Much to their detriment, many see payroll management as just a back-office function that simply calculates wages and processes bank transfers. In reality, payroll in Singapore demands synchronised compliance across agencies, precision that prevents 6-figure penalties, and strategic planning that directly impacts workforce retention and business growth.
The Central Provident Fund (CPF), Inland Revenue Authority of Singapore (IRAS), Ministry of Manpower (MOM), and Employment Act create overlapping obligations that businesses simply cannot ignore. Mistakes carry serious consequences – first-time salary payment violations result in fines from S$3,000 to S$15,000, imprisonment, or both.
Payroll obligations are vast as they are varied, including the Skills Development Levy (SDL), ethnic fund contributions, and sector-specific Progressive Wage Model (PWM) requirements. The 2024-2025 period brings major changes: CPF salary ceilings have increased, parental leave benefits have expanded, and minimum wage coverage has grown substantially.
In this blog, we delve into the key things to know about payroll management in Singapore.
Singapore Payroll Statutory & Regulatory Requirements
Central Provident Fund (CPF) Contributions
The CPF functions as Singapore’s social security system, requiring contributions from both employers and employees who are Singapore Citizens or Permanent Residents.
For employees up to age 55, total contribution rates equal 37% of wages – 17% paid by employers and 20% from employees’ salaries. Older workers receive modified rates that have increased; as of January 2025, employees aged 55 to 60 years old will have total contributions of 32.5%, higher than past levels.
| Employee’s Age (Years) | By Employer (% of wage) | By Employee (% of wage) | Total (% of wage) | Change From 2024 (Total Rate) |
|---|---|---|---|---|
| 55 and below | 17% | 20% | 37% | No change |
| Above 55 to 60 | 15.5% (+0.5%) | 17% (+1%) | 32.50% | +1.5% |
| Above 60 to 65 | 12% (+0.5%) | 11.5% (+1%) | 23.50% | +1.5% |
| Above 65 to 70 | 9% | 7.50% | 16.50% | No change |
| Above 70 | 7.50% | 5% | 12.50% | No change |
Source: CPF.gov.sg
These contributions apply to Ordinary Wages up to the monthly salary ceiling, now S$7,400 in 2025 and rising to S$8,000 from January 1st 2026. Additional Wages (bonuses) face an annual ceiling of S$102,000.
CPF payment deadlines occur at month-end, with a 14-day grace period. Late payments attract 1.5% monthly interest, an expense that multiplies quickly for businesses with many employees.
Foreign work pass holders do not join CPF. New Permanent Residents follow staged contribution rates for their first 2 years before reaching full levels.
Skills Development Levy (SDL)
All employees (including foreigners) need SDL contributions at 0.25% of monthly salary. This training fund ranges from $2 minimum to $11.25 maximum per employee monthly. SDL payments join CPF submissions, creating a single payment process.
Ethnic Funds
Singapore’s multicultural makeup shows in payroll through small monthly deductions for community funds by ethnicity (CDAC, SINDA, MBMF, ECF). These equal a few dollars monthly unless employees opt out. Most payroll systems count these as standard deductions.
Income Tax Reporting
While Singapore skips monthly tax withholding, employers must report yearly employee earnings to IRAS by 1 March each year via Form IR8A and related appendices.
Companies with five or more employees must submit these digitally through the Auto-Inclusion Scheme (AIS). Missing this deadline risks fines up to S$5,000.
For non-Singaporean employees ending employment, employers must file Form IR21 at least one month before their final working day or exit from Singapore. Final payments remain withheld until IRAS provides tax clearance, stopping foreign workers from leaving with unpaid tax debts.
Ministry of Manpower (MOM) Requirements
Employment Act Coverage
Since 2019, the Employment Act covers almost all employees except seafarers, domestic workers, and public servants. This legislation sets minimum standards for working conditions, outlining rules for salary payment, working hours, leave benefits, and dismissal procedures that protect employee rights. Part IV of the Act, which sets specific working hours, overtime pay, and rest days, applies only to:
- Workmen (manual labourers) earning basic monthly salary ≤ s$4,500
- Non-workmen (office employees) earning ≤ s$2,600
Managers and executives stay outside Part IV overtime rules regardless of salary level.
Payment Schedule Rules
Salary payments must happen at least monthly, within 7 days after each pay period ends. Overtime requires payment within 14 days of the pay period. Final wages upon job ending follow special timelines based on notice periods.
