on their last month of employment. For employees who are on no pay leave or have resigned/been terminated, employers should compute the CPF contributions payable based on the prorated wage and not the full wage for the month.

Non-payment on allowances: a. transport allowance b. third-party commission

Employers should ensure that CPF contributions are paid on allowances, e.g. attendance allowance, meal allowance, transport allowance, third-party commission etc. Example 1: Transport allowance If the transport allowance constitutes part of an employee’s wages, CPF contributions are payable. CPF contributions are not payable for reimbursement of travel/actual transport allowances. These include: a. travel in the line of official duty; b. travel between home and workplace beyond normal working hours, for example, on rest days and public holidays;


61


Common Mistake

Correct Practice c. travel from home/office to the place of assignment; and d. actual transport expenses where the employer is obliged to provide transport and where transport is not available. Example 2: Third-party commission CPF contributions are payable on third-party commissions as long as the commissions are money for services rendered by the employee during his employment. Thirdparty commissions are commissions that an employee earns from third parties for services rendered by him by virtue of his employment. Arrangement to pay commissions can be formal or informal and CPF contributions are payable on third-party commissions whether the employer earns a commission or whether such commissions are stated in the employment contract. For instance, Ivan is a salesperson and has to recommend his customers to financial institutions listed by his employer for car insurance. For any insurance he sells, he would be paid a commission from the financial institution. CPF contributions are payable on such commissions.

62


Common Mistake Non-payment for employees under a contract of service

Correct Practice Employers should ensure that CPF contributions are paid for all employees under a contract of service. Example: Jill employs a part-time receptionist, who comes to work a few days each month. There is neither a written agreement nor a need to serve termination notice. Jill has to pay CPF contributions for her temporary, part-time or permanent employees as long as there are wages due and payable to these employees.

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Source: http://mycpf.cpf.gov.sg/Employers/Employers_Guide_to_CPF/ Existing_Employer/determining+_CPF_con.htm

Effective from 1 January 2015 Employers to Face Higher CPF Contribution Rates Employers will face higher Medisave and older worker CPF contribution rates with effect from 1 January 2015, as announced in the FY2014 Budget Statement. Employers’ CPF contribution rates to the Medisave Account will be raised by 1 percentage point. In addition, the CPF contribution rates for workers aged above 50 years to 65 years will also be increased. The overall impact of these increases for an employee’s monthly wage of $750 and above is shown in Table 1 on the next page:


63


Table 1 Age (years)

Current

Effective 1 Jan 2015

Employer’s

Employee’s

Total

Employer’s

Employee’s

Total

CPF

CPF

CPF

CPF

CPF

CPF

50 and below

16%

20%

36%

17%

20%

37%

Above 50 – 55

14%

18.5%

32.5%

16%

19%

35%

Above 55 – 60

10.5%

13%

23.5%

12%

13%

25%

Above 60 – 65

7%

7.5%

14.5%

8.5%

7.5%

16%

Above 65

6.5%

5%

11.5%

7.5%

5%

12.5%

64


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Statutory Donations

Statutory Donations Chinese Development Assistance Council (CDAC) Fund All Chinese employees who are either citizens of Singapore or Singapore permanent residents may contribute monthly to the CDAC, according to the wage levels indicated below: Wage Level

Monthly Contribution

Less than $2,000

$0.50

$2,000 or more

$1.00

Singapore Indian Development Association (SINDA) Fund All working Indians except foreign workers on the FWL scheme in Singapore may contribute monthly to the SINDA Fund, according to the wage levels indicated below: Wage Level


Up to $600

$1.00

Above $600 to $1,500

$3.00

Above $1,500 to $2,500

$5.00

Above $2,500

$7.00

Mosque Building and Mendaki Fund (MBMF) All working Muslim Singapore citizens, Singapore permanent residents and foreign workers are required to contribute to the MBMF monthly, according to the wage levels indicated on the next page:


67

Statutory Donations

Wage Level


$200 and below

Nil

Above $200 to $1,000

$2.00

$1,001 to $2,000

$3.50

$2,001 to $3,000

$5.00

$3,001 to $4,000

$12.50

$4,001 and above

$16.00

Eurasian Community Fund (ECF) All working Eurasian Singapore citizens and Singapore permanent residents may contribute to the ECF monthly, according to the wage levels indicated below: Wage Level


Up to $1,000

$2.00

Above $1,000 to $1,500

$4.00

Above $1,500 to $2,500

$6.00

Above $2,500 to $4,000

$8.00

Above $4,000

$10.00

SHARE Programme Donations The CPF Board collects SHARE donations on behalf of the Community Chest, a division of the National Council of Social Service. Donations by the employees are voluntary and deducted from the employees’ wages.

