How to hire and pay independent contractors in Singapore

Singapore is among the top economies in Asia thanks to its proximity to Asian markets and global tech connectivity. The country was even named the most competitive economy globally in the World Economic Forum’s Global Competitiveness Report of 2019. This means that Singapore is also home to a dynamic and highly skilled workforce.

If you’re a startup or a growing company looking to hire talented remote workers from the APAC region, it makes sense for you to hire independent contractors from Singapore. Employing independent contractors gives you convenience and flexibility while growing your team — especially if you’re not quite ready to offer benefits or hire full-time employees. 

However, working with remote contractors in Singapore can be tricky if you're not familiar with the country's labor laws. Despite all the information available, it can still be hard to wrap your head around the complexities of hiring workers abroad. There’s a risk that you might misclassify employees, which could lead to fines and penalties.

In this article, we explain the different elements of hiring independent contractors in Singapore including labor laws, tax and compliance practices, and how to avoid misclassification risks.

How to hire independent contractors in Singapore

Before you hire independent contractors, you should be aware of relevant labor laws, minimum wages, and other regulations. 

Singapore treats full-time employees and self-employed independent contractors differently. If you misclassify workers, your company can face fines or legal issues. You could also lose access to your intellectual property rights over the works produced by your contractor. 

As an employer, you must comply with certain regulations outlined in the Workplace Safety and Health Act that are designed to protect the worker. Singapore has harsh penalties for companies that fail to do so. Singapore does not have a statutory minimum wage, except for two professions: cleaners and security guards (who must be paid a minimum of SGD 1,200 and SGD 1,100.  

The payroll cycle is similar to what many other countries follow. Employees are paid on the first working day of the new month or the last working day of the ending month. 

Under the Employment Act, employees who work under a contract of service with the employer are entitled to annual leave, sick leave, public holiday entitlements, fixed hours of work, overtime pay, and Central Provident Fund (CPF) contributions. 

Independent contractors do not have these rights, as they are self-employed individuals who work for themselves. They run their own businesses and are responsible for the success or failure of their operations. This means that they are also responsible for taking precautions to support their own health and safety. They are responsible for protecting themselves (by taking personal insurance) if they are unable to work due to injury or sickness.

Self-employed contractors in Singapore are generally not protected against unfair dismissal, unauthorized deductions from pay, and do not have sick leave or overtime pay. But, companies can offer specific benefits to independent contractors as outlined in their employment contracts. However, the company needs to make sure that their independent contractor is not being treated like an employee, as that could lead to misclassification. 

It is not a legal requirement, but good practice, to draft a written employment contract between the employer and independent contractor. The contract can cover essential details such as the nature and scope of the work, payment amount and schedule, and termination and dispute resolution clauses.

What are the risks of misclassifying Singaporean independent contractors as employees? 

The Inland Revenue Authority of Singapore (IRAS) Singapore makes a distinction between employees and self-employed contractors. As an employer, you have to be careful not to misclassify independent contractors as employees.

A person working for you under a “contract of service” is an employee, and a person who works under a “contract for service” is an independent contractor. 

An independent contractor is not protected by the Employment Act as employees are. The following are some factors used to differentiate between employees and independent contractors: 

• Control. As an employer, you can only exercise a certain degree of control over an independent worker. You have more control over employees and can take disciplinary action if they breach the company's rules. Employers cannot subject independent contractors to this kind of discipline. 

• Ownership of equipment. Under a contract of service, an employer must provide the employee with tools and equipment. The employer owns the equipment that their employees use in the workplace. Independent contractors generally use their own equipment to perform the job. 

• Remuneration method. Employees are typically paid every month or over regular intervals as agreed by both parties. Independent contractors are often paid through lump-sum payments or commissions at the end of a project or when an invoice is submitted to the employer. 

• Benefits. Employees are entitled to certain benefits in Singapore. These include holiday pay, overtime pay, paid medical leaves, and annual leaves. Independent contractors do not enjoy these benefits. 

Sometimes companies misclassify their employees as independent contractors to avoid offering benefits and evade paying certain taxes. Even if the company incorrectly classifies a worker as an independent contractor by mistake, penalties still apply.

Misclassification is considered a serious offense in many countries. In Singapore, it could land you in legal trouble. If a dispute arises about the question of worker classification, both the employer and the worker will have to go to court to determine the correct classification. 

If your worker’s employment classification is challenged, you may be fined up to 60,000 SGD. You may have to provide back payments to your employee, including CPF contributions, annual leave, and overtime pay.

A contractor management platform like Remote can ease your stress by minimizing the risks related to incorrect classification of your contractors and employees. To learn more about why it’s important to classify contractors correctly, read our guide on the consequences of contractor misclassification.