Payment Methods and Documentation
While bank transfers dominate, payments must come with itemised payslips at payment time or within 3 working days. These must list gross salary, allowances, deductions, overtime, net amount, and other required information.
Record-Keeping
Employers must keep records of the past 2 years for current employees. For former employees, records of their final two years of work must stay for one extra year after they leave. These records must contain personal details, employment terms, salary specifics, and leave balances.
Working Hours and Overtime
Standard work hours total 44 per week. Overtime payments must reach at least 1.5 times the hourly basic rate for qualifying employees. For non-workmen earning above S$2,600, the overtime rate calculation stops at S$2,600 base salary. No employee should work beyond 72 overtime hours monthly.
Leave Entitlements
Annual Leave
After 3 months of service, employees qualify for 7 days annual leave in year one, increasing to 14 days by year eight. Upon leaving, earned leave must be pro-rated based on time worked that year.
Sick Leave
After 6 months of service, employees receive 14 days outpatient sick leave and up to 60 days hospitalisation leave (inclusive of outpatient days). Between 3-6 months, sick leave is pro-rated. Payment requires valid medical certificates.
Childcare Leave
Parents of Singapore citizen children under 7 receive 6 days paid childcare leave annually (3 employer-paid, 3 government-funded). For children aged 7-12, parents get 2 days extended childcare leave.
Maternity Leave
Eligible mothers (Singapore citizen children, with less than 3 months service) receive 16 weeks paid maternity leave (8 weeks employer-paid, 8 weeks government-reimbursed). Others get 12 weeks (8 paid, 4 unpaid).
Paternity Leave
Since April 1 2025, fathers of Singapore citizens receive 4 weeks Government-Paid Paternity Leave, doubling the previous 2 weeks.
Foreign Worker Levy and Work Pass Rules
Foreign employees face different payment rules from locals. While exempt from CPF, S Pass and Work Permit holders incur a monthly Foreign Worker Levy (FWL), with rates varying by sector and skill level.
The S Pass levy will standardise at S$650 monthly by September 2025, an important cost consideration for employers. Additionally, companies must maintain ratios between local and foreign workers (Dependency Ratio Ceilings).
For Employment Pass holders, minimum qualifying salaries have increased – now S$5,600 for general sectors and S$6,200 for financial services, with further adjustments for older candidates.
Best Operational Payroll Practices in Singapore
Payroll Cycles
As mentioned earlier, the monthly pay cycle prevails across Singapore’s businesses, matching statutory guidelines and easing CPF/SDL submissions. Most full-time staff receive wages once monthly, often at period-end.
Some firms adopt semi-monthly or bi-weekly schedules (paying on 15th and last day, or every two weeks), mainly for hourly or part-time workers. Weekly payroll exists primarily in retail or F&B for casual labour.
Payroll Software & Systems
Singapore’s regulatory framework makes payroll software a necessity. SMEs gravitate toward cloud solutions like Xero that do automated pay runs and produce compliant payslips.
Related Read: Making the Right Choice: Payroll Software or Payroll Outsourcing?
Outsourcing Payroll Services
Successful Singapore SMEs and multinational firms increasingly turn to professional payroll specialists such as InCorp to transform this compliance-heavy function. Expert providers deliver superior accuracy, regulatory mastery, and streamlined processes that internal teams struggle to match.
Professional payroll services offer unmatched advantages:
- Dedicated specialists with deep knowledge of Singapore’s evolving regulations
- Advanced systems that catch errors before they become penalties
- Guaranteed business continuity without disruption from staff turnover
- Enhanced data security through purpose-built confidentiality measures
- Cost reduction compared to maintaining in-house payroll expertise
Salary Payments
Bank transfers via GIRO lead Singapore’s payment options, with electronic payments now the norm. Cheque usage falls yearly, while cash payments, though legal, need proper records.
For mandatory contributions, GIRO arrangements with CPF Board guard against missed deadlines through automatic transfers at grace period close.
Variable Payments
Annual Wage Supplements (AWS or “13th month”) and performance bonuses need exact CPF tracking, as they apply toward the Additional Wage ceiling of S$102,000.
