Employee benefits in Singapore: All you need to know

Globalization has affected every industry, especially in the area of employment. Regardless of their location, companies are now able to recruit and hire talent from anywhere in the world.

The COVID-19 pandemic has meant the workforce has adapted to remote work because of restrictions on travel and communal workspaces. As a result, it’s never been easier for employers to cast their net across borders and expand their talent pool to hot talent markets like Singapore.

Singapore has embraced remote working. This APAC regional hub is a very popular country for overseas employers. You’ll find a haven of highly-skilled professionals in Singapore, most with global experience. In 2020 alone, 49% of Singaporean employees worked remotely. This gives innovative businesses a solid incentive to open their borders to Singaporean talent, but before you hire, you must make sure you are set up to manage compliance with local labor laws.

Many companies use an Employer of Record (EOR) to provide the specialist services they need to comply with relevant employment regulations. This circumvents the need for the company to establish a legal entity in Singapore, along with the costs and expertise required.

Remote's fully owned local legal entity in Singapore can manage compliance, payroll, tax, and all aspects of employment law for international employers. This leaves you free to focus on the most important things – growing your business and building great teams.

In this guide to understanding benefits in Singapore, we’ll walk you through the following key areas:

• Singapore’s Employment Act and who is entitled to benefits

• Statutory benefits you must provide in Singapore

• Additional Benefits to attract top Singaporean talent

• The best way to manage benefits and compensation for international employees

Singapore’s Employment Act

Serving as Singapore’s main labor law, the Employment Act outlines the basic conditions and benefits that employers must provide to their employees.

Who is covered under the Employment Act?

All employees, whether local or foreign, who are employed under a contract of service with an employer, are covered under the Employment Act. Employees can be employed full-time, part-time, or temporarily. They may also be paid on an hourly, daily, monthly, or piece-rated basis.

Civil servants, domestic workers, and seafarers are not covered by the Act. Their work conditions and benefits are covered by their employment contracts.

On April 1, 2019, amendments were made to the Act. The notable changes now include coverage of managers and executives earning more than S$4,500 a month. This includes lawyers, accountants, doctors, and dentists.

What does this mean for benefits provisions?

Employees under the Employment Act (the “EA Employees”) are legally entitled to certain benefits that employers must provide. This includes things like annual leave, paid medical leave, and public holiday pay.

Note that in Singapore, independent contractors are not entitled to any specific statutory benefits. Any benefits or remuneration are determined by the contractual agreement between your business and the contractor.

It’s important to understand this delineation, and this is where global employment can start to get more complicated.

Regardless of whether you consider a worker to be an employee or a contractor, legislators will make the only determination that matters. If you’re found to have an employment relationship and you’ve neglected to provide statutory benefits, you’ll open your company up to the serious risks of misclassification and subsequent fines or penalties.

For more detailed information about understanding this concept, be sure to read our dedicated guide to employee misclassification.

Offering benefits to Singaporean contractors

Employers shouldn’t refrain from offering a benefits package to international (or local) contractors just because these entitlements aren’t required by law.

If you value your contractors, providing benefits can signal commitment and create a stronger connection with your business, especially in a remote context. You do still need to be mindful of triggering permanent establishment or misclassification dangers with the type of benefits you provide.

Value-based benefits like paid time off, flexible working hours, and parental leave provisions can often keep you on the safe side of this legislation (more on these types of offers in our guide to offering benefits to international contractors).

An employer of record (EOR) like Remote should be able to give you more specific advice to minimize associated risks according to the employment legislation of Singapore (or any other nation).

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Statutory benefits under Singapore’s Employment Act

Statutory benefits, also known as mandatory benefits, are entitlements that employers are obligated by law to provide to their employees. Common examples include benefits like paid annual leave, parental leave, worker's compensation insurance, and paid sick leave. We’ve outlined the benefits you must provide to Singaporean employees below.

Central Provident Fund - retirement and health benefit

Employers are required to pay about 17% of an employee's basic salary to the Central Provident Fund (CPF). This contributes to retirement and health benefits provided by the government.

Singaporean residents working for overseas companies must pay taxes in Singapore. Tax rates are on a scale up to 22%.

Singapore is a country that does not have minimum wage laws. However, the Employment Act defines what should be part of the basic rate of pay and how it is computed. The Act also defines and sets regulations on the gross pay rate.

Basic pay rate

This is used when an employee works on their rest day or a public holiday. The basic pay rate includes any wage adjustment and increment that the employee is entitled to under their contract.

