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SME Guide To Employer Of Record Services In Singapore
Introduction
Are you a small or medium-sized enterprise (SME) owner in Singapore looking to expand your business? If so, you may be considering hiring local employees or engaging independent contractors to help grow your company. However, navigating Singapore's complex employment laws and regulations can be a daunting task, especially if you are unfamiliar with the local market. That's where Employer of Record (EOR) services come in.
An EOR acts as the legal employer of your staff, handling payroll, tax and other HR matters while allowing you to focus on your core business operations. In this guide, we will explore what an EOR is, how it works in Singapore, its benefits, and how to choose the right EOR for your business.
What is Employer of Record (EOR)?
Before we delve into how EOR works in Singapore, let's first define what it is. EOR is a service that allows companies to outsource their HR and employment responsibilities to a third-party provider. This means that the EOR provider becomes the official employer of the company's staff, while the company retains full control over their day-to-day tasks and responsibilities.
How Employer of Record Works
When you engage an EOR in Singapore, the EOR becomes the legal employer of your staff.
This means that the EOR provider takes on all of the legal and administrative responsibilities associated with employment in Singapore, including:
- Issuing employment contracts
- Handling payroll and taxes
- Providing employee benefits
- Managing compliance aspects with local labor laws and regulations.
Why is Employer of Record (EOR) useful for SMEs in Singapore?
Now that we have a basic understanding of EOR and the hiring landscape in Singapore let's explore why EOR is so useful for SMEs in Singapore.
- Compliance with local regulations
Singapore has strict labor laws and regulations in place, and compliance is essential for any business. However, for SMEs, it can be challenging to keep up with the constant changes and updates to the law. By using an EOR service, SMEs can ensure that they remain compliant with all regulations, avoiding any legal or financial penalties.
- Cost-effective HR management
For many SMEs, hiring an in-house HR team can be an expensive and time-consuming recruiting process. By outsourcing HR management to an EOR, SMEs can reduce costs and save time while still ensuring that their employees are well taken care of.
- Streamlined payroll processing
Payroll processing can be a complicated and time-consuming task, especially for SMEs with limited resources. An EOR takes care of all payroll processing, ensuring that employees are paid on time and accurately. This can help to reduce errors and ensure that employees are satisfied with their pay.
- Flexibility in hiring and scaling up
SMEs need to be agile and flexible when it comes to hiring and scaling up. An EOR can help SMEs to hire quickly and efficiently, enabling them to respond to changing business needs.
Employer Tax and Social Security
It's essential to be familiar with the tax system to ensure compliance and avoid penalties. When it comes to employing workers, there are several types of taxes that you need to be aware of, including employer tax, social security, employee tax, and income tax.
Read also: Comprehensive Company Guide: CPF Contribution for Employees
Tax From Employee Salary
The employee tax rate ranges from 5% to 42%, depending on their salary. The social security rate ranges from 5% to 20%, with the same contributions made to the CPF as mentioned above.
Below is the table for the income tax rates in Singapore based on gross income:
Gross Income | Progressive Tax Rate |
Below 20,000 | 0% |
20,001 - 30,000 | 2% |
30,001 - 40,000 | 3.5% |
40,001 - 80,000 | 7% |
80,001 - 120,000 | 11.5% |
120,001 - 160,000 | 15% |
160,001 - 200,000 | 18% |
200,001 - 240,000 | 19% |
240,001 - 280,000 | 19.5% |
280,001 - 320,000 | 20% |
Over 320,000 | 22% |
Income Tax
Lastly, income tax is a tax that applies to all income earned in Singapore, including salaries. The income tax rate is progressive, ranging from 0% to 22%, depending on the gross income earned. The tax rates vary from 0% for those earning below SGD 20,000 to 22% for those earning over SGD 320,000.
As an SME owner, you'll need to file your taxes annually and ensure that all tax payments of employee are made on time to avoid penalties. Fines of up to SGD 60,000 and 6-12 months of prison time can be imposed on those who fail to comply with the tax regulations.
Being aware of the different taxes in Singapore is crucial for SMEs who are looking to hire employees through an Employer of Record. Ensure that you consult with a tax professional or use reliable tax software to ensure compliance and avoid any potential penalties.
Reputable EOR Service Providers in Singapore 2023
There are several EOR service providers in Singapore, including local and international companies. Some examples of EOR service providers in Singapore are:
NNRoad - a global EOR service provider that offers services in Singapore and other countries.
RGF Professional Recruitment - a recruitment and HR outsourcing company that offers EOR services in Singapore.
Adecco - a global staffing and recruitment company that offers EOR services in Singapore.
When considering an EOR service provider in Singapore, it is important to evaluate their experience, reputation, and compliance with local regulations.