68


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Aligning Business Objectives with Employment Law Updates

Day1: Updates & Changes to the Employment Act ■ Enhanced Coverage for Non-workmen & PMEs ■ Contract of Service versus Contract for Service ■ Managing Termination & Dismissal of Probationary & Confirmed Employees ■ Payment, Deduction of Salary & Payslips ■ Enhanced Employment Standards under the revised Part IV provisions ■ Retrenchment & Retirement Benefits ■ Revised Maternity & Childcare Benefits ■ Flexible Arrangements for Employers ■ Enhanced Enforcement & Compliance ■ Maintenance of Employment Records

Day 2: Employment of Foreign Manpower Act & Regulations ■ Changes to Foreign Manpower Policies & their Impact on Employers ◆ Reasons for changes to foreign manpower policies ◆ Foreign manpower policy considerations ◆ Work pass policy ◆ Debarment policy ◆ Housing standards ◆ Work pass quota system ■ Changes to Employment of Foreign Manpower Act & their Impact on Employers ◆ Changes to foreign manpower enforcement regime ◆ Statutes & regulations relevant to foreign manpower management ◆ What you need to know for compliance ◆ Role & responsibilities of employer in the inflow & management of foreign manpower ◆ Management of foreign manpower in the various industries ◆ Implications for non-compliance ■ Discuss Possible Action Plan ◆ Review & analyse current & future implications for the business ◆ Identify immediate & future changes ◆ Make key decisions for business continuity To Register:


Employment of Foreign Manpower

Employment of Foreign Manpower Information in this section is extracted/adapted from www.mom.gov.sg. Foreigners entering Singapore to work must obtain a work pass from Ministry of Manpower in one of the following categories: Employment Pass (P Pass, Q1 Pass, PEP), S Pass and Work Permit.

Types of Employment Passes (Accurate as at 1 January 2014) 1. P Pass A P Pass is given to a foreigner in a professional, managerial, executive or specialist position. • P1 Pass will be issued to the applicant if his/her fixed monthly salary is at least S$8,000, with acceptable qualifications. • P2 Pass will be issued to the applicant if his/her fixed monthly salary is at least S$4,500, with acceptable qualifications. Q1 Pass The Q1 Pass is meant for a foreigner whose fixed monthly salary is at least S$3,000. • Young graduates from good institutions can qualify if they earn at least S$3,000. • Older applicants would have to command higher salaries to qualify, commensurate with the work experience and quality expected of them. 2. Personalised Employment Pass (PEP) While an individual employment pass is tied to an employer, the PEP allows its holder to remain in Singapore without a job for up to six months while evaluating employment opportunities. It is issued only once with a validity period of three years and is non-renewable. PEP holders must earn at least an annual salary of S$144,000 in each calendar year of the PEP.


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3. S Pass A foreigner whose fixed monthly salary is at least S$2,200 is eligible for an S Pass. S Pass applicants will be assessed on a points system, taking into account various criteria such as salary, educational qualifications, skills, job type and work experience. Currently, the number of S Pass holders a company can employ is capped at a sub-Dependency Ceiling (sub-DC) of 15% of the company’s total workforce in the Services sector and 20% in the remaining sectors. 4. Work Permit A foreigner whose fixed monthly salary is not more than S$2,200 will need to apply for a Work Permit. The permit can be categorised into ‘semi-skilled’ and ‘unskilled’ depending on the educational level and industry sector the applicant is employed under. An employer that wishes to bring workers from North Asian Sources, Non-Traditional Sources* and the People’s Republic of China into Singapore needs to furnish a security bond of S$5,000 per worker and pay foreign worker levies for them. *www.mom.gov.sg/foreign-manpower/passes-visas/work-permit-fw/ before-you-apply/Pages/overview.aspx#grp

Foreign Worker Levy (FWL) An employer who is liable to pay the levy for his foreign workers is not required to pay CPF contributions for them. However, he is required to pay the Skills Development Levy (SDL) at the prevailing rate. If a work permit holder on the FWL scheme is subsequently granted Singapore Permanent Resident (SPR) status, he will be placed on the CPF scheme. This will take effect from the day he is granted SPR status.