Gross pay rate

The gross rate of pay includes any allowances that your employee is entitled to under their contract. The gross pay rate is used for calculating pay during the following:

• Salary instead of notice of termination of service

• Salary in place of annual leave

• Salary deductions for every unauthorized absence from work

• Paid public holidays

• Approved paid leave

Work hours, breaks, and rest days

Under normal working conditions, the number of workdays determines the number of hours an employee works per day. Employees cannot work for more than 12 hours per day. This includes their normal working hours plus paid overtime.

Regular work breaks are mandated, and rest days should be one day a week, or two days for up to 12 days of consecutive working.

Overtime work and pay

Singapore has a limit of overtime work hours for its employees. They are only allowed paid overtime up to 72 hours in a month. If an employee works on their rest day this does not count as overtime, unless the work exceeds their usual daily working hours. Overtime pay is paid at least 1.5 times the basic pay rate and should be paid within 14 days.

Leave entitlements in Singapore

Annual leave

An employee has the right to paid annual leave after three months. The amount of leave accrues with the length of employment and reaches 14 days' leave after eight years. There are pro-rata rates for part-time workers.

In addition, full-time employees receive 11 paid public holidays annually.

This is a relatively low portion of annual leave (particularly in comparison to other European global hubs like London, Paris, and Berlin). International employers can take advantage of this opportunity to incentivize Singaporeans with additional annual leave provisions as a simple way to stand out from competitors.

Some extra time off will not impact productivity significantly, and a growing number of progressive employers are offering leave above these guidelines.

Sick leave

An employee is entitled to 14 days paid sick leave and 60 days hospitalization leave when they meet various conditions, such as certified registration of illness.

Employers are required to reimburse consultation fees of the employee unless they fall sick during their annual leave, rest days, or non-working holidays. They should receive full pay, minus any shift allowances, during their sickness absence.

Childcare leave

Parents are allowed either two days or six days of paid childcare leave per annum for children under seven. This difference depends on whether the child is a Singapore citizen or not.

Note, this is another opportunity for a global employer to provide an additional benefit here. Equity across an international workforce will help develop harmony and trust amongst employees. Child care allowances are highly prized in the minds of team members with parents, so this provision should come into your calculations.

Maternity leave

A working mother has the option of 16-weeks Government-Paid Maternity Leave (GPML) if their child is a citizen of Singapore. Foreign residents are entitled to 12 weeks.

Paternity and parental leave

Working fathers who have children born on January 1, 2017, or after are entitled to Government-Paid Paternity Leave (GPPL) equal to two weeks. The leave credits will depend upon the number of days they work. Partners can file for the GPPL within 16 weeks of childbirth.

Statutory provisions also include shared parental leave. A working partner can share up to four weeks of their wife’s 16-week GPML.

Social security

Singapore’s social security system is one of the most developed schemes in Asia. The CPF meets employees’ retirement, housing, and healthcare needs.

Monthly contributions to the CPF go into three different accounts:

• Ordinary account (2.5% - 3.5%) – for retirement and housing needs

• Special account (4%-5%) – for retirement needs

• MediSave account (4%-5%) – for healthcare needs.

From January 2022, there will be an increase in the CPF contribution rate for senior workers.

Retirement provisions

On retiring, the CPF will transfer Ordinary and Special account funds to the employee’s Retirement Account. It has recently been announced that from July 2022, the retirement age will increase from 62 to 63, and increase progressively to 65 by 2030. Employers cannot terminate someone's employment on grounds of age before they reach the statutory retirement age.

There are two ways that an employee can receive their retirement income.

1. Monthly payouts. Employees can get a monthly income regardless of how long they live.

2. Withdrawals for immediate needs. Employees can withdraw up to $5,000 when they are in immediate need. The amount can go higher, depending on the retirement sum in their Retirement Account. Employees can only access this fund after they are 55.

Health insurance

The Basic Healthcare Sum (BHS) covers employees’ healthcare needs in old age. The funds in the BHS come from the employees’ MediSave account. CPF members have a BHS that is adjusted annually to keep pace with expected MediSave use when they reach retirement age. Once the CPF member retires, their BHS becomes fixed.

Health insurance provisions can be supplemented by astute employers looking to entice and retain Singaporean employees. You should strongly consider private health insurance to give your employees access to more premium coverage.

Supplemental health insurance can help employees pay for additional medical care such as emergency room visits, hospital stays, outpatient surgery, and other potential extra costs.

Indeed, offering health cover, or other additional insurance benefits (like dental insurance, vision insurance, and life insurance), can be such an effective way to build trust with new hires and separate your offer from that of a competitor.