Statutory Benefits
In Singapore, employers are required by law to enroll all Singapore Citizen and Singapore Permanent Resident (SPR) employees in the Central Provident Fund (CPF). This is the national pension fund that helps citizens and permanent residents save for retirement, healthcare, and home ownership. Employers must make monthly contributions to this fund based on the employee's age and salary.
Apart from CPF, Singapore citizens and SPRs are entitled to benefit from MediSave, a national medical savings scheme that helps them pay for healthcare expenses. Employers are also required to provide health care coverage to their Work Permit and S Pass holder employees, which includes hospitalization and surgical expenses.
Overall, these statutory benefits ensure that employees in Singapore have access to retirement savings and affordable healthcare, helping them to secure their financial future and overall wellbeing, i.e. sense of security. Employers must comply with these regulations to ensure that their employees receive the necessary support and benefits they are entitled to.
Common Non-Mandatory Benefits
Employers who want to stand out and attract the best employees know that offering more than just the standard benefits is crucial. Perks like per diems, extra holidays (not only public holidays), and stock options show that the company is invested in its employees' well-being and success.
Of course, bonuses are always appreciated and can serve as a powerful motivator. Relocation packages are another great benefit, as they help employees move without worrying about the financial burden.
For foreign workers, visa sponsorship is a must-have. Additionally, flexible work arrangements for remote workers and flexible hours can make a huge difference in employees' work-life balance and overall job satisfaction.
Career development opportunities are also essential for attracting and retaining top talent. Providing training programs and mentorship opportunities show that the company is invested in its employees' growth and long-term success.
By offering a combination of both mandatory and non-mandatory benefits, companies can create a competitive compensation package that sets them apart from others and ensures they are able to attract and retain the best talent.
Employee Rights and Protections in Singapore
As an employee in Singapore, you have several rights and protections that are safeguarded by the law. Your employer is required to provide you with a written employment agreement and a payslip that details your salary and other benefits.
You also have the right to join a union, which can help you negotiate better working conditions and wages. In addition, you may be eligible for flexible working arrangements, such as working from home or adjusting your work hours, to accommodate your personal needs.
Harassment in the workplace is strictly prohibited and there are laws in place to protect you from it. Your personal information must also be kept confidential by your employer.
Employers must adhere to health and safety regulations to ensure a safe working environment for their employees. If you feel that your workplace is not meeting these standards, you have the right to report it.
In the event of unfair dismissal, the law provides protection for employees, and your employer must have a just cause for terminating your employment. You are also entitled to various types of leave, including paid time off, paternity leave for male employee, paid sick leave, parental leave, and maternity leave for female employee.
Probationary Term
Although there is no statutory requirement for the length of probation periods in Singapore, it is common to agree on a probation period of 3 to 6 months, during which the notice period is shorter.
Salary Payment
Salaries are required to be paid monthly within 7 days of the end of the salary period, or within 14 days for overtime payments.
Process of Employment Termination
The termination requirements for the process are as below.
- Termination of employment requires a valid reason from the employer and a written notice (termination letter) to the employee.
- Foreign employees who are terminated will have their Employment Pass or S Pass cancelled within 7 days of employment ending.
- Dismissals during maternity leave are prohibited.
Conclusion
Expanding your business to Singapore can be a lucrative move, but it is important to understand the laws and regulations surrounding employment in the country. As an employer, you must provide your employees with statutory benefits such as the Central Provident Fund and healthcare, as well as offer non-mandatory benefits to attract and retain talent.
Employee rights and protections, including various types of leave, are also crucial to ensure a fair and just workplace. By understanding the laws and regulations and providing a positive work environment, you can create a successful and thriving business in Singapore.
Frequently Asked Questions
What is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party service provider that takes on the responsibility of being the legal employer for a company's workers. The EOR handles payroll, benefits administration, tax withholding, and compliance with local labor laws and regulations.
When is it appropriate to use an Employer of Record service?
An Employer of Record service is appropriate when a company needs to quickly expand its workforce in a new location, but does not have the time or resources to set up a legal entity or navigate local labor laws. It can also be useful for companies that want to test the waters in a new market before committing to a full-scale operation.
What are the benefits of using an Employer of Record service?
Using an Employer of Record service can save companies time and money by eliminating the need to set up a legal entity and hire local HR staff. It also ensures compliance with local labor laws and regulations, reduces the risk of penalties and fines, and allows companies to focus on their core business operations.
How does an Employer of Record service differ from a staffing agency?
An Employer of Record service and a staffing agency may seem similar, but there are important differences. An EOR takes on the legal responsibility of being the employer of record for a company's workers, while a staffing agency simply provides temporary or permanent staff to fill specific roles. Additionally, an EOR handles payroll, benefits administration, and compliance with local labor laws, while a staffing agency typically only provides staffing services.
Read also: What's New: Release Of Tripartite Guidelines For Flexible Work Arrangements In 2024
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