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Mode of Payment It is compulsory for all employers involved in the FWL scheme to pay the levy by Interbank GIRO. Employers who fail to do so may risk facing the cancellation of their workers’ permits.

Grace Period for Payment The grace period for FWL payment is 14 days after the end of the month for which the levy is due and payable. For employers who are on FWL IBG payment, the levy deduction will be made on the 17th of the month. If the 17th falls on a Saturday, Sunday or Public Holiday, the levy will be deducted on the next working day. For updated information on Foreign Worker Levies, please refer to: www. mom.gov.sg/foreign-manpower/foreign-worker-levies/Pages/levies-quotasfor-hiring-foreign-workers.aspx

Table of Changes from 1 July 2013

Pending Changes

New Applicants

Current Foreign Workers

Job Flexibility Scheme for Services Sector Market-Based Skills Framework for the Services Sector Increase in Salary Threshold for fulltime employment from $850 to $1,000 S Pass Qualifying Criteria raised from $2,000 to $2,200 Service Companies DRC will be at 40% DRC, Service S Pass at 15% Sub-DRC

July 2013 July 2013 January 2014 July 2015


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Pending Changes

New Applicants

Current Foreign Workers

Service Companies DRC will be at 45% DRC, Service S Pass at 20% Sub-DRC

July 2013

July 2014

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Progressive increase in Foreign Worker Levy Rates

July 2013/2014/2015

Marine Sector DRC will be at 1 Local: 4.5 Foreigners

January 2016

Marine Sector DRC will be at 1 Local: 3.5 Foreigners

January 2018

Effective from 1 January 2015 During the Budget 2014 announcement, the government encouraged employers to retain higher-skilled foreign workers by: 1. Extending the maximum Period of Employment for ‘Higher Skilled’ (R1) Work Permit Holders (WPHs) from Non-Traditional Sources and the People’s Republic of China in the Construction, Marine and Process sectors. 2. Implementing a new scheme called the Market-Based Skills Recognition Framework for the Construction sector to allow ‘Basic Skilled’ (R2) Construction WPHs to upgrade to R1 status. 3. Raising the foreign worker levy rate for R2 Construction WPHs.

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Globally Connected

International

2-Day Seminar

Advanced Payroll Masterclass for HR Professionals This intensive two-day masterclass allows HR, Payroll and Finance professionals to fast-track development of their skills in making effective strategic decisions for the payroll department. The advanced course will provide them with the skills and expertise to become premier payroll specialists within their organisations.


Our trainer, DAPHNE LIM, has established herself as a highly experienced Payroll & HR practitioner with hands-on experience in the development and implementation of payroll & HR policies, payroll administration and training and development. Currently, she manages a team that handles an impressive portfolio of over 200 clients across diverse industries.


Programme Outline

Globally Connected

International

Advanced Payroll Masterclass for HR Professionals

Payroll Best Practices ■ Learn about the latest payroll best practices that companies are adopting ■ Learn about updates to Government-paid Leave Schemes ■ Find out how to handle unique payroll situations that call for special treatments ■ Reimbursements or Allowances − which is the better choice?

Payroll Processing ■ Tips on how to increase the effectiveness of your payroll processes ■ How to improve your payroll information management ■ Ensure accuracy of staff salary payments ■ Tips on how to safeguard your payroll information

Payroll Auditing ■ Appreciate the importance of accurate records throughout the year ■ Learn essential payroll policies that every company should have ■ Employment Act versus Employment Contract − when will one supersede the other?

