The short answer: when you hire your first employee in Singapore, you take on a set of ongoing obligations — CPF contributions, SDL, MOM-mandated employment terms, and annual IRAS reporting — that begin from the first day of employment and cannot be retrospectively corrected without cost. Getting the setup right from the start is significantly easier than fixing it later.
Who is covered by the Employment Act?
The Employment Act is Singapore’s primary labour law and covers most employees working under a contract of service — including part-time, fixed-term and foreign employees. Since amendments in 2019, the Act applies to all employees regardless of salary level, with the exception of certain provisions (such as overtime pay and rest-day rules) which apply only to employees earning up to S$2,600 per month in basic salary.
As an employer, understanding whether a worker is an employee or an independent contractor is the first decision to get right. Only employees trigger CPF, SDL, and Employment Act obligations. Contractors do not — but misclassifying an employee as a contractor creates significant compliance and tax risk. MOM and IRAS both scrutinise this distinction. If in doubt, seek advice before drawing up the engagement terms.
Issue a Key Employment Terms document
Within 14 days of an employee’s start date, employers are required by law to issue a Key Employment Terms (KET) document setting out the core terms of employment. The KET must cover:
- Full name of employer and employee
- Job title and main duties
- Start date and, if applicable, end date
- Working hours and rest days
- Salary, allowances and any other remuneration components
- Overtime rate and eligibility (where applicable)
- Leave entitlements
- Probation period, if any
- Notice period for termination by either party
A full written employment contract is not legally mandated, but is strongly recommended. It provides clarity on matters the KET alone does not cover — intellectual property assignment, confidentiality, non-solicitation, and post-employment restrictions — and reduces the risk of a dispute later.
CPF contributions: rates, ceilings and timing
CPF (Central Provident Fund) contributions are mandatory for Singapore citizens and permanent residents employed by a Singapore entity. Contributions are calculated on the employee’s gross wages each month and split between employer and employee.
Contribution rates (employees aged 55 and below)
For employees earning more than S$750 per month:
- Employer contribution: 17% of gross wages
- Employee contribution: 20% of gross wages
- Total CPF contribution: 37% of gross wages
Contribution rates step down for employees aged above 55, and are reduced for employees earning between S$500 and S$750 per month. Employees earning S$500 or below are exempt from CPF contributions.
Wage ceilings
CPF contributions are subject to two ceilings:
- Ordinary Wage (OW) ceiling: S$7,400 per month from January 2026. Only the portion of monthly wages up to this ceiling attracts CPF contributions on ordinary wages.
- Additional Wage (AW) ceiling: S$102,000 minus total ordinary wages on which CPF was contributed during the year. Applies to bonuses and other non-monthly remuneration.
When to pay
CPF contributions must be paid to the CPF Board by the 14th of the following month. Late payment attracts interest charges and, for persistent non-compliance, prosecution under the CPF Act. Most payroll software integrates directly with CPF e-Submit to streamline this process.
Skills Development Levy (SDL)
The Skills Development Levy is a mandatory levy payable by all employers on the gross wages of every employee — including part-time, casual, and foreign employees. Unlike CPF, SDL applies regardless of the employee’s nationality or residency status.
- Rate: 0.25% of gross wages
- Minimum: S$2 per employee per month
- Maximum: S$11.25 per employee per month (based on wages up to S$4,500)
- Due: by the 14th of the following month, alongside CPF contributions
SDL is collected by the CPF Board and remitted to SkillsFuture Singapore, where it funds national workforce training and upskilling programmes. Employers can draw on SkillsFuture Enterprise Credit and other grants funded partly by SDL proceeds.
Running payroll: what to include and when
Singapore law does not prescribe a specific pay frequency, but most employers pay monthly. The Employment Act requires that employees be paid within seven days after the end of the salary period. Each employee must receive a payslip with every payment, either in hardcopy or electronic form, covering:
- Basic salary
- Allowances paid (itemised by type)
- Deductions (CPF employee contribution, any other approved deductions)
- Overtime pay, where applicable
- Start and end date of the pay period
- Date of payment
Payslip records must be kept for at least two years for current employees and one year after an employee leaves. MOM may request these records in the event of a salary dispute or audit.
IR8A and the Auto-Inclusion Scheme
By 1 March each year, employers must report to IRAS the total remuneration paid to each employee during the preceding calendar year. This is done via Form IR8A — the employee earnings statement — which covers:
- Gross salary and wages
- Bonuses and director’s fees
- Benefits-in-kind (company car, accommodation, club memberships)
- Stock options and equity-based remuneration
- Retirement gratuities and termination payments
Most employers with five or more employees — and all employers whose employees use the No-Filing Service — are required to participate in IRAS’s Auto-Inclusion Scheme (AIS). Under AIS, the employer files IR8A data directly to IRAS electronically, and IRAS pre-populates the employee’s personal income tax return automatically. Employees covered by AIS do not need to manually declare their employment income.
Even for employers not yet required to join AIS, it is good practice to do so early — it reduces errors and simplifies the annual reporting process for both the employer and the employee.
Statutory leave entitlements
Employees covered by the Employment Act are entitled to statutory leave that accrues from their first day of employment. Key entitlements to build into your payroll and HR records:
Annual leave
Employees who have served at least three months are entitled to paid annual leave. Entitlement begins at seven days per year for the first year of service and increases by one day per additional year, up to a maximum of fourteen days under the Act. Many employers offer more generous terms.
Sick and hospitalisation leave
Employees with at least three months’ service are entitled to up to 14 days of paid outpatient sick leave and 60 days of paid hospitalisation leave per year (inclusive of the 14 outpatient days). Sick leave must be certified by a registered medical practitioner.
Public holidays
Employees are entitled to 11 gazetted public holidays per year. If an employee is required to work on a public holiday, they must receive an additional day’s pay or a day off in lieu.
Maternity, paternity and childcare leave
Statutory maternity leave (16 weeks for citizens, 8 weeks for non-citizens), paternity leave (2 weeks for citizen children), shared parental leave, and childcare leave obligations apply under the Child Development Co-Savings Act and the Employment Act. Government reimbursement is available for a portion of maternity and paternity pay where eligibility criteria are met.
A note on foreign employees
Foreign employees on Employment Pass, S Pass, or Work Permit are not entitled to CPF contributions and are not covered by certain provisions of the Employment Act relating to overtime and rest days (for Work Permit holders, separate provisions apply under the Act). However:
- SDL applies to all employees regardless of nationality.
- Foreign employees are subject to income tax in Singapore and must be reported under IR8A.
- Employers of foreign employees on Work Permits are also required to purchase medical insurance of at least S$15,000 per year per employee.
- Pass types carry their own levy obligations — the Foreign Worker Levy for Work Permit holders and the S Pass levy for S Pass holders — payable monthly to MOM.
The bottom line
Hiring your first employee in Singapore triggers a set of obligations that run concurrently and do not pause while you get up to speed. CPF must be paid by the 14th of each month. SDL is due at the same time. The KET document must be issued within 14 days of the start date. IR8A must be filed by 1 March the following year. None of these have discretionary grace periods.
The good news is that a clean payroll setup — the right software, the right records, and the right filing cadence — makes ongoing compliance straightforward. The complexity is in the setup, not the maintenance. Getting professional support at the point of your first hire is almost always cheaper than correcting months of accumulated errors.
To learn more about how we handle payroll compliance for Singapore SMEs, see our services. You may also find our article on the hidden costs of DIY accounting a useful companion read.