Finding the right employees is crucial to the success of your enterprise. Hence, it is pertinent that employers are well informed of the Singapore Employment Act as well as all the relevant legal regulations and guidelines which pertain to the hiring of employees in Singapore.
There are a number of important factors which employers ought to consider before they engage in any sort of employment process including:
- The labour laws and the practical effect, in terms of processes and costs, they have on your business operations
- The formalities involved in both local and foreign hiring and the various restrictions on the number of foreign workers which employers can choose to hire.
- The difference between full time, part time, and contract hiring.
- The true cost of employing someone including the levies and provident fund contributions.
- The common practices which are followed in areas where there are no statutory requirements.
- The various recruitment guidelines to ensure you hire the right employees for your business.
Ottavia’s guide addresses all of these factors and is designed to provide newly incorporated companies in Singapore with an overview of key labour legislations and the hiring guidelines for local and foreign employees.
The Employment Act
This is the key labour legislation in Singapore which sets out the basic terms and conditions of employment as well as all the rights, duties, and responsibilities of both employers and employees. Most employees in Singapore are protected by this act and if protected, their terms of contract cannot be less than what is stipulated in the act. However, some employees are not covered by the act and if this is the case, the contract terms and conditions can be negotiated.
Employees who are exempt from protection under the Employment Act include domestic workers, seamen, and most government staff as well as those in managerial or executive positions where someone has direct authority in the employment outcomes of others (hiring, firing, transfer, promotion, etc.) or whose main duties involve managing and running the business. The Act also does not protect professionals who have similar responsibilities to managers or executives.
The Employment Act distinguished between those who earn less than SGD $2,500 per month and those who earn over that amount. Those who earn under S$2,500 are provided additional protection regarding rest days, hours of work, overtime, public holidays, annual and sick leave, retrenchment and retirement benefits, annual wage supplements and other variable payments. This additional protection is outlines in Part IV of the Act.
Employer duties and obligations
There are a number of highly important responsibilities which employers must undertake and comply with in regards to their employees. These include:
Formalization of the employment contract: All employees have a right to a contract which specifies their terms and conditions of employment. Employers are able to draft these contracts independently however it is advisable to seek input from an HR consultant or lawyer to ensure the contract abides by the minimum requirements of the employment act. The key points in the contract include the appointment position, the contract duration (if applicable), the date of commencement, remuneration, hours of work, benefits, probation clause (if applicable), code of conduct and termination guidelines.
Reporting employee earnings: Employers are required to prepare tax forms for all Singapore based employees in accordance with the Income Tax Act.
Foreign employee tax issues: Tax clearance is required for foreign employees ceasing work, leaving on an overseas posting or leaving Singapore for any period over three months to ensure they have paid their taxes. Employers are bound to notify the IRAS (tax authority) and withhold all payment due to your employee as soon as they inform you of a decision to leave or you engage them in one of the aforementioned activities. Once the IRAS has assessed your employee and issued a tax clearance certificate, payment can be released.
Central Providence Fund (CPF) contributions: A CPF contribution from the employer is mandatory for all local employees (PRs and citizens) who earn over SG 50 a month. The maximum contribution rate for employers is 17% and for employees it is 20%. It can be lower depending on the employee’s circumstances. Foreign employees do not have a CPF, therefore a contribution is not applicable.
Levy payment: The Foreign Worker Levy is collected by the government for foreign employees who are classified as low skilled or unskilled. This levy is designed to limit the demand for foreign workers and encourage local employment.
The hiring of students: Singaporean students and PRs can be hired on a full time basis with no employment restrictions and are entitled to CPF contributions unless exempted. Hiring interns does not require a CPF contribution and they are expected to be paid only a monthly allowance. Foreign students are not permitted to work in Singapore unless they have a Work Pass exemption from the Employment of Foreign Manpower (Work Pass Exemptions) Notification. Foreign internships and industrial training require a Training Employment Pass or Training Work Permit applied for by the employer on behalf of the student. In the case of training positons, no Foreign Worker Levy needs to be paid and foreign students are to receive a monthly allowance.
Part time employees and contractual staff: Part time employees are defined as those who work under 35 hours a week whilst contract workers are defined as those who are either employed for a fixed term or on a casual basis. Singapore provides many of the same job protections for part time and contract workers as they do for full time workers with a few exceptions. Employers and employees are free to negotiate pro-rating of employment benefits, encashment of annual leave, and rest days. Commonly, part time and contract workers are not entitled to some privileges like bonuses or medical insurance.
Individuals are able to be legally employed from 17 years onwards although there is a restricted list of jobs which 13-16 year olds are able to be employed for. Retirement age is 62.
It is not uncommon for Singapore companies to hire foreign employees to supplement their local talent. This is due in part to an aging population, the booming economy, declining birth rate, and a local skills shortage in certain industries. The IT, business, finance and R&D industries all have a skills shortage locally and resort to foreign hiring to fill positions. There are some professions like construction work and domestic work which are unpopular amongst locals and only foreign nationals are willing to take these jobs. The government has a liberal immigration policy in line with its historical reputation for attracting foreign professionals.
To be able to work in Singapore, a foreigner needs to have a valid work visa. Those wishing to hire a foreigner will need to apply for a work pass or permit on the employees behalf before they can commence working. There is also a cap on the number of foreign employees which a company can hire.
Foreign employees are defined as either skilled professionals (engineers, doctors, etc.) and issued an Employment Pass, semi-skilled professionals (chefs, administrative professionals etc.) and given an S Pass, or unskilled professionals (domestic help, construction workers) and issued an R pass.
Employers are encouraged to adhere to progressive and fair HR practices to support the needs of Singapore’s diverse and multicultural workforce. This is especially important when it comes to recruitment and the Ministry of Manpower has issued guidelines on what is deemed to be fair and appropriate.
- Meritocracy should be the basis ofselecting and recruiting employees.
- The candidate’s ability and experience ought to take precedence over age, race, religion, family status, disability, or gender
- The selection criteria should only pertain to the job requirements. It should be made known to all applicants and regularly reviewed.
- Advertisements should avoid listing personal attributes which is deemed as discriminatory unless it is justifiable in certain industries.
- Applications should only require the prospective candidate to list information which is relevant to their suitability. Personal data should be collected for administrative purposes only and stipulated as such on the application.
- Interviews and tests should focus on questions which pertain to the job requirements
The following are popular recruitment channels which Singapore employers seek out for recruitment solutions.
Employment agencies and recruitment firms: These are head hunting firms which are favoured by medium and larger sized businesses. There are both local and international firms which offer this service in Singapore and provide convenient employment solutions. It is important to ensure you check the agency’s level of competency before engaging their services.
Newspaper advertisements: Singapore’s most widely circulated is The Strait Times and their classifieds section is popular amongst local employers and residents alike. Companies should consider the placement rates and their target audience before settling on this solution.
Websites: There are a few reputable recruitment portals in Singapore where employers can pay a fee to post their advertisements. This channel is ideal for those seeking to place workers in regional roles.
Career fairs: The advantage of hiring this way is that employers can conduct on the spot interviews. This method of job seeking has become increasingly popular in recent years. This recruitment channel is suitable for those seeking to full skilled roles.
Campus recruitment: Universities and polytechnics in Singapore generally let recruiters conduct interviews and recruitment talks on campus.