Legislation ■ Understand payroll regulations ■ Learn how to avoid penalties & fines for non-compliance ■ Find out how the Employment Act impacts your payroll ■ Discover the latest updates to labour laws & what you must do to remain compliant ■ Fix common mistakes in the IRAS Year-end Reporting & CPF contributions ■ Identify potential risk areas before possible compliance audits

To Register:


Other Regulations

Other Regulations Skills Development Levy (SDL) Employers have to contribute SDL for all employees up to the first $4,500 of gross monthly remuneration at a levy rate of 0.25%, subject to a minimum of $2, whichever is higher. Employees include full-time, casual, part-time, temporary and foreign workers rendering services wholly or partly in Singapore. Example: Employee

Gross Monthly Remuneration

SDL Payable

Remarks

Colin

$150.80

$2.00

Minimum of $2 payable

Sharon

$2888.00

$7.22

0.25%

Michelle

$4,500.00

$11.25

0.25%

Joseph

$10,000.00

$11.25

First $4,500 at 0.25%

*Total SDL

$31.72

$31.00 payable

*All cents to be dropped from the final computation

National Service Make Up Pay (MUP) When an employee has to report for National Service, his pay will be deducted based on the formula: Total Salary x Number of Working Days during ICT Period Number of Working Days in a Month The employer will have to submit all claims 14 days before the commencement of training either online via the NS portal (www.ns.gov.sg) or through hardcopy claim forms downloaded from the same website.


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Other Regulations

Example: Shaun attends ICT from 2 May to 6 May (5 days). His monthly basic salary is $2,000, with a fixed meal allowance of $200 monthly. He works a 5-day week. What is his deduction for the 5 days? Solution Deduction: [($2,000+$200) x 5] / 22 = $500

MUP Claim Employers have two options for MUP • Option 1: Direct Reimbursement to Employers of Claims for NS Training Scheme (DIRECT) The employer will continue to pay the employee in accordance with the company’s pay schedule when the NSman attends NS training and claim reimbursement from MINDEF. • Option 2: Payment to NSman The employer will certify the MUP claim and submit it to MINDEF, which will directly reimburse the NSman.

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ONE-STOP SERVICE Accounting Information Technology Payroll & HR


Staffing

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Accounting We assist businesses with simple to complex accounting work. Our system and processes are SSAE 16 certified to be able to host and process data securely. ■ SWAT Accounting

■ Routine Accounting

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Payroll & HR We are able to support every stage of growing businesses with our strategic tie-ups with global leaders. Our payroll & HR division is SSAE 16 certified, catering to the need for utmost confidentiality and security of business data. ■ Payroll Administration

■ HR Administration & Compliance Services

Information Technology Our close partnerships with leading IT solution providers allow us to provide effective and efficient solutions to businesses. We believe in deploying best-of-breed technologies to build a reliable infrastructure to support our clients’ long-term business growth. ■ Sage 300 ERP Support

■ IT Outsourcing

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Staffing We help businesses from major industries with their recruitment needs. ■ Contract Placements, Permanent Placements, Executive Search

For further information, please contact: 8 Wilkie Road, #03-08, Wilkie Edge, Singapore 228095 T +65 6533 7600 F +65 6538 7600 [email protected] www.StoneForest.com.sg

■ Recruitment Consulting & Management, General Office Administration, Customer Support Operations

Tax Reporting for Employee’s Remuneration

Tax Reporting for Employee’s Remuneration Information in this section is extracted/adapted from www.iras.gov.sg.

Year-end Reporting The employer must submit the employment income details of all employees employed in Singapore to IRAS by the 1st of March each year.

Forms of Submission Manual Submission The employer will prepare its employees’ employment income records and send the forms to the employees for their own reporting. The forms must be signed by an authorised person.

Auto-Inclusion Scheme (AIS) Under the Auto-Inclusion Scheme, employers submit details of employees’ employment income to IRAS electronically. The AIS is compulsory for employers who have 14 or more employees for the entire year ending 31 December 2013 or who have received the “Notice to File Employment Income of Employees Electronically”.

Types of Tax Forms Form Name

Description

Form IR8A

To be completed for all employees.