Other variable elements include:
- Commissions: CPF-applicable, must show on itemised payslips
- Cash allowances: Most attract CPF unlike expense reimbursements
- Deductions: Restricted to permitted reasons with a 50% cap on total deductions (excluding CPF, absence, tax)
Record-Keeping
Past minimum legal periods, good practices involve keeping secure audit paths for all payroll activities, safeguarding salary data, and holding records longer for possible disputes.
For departing staff, final payments demand particular care for pro-rating salary and leave balances.
Penalties for Non-Compliance
Late or Non-Payment of Salary
Failing to pay salaries on time constitutes an offence under the Employment Act. As mentioned earlier, first-time violations can result in fines between S$3,000 and S$15,000 and/or imprisonment up to 6 months. Subsequent offences face higher penalties from S$6,000 to S$30,000 and/or up to 12 months’ jail.
CPF Contribution Failures
Not remitting CPF attracts severe consequences. Employers face fines of S$1,000 to S$5,000 per offence and/or imprisonment up to 6 months. The CPF Board will demand payment of all arrears plus 1.5% monthly interest.
Deducting employee contributions without transferring the money to CPF Board amounts to misappropriation, risking fines up to S$10,000 and/or 7 years’ imprisonment.
Tax Reporting Breaches
Missing the annual Form IR8A submission deadline or failing to join the Auto-Inclusion Scheme can attract fines up to S$5,000.
Common Payroll Mistakes
Through our extensive work with clients across Singapore, InCorp’s payroll specialists have identified these recurring errors that businesses should proactively address:
CPF Calculation Errors
We’ve seen numerous businesses miss applying CPF to overtime, commissions, and allowances. Others mistakenly pay CPF on expense reimbursements. Both errors create compliance risks and financial implications.
Employee Status Changes
Our team regularly corrects missed CPF rate adjustments when employees turn 55, 60, or 65. Similarly, we’ve helped many companies rectify failures to start CPF for new Permanent Residents, preventing unexpected back-payments.
Overtime Miscalculations
Wrong overtime base rates or forgetting to cap overtime calculations remain among the most frequent issues we resolve for clients.
Tax Clearance Oversights
We’ve rescued many companies that overlooked Form IR21 tax clearance for departing foreign employees, saving them from liability for outstanding taxes.
Payment Timeline Breaches
Our payroll calendar systems help prevent late processing that would violate the Employment Act’s 7-day payment window after the period ends.
Leave Administration Errors
InCorp’s specialists routinely correct incorrect pro-rating of leave balances for mid-year joiners or leavers before they cause employee disputes.
Staying Current With Changes
Our dedicated regulatory monitoring team ensures clients never miss CPF ceiling increases, contribution rate adjustments, or Progressive Wage Model updates that would result in underpayment liabilities and penalties.
Where to Next With InCorp
Effective payroll management in Singapore demands far more than just mathematical accuracy – it requires expert knowledge of an ever-changing regulatory framework that affects every business operating in the country. Through proper handling of CPF contributions, tax reporting, Employment Act compliance, and leave administration, companies protect themselves from substantial financial penalties while building employee trust.
InCorp’s team brings decades of combined payroll expertise to businesses across Singapore. Our specialists manage the entire payroll cycle, from monthly processing to year-end reporting, allowing you to focus on growth rather than administrative compliance. We’ve helped hundreds of companies eliminate costly mistakes, navigate regulatory changes, and optimise their payroll operations.
Contact InCorp today for a personalised assessment of your payroll needs. Our team will review your current processes, identify opportunity areas, and outline how our payroll solutions can save you time, reduce risk, and enhance compliance.
FAQs about Payroll Management in Singapore
What happens if I miss a CPF payment deadline in Singapore?
- Missing CPF payment deadlines incurs 1.5% monthly interest on outstanding amounts. The CPF Board may impose fines from S$1,000 to S$5,000 per offence and penalties can include imprisonment up to 6 months. Deducting but not remitting employee CPF portions constitutes misappropriation with even harsher consequences.
What records must I keep for Singapore payroll compliance?
- Maintain records of current employees' past two years of employment. For former employees, keep records of their final two years of employment for one additional year after departure. These must include personal details, employment terms, salary information, CPF contributions, and leave balances.
How can I avoid common payroll mistakes in Singapore?
- The optimal method to avoid payroll errors is to outsource to a trusted, local payroll expert such as InCorp. This removes compliance risk from your business while providing cost efficiency compared to managing these complex processes in-house.
We’re here to help. Discover how our payroll management solutions can assist your business!
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