Recruit an employee: What are the different categories of employees?

When you want to recruit an employee, there are several categories of employees that involve different levels of responsibility, that you need to know:

1. Full-time employees who are an invaluable resource to your business as they become more efficient in the day-to-day operations of the business over time;

2. Temporary employees provide the company with more manpower when needed. Administrative procedures are minimal as there is no requirement to end a temporary employee;

3. A contract employee or independent contractor allows a company to use their expertise for specific purposes. An independent contractor is usually someone with a technical background. You can recruit employee and release contract employees with short notice.

4. A part-time employee works no more than 35 hours per week.

What laws apply?

There are two forms of legislation for those who hold an EP, a PEP or an EntrePass: the Employment Law and the Foreign Labor Employment Law.

The Employment Law protects all employee, foreign or local, except:

➤ Executives or managers who receive a monthly salary of more than $4500
➤ Employees who work at sea
➤ Domestic workers
➤ Employees of statutory councils or public service employees

If you recruit an employee, like a manual worker with a base monthly salary of $4500 or less or recruit an employee covered by the employment law with a base monthly salary of $2500 or less, your business will have to comply with and meet more employment law requirements such as:

➤ Mandatory break times, overtime pay, and rest days
➤ Workers cannot work for 6 hours straight without a break. All breaks must be at least 45 minutes long
➤ Workers may not work more than 44 hours per week and entitle to overtime pay of $11.80 per hour
➤ One day of rest per week is mandatory
Recruit an employee in Singapore

Why is important to sign an Employment contracts when you recuit employee

The employment contract determines the terms and conditions between employers and employees. Employers may add any terms and conditions they deem necessary if those terms and conditions comply with the Employment Act.
An employment contract may be written, verbal, express or implied.
It is essential that the employment contract be properly drafted to avoid any potential litigation after you recruit employee.
A free sample employment contract in Singapore can be downloaded from the Ministry of Manpower website.

Under the Employment Act, the following items must be included in the employment contract:

➤ The position held
➤ The duration of the employment contract
➤ Total compensation
➤ Hours of work
➤ Tax benefits
➤ The probation clause
➤ Cases of dismissal

What are the essential conditions of employment?

According to the Employment Act, to recruit an employee, employers must do what follows:

1. Issue itemized pay statements within three business days of receiving wages.

2. Publish terms and conditions of employment that explicitly state leaves and benefits.

3. Maintain employment records that include employee records and payroll records.

4. Pay the SDL for all employees working in Singapore.

5. Cover workers under Part IV of the Employment Act which regulates hours of work, break entitlements, rest days and overtime pay.

6. Provide a variety of leave entitlements such as maternity leave, paternity leave, sick leave, etc.

These requirements are intended to help employees better understand how their pay is calculated and to help employers reduce misunderstandings and conflicts in the workplace.

How is the declaration of employee income tax done?

Under the Income Tax Act, as an employer you are required to prepare Form IR82 and Schedule 8A, Schedule 8B or Form IR8S for employees working in Singapore before March 1st each year. Employers with more than 5 employees are required to submit the employment income information electronically under the automatic inclusion program. However, the employer is not required to do withholding tax from the employees as it is the responsibility of each employee to file their personal income tax by mid-April each year.

What are the additional levies?

When you are an employer, you must contribute to the Central Provident Fund for your employees if they are Singapore citizens or permanent residents. These payments must be made within two weeks of the last day of each month.
There are two shares for the monthly Central Provident Fund payment, and as an employer you must pay both. The employee’s share is automatically deducted from their monthly salary.

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The special case of foreign employees

When hiring foreign employees, you are subject to additional requirements, you must apply for work permit to recruit an employee from the Ministry of Manpower. These include the following documents:

➤ Employment Pass: experienced professionals and managers
➤ S Pass: mid-level skilled workers
➤ Work Permit: semi-skilled workers in the construction, manufacturing, marine, processing, or service industries

The Singapore government levies a foreign worker tax on all semi-skilled and unskilled foreign employees. This tax is intended to regulate the demand for foreign workers in Singapore.
If the company is already paying a foreign worker levy, you will pay a skills development levy in lieu of the monthly Central Provident Fund payments.

As an employer, you must ensure that a foreign employee pays all taxes due before leaving Singapore for more than 3 months. You must file a form with the Inland Revenue Authority of Singapore. You must also withhold all payments due to your foreign employee at least one month before he or she terminates employment. Once the Inland Revenue Authority of Singapore has conducted an assessment and issued a tax exemption certificate, confirming that all taxes have been paid, you can release the payment due to your employee.

Is it possible for a company to hire students?

There are no restrictions on hiring Singaporean citizen or permanent resident students. If you have students on internship, you are exempt from paying their Central Provident Fund and you can choose to pay a monthly allowance.

If you wish to offer an internship to a foreigner, you must apply for the following:

1. Training Employment Pass: This is a visa granted to foreign students from recognized institutions to train in established Singaporean companies for 3 months, provided that the training is part of their academic curriculum.

2. Training Work Permit: This permit is for semi-skilled and unskilled employees sent by a foreign company for training in a related company in Singapore, or for foreign students studying at educational institutions in Singapore and undergoing training as part of their studies.

3. A Work Holiday Pass: This permit is for foreign students and graduates who wish to work and stay in Singapore for 6 months. It is not renewable. Applicants must be between the ages of 18 and 25 and have completed an undergraduate degree or graduated from a recognized university in Australia, France, Germany, Hong Kong, Japan, New Zealand, Switzerland, in the United Kingdom, or in the United States.

4. A Work and Holiday Visa Program: This permit is only open to Australian students and graduates and applicants must be Australian citizens between the ages of 18 and 30. If approved, this permit is valid for 12 months and cannot be renewed. Applicants are not allowed to work for the same employer for more than six months.

Are there any age restrictions for recruiting an employee?

The legal working age in Singapore is 17. However, you are allowed to employ children and teenagers between the ages of 13 and 16, but there are restrictions on the type of work they can do. The retirement age in Singapore is 62.

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