Appendix 8A

To be completed if benefits-in-kind are provided to the employees. Some common benefits-in-kind are: 1. Company car provided to employee


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Form Name

Description 2. Housing accommodation provided by employer to employee (where the tenancy agreement is signed between the company and the landlord) 3. Home passage provided to work pass holders

Appendix 8B

To be completed if employees derived gains or profits from Employee Stock Option (ESOP) Plans or other forms of Employee Share Ownership (ESOW) Plans.

Form IR8S

To be completed if the employer has made excess CPF contributions on its employees’ wages. This form is to be completed even if the employer has requested for the excess contributions to be refunded from CPF Board.

Common Mistakes Made by Employers Form IR8A Wrong Reporting Method

Correct Reporting Method

Entering cents for the fields under Income (items a to e) & Deductions

Rounding up or down to the nearest dollar

Including non-taxable components of lump sum payments in item d4

To declare the non-taxable components under “Compensation for loss of office”

Deducting the amount of payment in lieu of notice paid by employee for insufficient resignation notice

Payment by the employee is not tax deductible

Reporting overseas employment income and employee’s CPF contribution for employees who are posted overseas

Do not report overseas employment income and employee’s CPF contribution for employees who are posted overseas

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Wrong Reporting Method


Including the employer’s CPF contribution with the employee’s compulsory contribution to CPF

Only the employee’s compulsory contribution to CPF is required

Including excess/voluntary contribution to CPF, which has been refunded or is to be refunded to the employer, under item d7

Do not report the excess employer’s CPF contribution as taxable income. Complete Section C of the Form IR8S.

Form A8A Wrong Reporting Method


Declaring under A8A that the housing benefit is provided by the employer, but the tenancy agreement is signed between the employee and landlord

Declaring under IR8A that the housing benefit is provided by the employer, but the tenancy agreement is signed between the employee and landlord

Declaring under A8A that the employee’s private car running expenses are reimbursed by the company

Declaring under IR8A that the employee’s private car running expenses are reimbursed by the company

Not declaring hampers, gifts, etc, valued above $200 to employees for the following occasions: • Wedding Gifts • Long Service Awards • Baby Shower • Festive Gifts

Declaring hampers, gifts, etc, valued above $200 to employees for the following occasions: • Wedding Gifts • Long Service Awards • Baby Shower • Festive Gifts *see note below

Refer to www.iras.gov.sg/irasHome/page04.aspx?id=1818 for the detailed list of benefits-in-kind granted administrative concession or exempt from income tax.


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Form A8B Wrong Reporting Method


Not declaring free shares granted/ awarded to employees from parent or local company

Declaring free shares granted/ awarded to employees from parent or local company

Not converting the value of shares or stock options granted/awarded to employees in foreign currency into Singapore currency

Converting the value of shares or stock options granted/awarded to employees in foreign currency into Singapore currency

Incorrectly reporting gains from Employee Stock Option (ESOP) / Employee Share Ownership (ESOW) with selling restriction (moratorium) imposed

1. Payment by the employee is not tax deductible. 2. The gains accrue on the date when the selling restriction (moratorium) is lifted and not on the date of exercise or grant.

Form IR8S Wrong Reporting Method Not reporting the amount of excess/voluntary CPF contribution

Correct Reporting Method Complete Section B if there is excess CPF contribution. This has to be done even if the employer has requested CPF Board for a refund.

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Source: www.iras.gov.sg/irashome/page.aspx?id=15321

Effective for Year of Assessment 2015 onwards Benefit Place of Residence

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New Taxable Value Annual Value (AV) of the premises (less rent paid by the employee), regardless of whether the premises is owned or rented by the employer


Benefit

New Taxable Value The current method of determining AV will continue to apply, i.e.: 1. AV will be apportioned if accommodation is not provided for the whole year or accommodation is shared by 2 or more employees; and 2. Changes in AV during the year are taken into account

Hotel Accommodation Furniture & Fittings (F&F)

The actual costs incurred by the employer for the hotel stay provided. 40% of the AV if the premises is partially furnished; or 50% of the AV if the premises is fully furnished Partially furnished — Only fittings (e.g. lightings, airconditioner/ceiling fan, water-heater) are provided. Fully furnished — Both fittings and furniture/household appliances are provided.

Tax Clearance What is Tax Clearance? The employer’s responsibility is to notify and seek tax clearance by filing form IR21 for foreign employees.