What are the labor laws in Singapore?

The primary labor law in Singapore is the Employment Act. But some other laws regulate employment in Singapore as well, including the Employment of Foreign Manpower Act and the Workplace Safety and Health Act. 

Employers should also be aware of Singapore’s Central Provident Fund (CPF), a mandatory pension scheme for workers in the country. The money from this fund helps provide for multiple social security programs, such as healthcare, family protection, retirement, and homeownership. Both employers and employees are required to contribute to this fund. 

Remote helps you stay compliant with labor laws when you hire independent contractors in Singapore to save you from additional administrative work. To make sure that your global independent contractors are in compliance with local labor laws and regulations, use Remote’s handy compliance checklist.

Tax and compliance practices for hiring independent contractors from Singapore

Employers should learn how statutory fees and employment taxes in Singapore affect their payroll when hiring in Singapore.

Employers do not have to withhold taxes for their employees in Singapore. Employees are responsible for filing their own tax returns with the Inland Revenue Authority. However, when hiring employees who are Singapore citizens or permanent residents, employers have to pay into the CPF fund.

Independent contractors are also responsible for filing and submitting their own taxes if their salary exceeds $20,000 a year. However, they can claim business expenses against their income to pay lower taxes.

Tax compliance for US companies who are hiring independent contractors in Singapore can be tricky because they have to fulfill Singaporean requirements along with the ones specified by the Internal Revenue Service (IRS).  All US companies with international contractors have to fill out the W-8 BEN Form, which the IRS requires. The form collects tax and employment-related information from your independent contractors. 

While you're trying to meet your business goals for the year, you might miss the deadlines for filing essential tax documents. Likewise, all this legal paperwork can overburden you with tasks that can easily be taken care of in other ways. 

You don't have to worry, though. Remote’s contractor management service makes tax compliance simple. During onboarding, Remote prompts your contractors to fill out the relevant tax forms based on their location. The forms can be filled and submitted in minutes, saving you time and the hassle of tax compliance.

How do I convert an independent contractor in Singapore to an employee?

There are many reasons to convert an independent contractor to an employee. You might want to make your contractor a permanent part of your team, or your contractor might request a change in status.

If you choose to convert your independent workers into employees, remember that you have to offer them extra benefits. While that may increase your overall expenditure, it could be good for your company in the long run. Full-time employees can integrate into the company culture and work on specific time schedules. Offering them benefits could also translate to greater employee satisfaction, leading to stronger performance and company growth.

Converting your contractor to an employee is a lot of work, though. You’ll have to update your employment contract, comply with labor and tax laws, and process payroll efficiently. 

Luckily, Remote can do the heavy lifting for you. Our contractor management platform makes it quick and easy for you to convert your global contractors to employees.

How do I pay an independent contractor in Singapore?

Although bank wire transfers are commonly used to pay independent contractors in Singapore, you can use other payment options such as: 

• Wise. Wise is an international payment service that allows you to transfer money in over 45 currencies, including the Singaporean dollar. Your contractors will receive payments in up to two working days. 

• OFX. OFX is another payment platform that allows you to pay contractors in Singapore without charging transfer fees. However, it may take about five days for the money to reach your contractors. 

• MoneyGram. This is a fast way to transfer money to your Singaporean contractors, but the fees are very high. Your contractors can only receive their remuneration through cash pick-ups from a MoneyGram branch. 

There are some drawbacks to using these payment methods, such as transfer fees and high exchange rates. It can also be a pain to manage the payments process if you are working with many contractors.

Remote’s contractor management platform helps you easily and quickly pay your contractors in their preferred currencies. From employment contracts tailored to local laws to automated payments and invoices, Remote helps you manage and pay your global contractors with confidence. 

The best way to hire independent contractors in Singapore 

If you're looking to hire a highly skilled worker in a thriving economy in the Asia Pacific, hiring contractors from Singapore is a solid option.

But you'll need to understand Singapore's labor laws, ensure tax compliance, and set up payments so that you can pay your contractors quickly. You also have to be aware of the dangers of misclassifying employees.

However, the challenges of contractor management should not stop you from expanding your team in Singapore. Remote’s global contractor management is designed to help you hire, pay, and onboard independent contractors in Singapore with just a few clicks.

With Remote, you can: 

• Tailor your contracts to local labor laws

• Manage all your contractors in one place

• Invoice and pay your global contractors easily

• Receive support from our team on all aspects of compliance 

If you’re ready to hire independent contractors in Singapore, sign up and start onboarding your team with Remote today!