Termination and Severance

Generally, terms of termination are covered in an employee's employment contract. However, basic principles apply through Singapore's Employment Act.

• The notice given by an employer has to match that given by an employee.

• The minimum notice period depends on the time served. This ranges from one day if employment is less than 26 weeks, to four weeks if more than five years.

• Notice periods and severance pay are waived if the employee has breached the conditions of the contract.

• Termination can cease immediately if the gross salary is paid, either by an employee to employer, or vice versa. This amount is equal to the period of the notice.

There are no specific regulations about the amount of severance pay required. These are usually stipulated in the employment contract. These generally include "retrenchment benefits" which are between two weeks' and one months' pay for every year the employee has served. Retrenchment benefits don't apply if an employee has worked for less than two years.

If an employer terminates a contract for any reason, final termination payment must be paid within three days.

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Attracting Singaporean Talent: Additional Benefits

To recruit and hire the best talent in Singapore, companies need to present offers that are attractive in a local context. A strong benefits package will help you to separate your business from competitors to help you attract and retain the best talent (and even the smallest of businesses can provide affordable benefits for their international workers).

In this very competitive global employment market, it's not enough to cover the basics, or even offer a great salary. A smart company needs to recognize that perks must be provided to its reliable employees.

These benefits need to be flexible, as workers in different countries will have differing circumstances. What is seen as a valuable benefit in one country will not be prized as much in another.

We’ve pulled together a shortlist of affordable but highly-prized benefits to provide a stronger work-life balance for global employees:

Flexible working hours

Progressive employers have an opportunity to offer more flexible working hours. If you can demonstrate a commitment to afford your employees a solid work-life balance, you’ll find it easier to lure top-quality local talent from more traditionally-minded employers.

Remote-first global teams cannot be restricted to one time zone. People who work from home also find they want to fit their work life around their need for regular breaks and downtime.

Allowances for home working

People who work from home may not have adequate equipment, furniture, or supplies to get started quickly. Remote-first global employers can offer stipends for purchases of a desk, an ergonomic chair, and Bluetooth headphones.

Additional allowances to compensate for the likely increased cost of internet, electricity, and phone contracts will also help to provide specific support for Singaporeans working from home.

Value-based benefits

You don’t have to allocate huge budgets to prepare the type of benefits package that will incentivize and motivate your employees. There are so many alternative affordable perks that small businesses can offer remote teams.

Here’s a quick list of comparatively affordable options to bolster your compensation package and attract the best global talent:

• personal learning and development budget

• therapy or coaching allowances

• mentorship programs

• volunteering days

• birthday leave

• meal and travel expenses

• gym or health club membership

For more detailed information, check out our dedicated article on alternative value-based benefits you could consider.

How to set up and manage benefits for global employees

Creating a globally competitive and compliant benefits package doesn’t have to be complicated.

Whether you’re hiring a recruiter from Singapore, a project manager from Tunisia, or a marketing analyst from Sweden, you need to understand how benefits work in each country to stay compliant and attract the best talent.

Most importantly, you need a solution that allows you to stay compliant with all of the local labor laws in each country of operation.

Instead of building a fully-owned local legal entity with a specialist HR function in each new market, an employer of record (EOR) provides a cost-effective, fast, and secure alternative to help you grow your team across borders.

(Not familiar with the value an EOR can provide? Read through our dedicated article explaining what an EOR can do for a global company)

When should you use an employer of record?

If you don’t have an established process to manage the complicated parts of scaling global hiring (in Singapore, APAC, or abroad), an employer of record like Remote will give you immediate relief.

Remote’s EOR service comes with a team of dedicated local specialists with the expertise you need to create a strong benefits package, a compliant employment contract, and a competitive offer to your candidate.

We’ve previously dedicated an entire guide to when should you use an employer of record, but there are a few critical trigger areas where an EOR can dramatically minimize your risk:

• Creating a consistent and competitive global benefits package

• Managing the delivery of benefits in compliance with all local labor laws

• Terminating an employee in compliance with local regulations, and

• Managing the nuances of IP & patents produced by your remote employees

An employer of record like Remote manages the complicated parts of international employment. The combination of Remote’s simple software hub and our team of global HR experts combine to organize all the tiny details of managing a distributed team. Remote powers your global employment while you focus on growing your business.

Remote cares passionately about providing perks and benefits to enable your global team to enjoy security, stability, and work-life balance. Our team of internal HR specialists and global benefits experts are constantly working with our customers to create customized and competitive benefits packages to attract top talent.

Learn how Remote simplifies international hiring so you can scale your distributed team faster.

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