Hiring your first employee is a milestone for any Singapore business, and it also marks the point at which a company takes on a new layer of legal obligations. If you are asking what a sound “Hiring Your First Employee in Singapore: Compliance and Documents Checklist” should contain, this article sets out the main rules and paperwork in plain terms.
Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.
The requirements come from several sources, including the Employment Act, the CPF Act, the Income Tax Act and the Personal Data Protection Act (PDPA). Getting the basics right at the start is far easier than correcting them after a few months of payroll.
Who this applies to
This checklist is relevant to any Singapore-registered company, sole proprietorship or partnership that is about to employ its first staff member under a contract of service. That includes:
- Start-ups and newly incorporated companies that have so far been run by the directors alone.
- Established sole proprietors who have relied on freelancers and are now moving to a full-time hire.
- Companies hiring a Singapore Citizen or Permanent Resident, as well as those hiring a foreigner on an Employment Pass, S Pass or Work Permit.
The Employment Act covers most employees, including managers and executives, although certain groups such as public servants, domestic workers and seafarers are excluded. Some provisions, such as overtime pay, apply only to workmen and to non-workmen earning up to a stated monthly salary, so the exact position depends on the role.
Key rules and requirements in Singapore
Written employment terms
Employers must issue Key Employment Terms (KETs) in writing to employees covered by the Employment Act, within 14 days of the start of employment. KETs include the job title, duties, start date, working hours, rest days, salary period, basic salary, fixed allowances and deductions, overtime rates where applicable, leave entitlements, medical benefits and the notice period. A full employment contract is not strictly the same thing as KETs, but most companies combine the two in one document.
Salary payment and payslips
Salary must generally be paid at least once a month and no later than seven days after the end of the salary period. Employers are expected to provide itemised payslips showing the basic salary, allowances, deductions and any overtime payment.
CPF contributions
Employers must pay CPF contributions for Singapore Citizens and Permanent Resident employees. Contribution rates depend on the employee’s age and, for new Permanent Residents, how long they have held that status. Contributions for a given month are due by the 14th of the following month. Foreign employees on work passes do not receive CPF contributions.
Skills Development Levy
The Skills Development Levy (SDL) is payable on the monthly remuneration of all employees, including foreigners, subject to a minimum and maximum amount. It is normally paid together with CPF contributions.
Leave and public holidays
Employees who have served at least three months are entitled to paid sick leave, and annual leave starts at a minimum of seven days in the first year of service, rising with each year of service. Employees are also entitled to public holidays, or a day’s pay in lieu where applicable. Many employers offer more than the statutory minimum, which should be reflected in the contract.
Work injury compensation
Under the Work Injury Compensation Act, employers must buy work injury compensation insurance for all employees doing manual work, and for non-manual employees earning up to the prescribed salary threshold. Many employers choose to insure every employee for simplicity.
Hiring foreigners
A company that wants to hire a foreigner must apply to the Ministry of Manpower (MOM) for the right pass. Under the Fair Consideration Framework, employers applying for an Employment Pass or S Pass generally need to advertise the vacancy on MyCareersFuture for a minimum period before applying, and must show that they have assessed local candidates fairly. Qualifying salary levels and quotas change from time to time, so check the current MOM requirements.
Step-by-step process
- Define the role. Settle the job title, duties, reporting line, working hours and salary range before advertising.
- Recruit fairly. Describe the job on the basis of skills and experience, and avoid discriminatory requirements, in line with the Tripartite Guidelines on Fair Employment Practices.
- Verify eligibility to work. For Singaporeans and Permanent Residents, check the NRIC. For foreigners, obtain the in-principle approval and valid pass from MOM before the person starts work.
- Issue the offer letter and employment contract. Include the Key Employment Terms and obtain the employee’s signed acceptance.
- Collect personal data properly. Under the PDPA, tell the employee why you are collecting their details and how they will be used.
- Register for CPF and SDL. Obtain a CPF Submission Number if the company does not already have one, and set up the monthly payment routine.
- Arrange insurance and run payroll. Place work injury compensation cover, then issue payslips and pay on time.
- Keep records. Retain contracts, payslips and payment records.
- Report to IRAS. Submit employment income through the Auto-Inclusion Scheme, normally by 1 March each year, using the IRAS myTax Portal or the approved submission method.
Common mistakes to avoid
- Treating a new hire as a “freelancer” to avoid CPF, when the working arrangement is in substance a contract of service.
- Letting a foreign employee begin work before the work pass has been issued.
- Issuing KETs late, or leaving out items such as notice period and leave entitlements.
- Missing the 14th-of-the-month CPF deadline and incurring late payment interest.
- Forgetting work injury compensation insurance until after an incident has occurred.
Practical examples
Consider a Singapore-incorporated design studio with two directors that hires a Singapore Citizen as an administrative executive at SGD 3,200 a month. The company issues a contract with the KETs before or on the first day, enrols the employee for work injury cover, pays salary within the stated period, and contributes employer and employee CPF each month by the 14th of the following month. At year end, the employee’s income is reported to IRAS.
Now take a trading company that wants to hire a marketing manager from overseas. Before any contract is signed, the company checks whether the role is likely to meet the Employment Pass criteria, advertises the job on MyCareersFuture where required, and submits the application through the MOM portal. The person starts only after the pass is issued, and no CPF is payable because the employee is a foreigner, although SDL still applies.
How a corporate secretary can help
A corporate secretary in Singapore is not a substitute for an employment lawyer, but the role sits close to many of the tasks above. Raffles Corporate Services can assist with company records, board approvals for new hires where the constitution requires them, ACRA filings, and the changes that follow when a company moves from director-only operations to having staff. Our accounting, tax and payroll support can also help you set up CPF, SDL and IRAS reporting correctly from the first pay run.
Frequently Asked Questions
Do I need a written contract for my first employee?
For employees covered by the Employment Act, the Key Employment Terms must be given in writing within 14 days of the start date. A full employment contract is not strictly required by law, but it is strongly recommended because it records the agreed terms clearly.
Does a company need to register with CPF before hiring?
An employer needs a CPF Submission Number to make contributions for Singapore Citizen and Permanent Resident employees. It is best to set this up before the first salary is paid.
Can I pay my first employee in cash?
The law does not prohibit it, but bank transfers create a clearer audit trail and make payroll records and IRAS reporting simpler. Whatever the method, a payslip should still be issued.
Do I have to pay CPF for a foreign employee?
No. CPF contributions are payable only for Singapore Citizens and Permanent Residents. Foreign employees may still attract SDL and, for some pass types, a foreign worker levy.
How long should I keep employment records?
Employment Act regulations require certain records, such as those for leave and salary, to be kept for a set period, and tax and accounting rules have their own retention periods. Keeping the full set for at least five years is a common practice, but check what applies to your case.
Key takeaways
- Issue written Key Employment Terms within 14 days of the employee’s first day, and preferably have a signed contract in place before they start.
- Register for CPF and SDL and set up monthly payments before the first payroll run.
- Arrange work injury compensation insurance and comply with leave and public holiday entitlements.
- For foreign hires, obtain MOM approval and a valid pass before work begins, and follow the Fair Consideration Framework.
- Handle personal data in line with the PDPA, and report employment income to IRAS each year.
- Requirements may change, so always check the latest guidance from ACRA, IRAS or MOM, or consult a professional adviser.
If you would like to find out more about how Raffles Corporate Services can assist with your company’s compliance and corporate secretarial requirements, please get in touch with the team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services
Disclaimer: This does not constitute legal advice. If you require legal advice, please contact a lawyer.