A Guide to Hiring Employees in Singapore

Are you ready to hit the ground running as a new business owner and quickly grow your team? Before you begin the hiring process, it’s vital to recognise the legalities that come with it and the various protocols that must be adhered to.

To ensure a smooth hiring process, you must have comprehensive knowledge of the Singapore Employment Act, which details the rights and protections offered to employees.

While you may choose to focus on what you can do as an employer, it’s equally important to know what you legally cannot do. As a new business owner in Singapore, you have a duty and responsibility to become well-versed with the Singapore Employment Act.

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In this guide, we will be exploring the following questions:

• What is the Singapore Employment Act?
• Who does the Employment Act apply to?
• How do you formalise an employment contract?
• How do you make Provident Fund contributions?
• What is an SDL and who does it apply to?
• What do you need to know about hiring foreign employees?

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Important Notice: This guide is for general information only and does not provide legal advice. The information outlined should not be relied upon in place of consultation with appropriate legal advisers in your jurisdiction. These questions and answers may not be correct at the time of reading. If you are unsure of laws or regulations, you should contact the local authorities.

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Without wasting any time, let’s dive straight in.

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What is the Singapore Employment Act?

The Employment Act is a crucial piece of legislation relating to employment and labour issues in Singapore. The Act breaks down the rights, duties, and responsibilities of both employees and employers.

Before embarking on any hiring, as a new business owner, you must familiarise yourself with the basic terms and conditions of employment. To effectively grow and scale your business in Singapore, you must work within the confines of the Employment Act.

First and foremost, you need to know whether the potential employee would be protected by the Employment Act. In the event they are not covered by the Act, the terms and conditions of employment should be negotiated between both parties and outlined in the final contract.

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Who does the Employment Act apply to?

The Employment Act in Singapore covers all employees (locals and foreigners), with the exception of the following:

• People operating as domestic workers
• People working for the Singapore government
• People working as seamen

Managers and executives are only partially covered—they are not covered under Part IV of the Act, which provides for rest days, hours of work and other conditions of service.

To expand on this, those working in managerial and executive positions are defined as professionals with responsibility over managing the business and has authority to hire and fire other employees. In other words, if you are operating in a position of power within a workplace, Part IV of the Employment Act does not apply.

In addition, employees receive different rights depending on their pay. Those earning less than 2,000SGD a month are offered further protection in relation to issues such as overtime, annual leave, and sick leave.

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How do you formalise an employment contract?

Whether you’re hiring a full-time or part-time employee, the employment contract is a critical document as it breaks down the terms and conditions of employment between both parties, leaving little room for ambiguity. To formalise an employment contract, we would strongly recommend seeking guidance and advice from a lawyer or human resource professional.

If your employee is going to be covered under the Employment Act, you must ensure the terms of the contract abide by the Act’s minimum requirements. Here are just a few essential points that must be covered in the contract:

• The date of employment commencement
• The length of employment
• Specific employee benefits
• The hours of work
• Annual leave and sick pay
• The code of conduct
• Probation clause
• Termination

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How do you make Provident Fund contributions?

The Central Provident Fund (CPF) is a social security savings plan for Singaporeans. Employers will need to pay CPF contributions for all Singaporean (citizens and permanent residents) employees earning more than 50SGD a month. If the employee earns more than 500SGD per month, employers may recover the employees’ share from their wage. These contributions are not applicable to employees who are foreigners, and are not compulsory for Singaporeans working overseas.

The maximum contribution rate for employees and employers is 20% and 17% respectively. It should be noted that these can vary depending on many different factors, such as the age of an employee and their permanent resident status.

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What is an SDL and who does it apply to?

On top of CPF contributions, you'll also need to pay for a Skills Development Levy (SDL) for your employees. The SDL collected goes towards the Skills Development Fund (SDF), both of which are administered by the SkillsFuture Singapore Agency. SDF is used for training and upskilling programmes and to provide employers like yourself training grants under the National Continuing Education Training system.
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Unlike the CPF contribution, the SDL applies to all employees—even foreigners with a work permit. The contribution rates are the following:

• 0.25% of the first $4,500 of each of their employees’ total monthly wages (this includes salary, commission, bonus, leave pay and other remuneration in cash)
  remuneration, OR

• A minimum of $2, for employees whose wages are $800 and below

You may also use this link to calculate how much you will need to pay for your employees in total.

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What do you need to know about hiring foreign employees?

Under the Employment Act legislation, for a foreigner to work in Singapore, they must have a valid work visa. Employers looking to hire foreign workers are required to apply for a valid work pass or work permit on their behalf. This has to be done before the employee is allowed to begin any work with the employer.

There are many different work passes for foreign employees. The correct pass to apply for is largely dependent on their skill level and wage. For more information about the different work passes, you may refer to this link.

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If you have any further questions on hiring employees in Singapore, we would recommend reaching out to a legal professional for additional information.

If you’re looking to hire a foreign professional, Sprout Asia offers employment pass application services. We provide advisory, reviewing of documents and liaison with the Ministry of Manpower (MOM) regarding your application.

After expanding your team, managing your payroll might become more tedious. Reach out to Sprout Asia—we can lend a hand in that and more!