When to Seek Tax Clearance The employer must seek tax clearance by filing Form IR21 at least one month before the non-citizen employee: 1. Ceases employment with the company in Singapore; or 2. Plans to leave Singapore for more than three months; or 3. Is posted overseas.


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If the employer is unable to give 1 month’s notice, it will have to state the reasons when filing Form IR21. Unless the Comptroller accepts a shorter notice, employers that do not comply may be liable to a fine of up to S$1,000.

What to Do pending Tax Clearance The employer is required to withhold all monies (including salary, bonus, overtime pay, leave pay, allowances, gratuities, lump sum payments, etc.) due to the employee from the day: • The employee notifies of his intention to cease employment/depart from Singapore; or • The employer decides to terminate the employment; or • The employer decides to post the employee to an overseas location. In the event where the employer is unable to withhold monies from the employee, it will have to state the reasons on the IR21 form. If there is no valid reason for not withholding the employee’s monies, the employer may be held liable for the tax that is owed by the employee.

FAQs on Tax Clearance It is important that you provide full and complete information when filing Form IR21. Below is a table sourced from IRAS, compiling the common errors made during IR21 filing. Mistakes

What you need to do

Declaring Employment Income 1

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My employee worked with my company from 1 November 2009 to 31 May 2010. His income for this whole period is $35,000. I reported this amount under the column ‘year of cessation’.

This is incorrect. You should report your employee’s income separately for each calendar year accordingly: a. Year of Cessation (1 January 2010 to 31 May 2010) — Income $25,000


Mistakes

What you need to do b. Year prior to Year of Cessation (1 November 2009 to 31 December 2009) — Income $10,000

Withholding Monies for Tax Clearance 2 My employee tendered his resignation on payday. I paid him his last month’s salary. I do not know that I have to withhold monies for tax clearance. So I indicated zero in the field for ‘Monies withheld pending tax clearance’ when preparing Form IR21.

Your company will be liable for the tax payable by the employee as you could have withheld the last month’s salary for tax clearance.

Employee’s Income Tax Borne by Employer 3 Since I shall deduct the tax payable by my employee from his last salary, I have indicated this by crossing the checkbox ‘Income Tax Borne by the Employer’ in the Form IR21.

This is incorrect. Your company is not picking up the tab for his tax bill. You are merely deducting his income tax from his salary to pay to IRAS. Do not cross the box for the item ‘Income Tax Borne by the Employer’ as there is a tax consequence. Where the employee’s income tax liability is actually paid off by the employer, the tax that is borne by the company forms a taxable component in the hands of the employee.


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Mistakes 4 I have withheld my employee’s salary pending tax clearance. I have indicated this by crossing the box ‘Income Tax Borne by the Employer’ in the Form IR21.

What you need to do This is incorrect. Do not cross the box since your company is not picking up the tab for his tax bill.

Unexercised Stock Options 5 My employee has not exercised his stock options when he ceased employment in Singapore. There are no stock gains to be reported in the Form IR21.

Your employee is deemed to have derived stock gains at the point of tax clearance under the ‘deemed exercise rule’. You will need to compute the deemed gains from the unexercised stock options and report this in the Form IR21 — Appendix 2.

Making Changes After Filing 6 I am making out some additional payments to my employee for overtime put in by him. I have completed the ‘Additional’ Form IR21, reporting the total income paid to him thus far.

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This is incorrect. You should only report the additional overtime pay in the ‘Additional’ Form IR21. Remember to: a. Cross the checkbox to indicate ‘Additional’ and enter the date of the Form IR21 filed earlier b. Enter the overtime pay in the field for ‘Monies Withheld’ c. Withhold the overtime payment pending tax clearance


Mistakes

What you need to do

7 I discovered some errors after filing. The income for my employee should be lower than that reported. I have completed another ‘Original’ Form IR21 to replace the one filed earlier.

This is incorrect. You should complete the ‘Amended’ Form IR21 to supersede the ‘Original’. Cross the checkbox to indicate ‘Amended’ and enter the date of the Form IR21 filed earlier.

Source: www.iras.gov.sg/irasHome/page04.aspx?id=8904


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