3 interesting factors that affect the way you do payroll in Singapore

Payroll in any country is complex — but here in Singapore, there are 3 interesting factors that make payroll particularly complicated. They are:

1. Maternity and paternity leave benefits; 
2. Skills Development Levy; and
3. Contributions to self-help group funds.

If you’re an accountant or payroll provider struggling with these calculations, why not let a cloud-based payroll software like Employment Hero Payroll do all the heavy lifting for you? In this blog, we’ll cover the three factors that make payroll calculations in Singapore complicated, and how you can help your clients run payroll easier and smoother with an automated payroll solution — leaving you with more time and resources to focus on strategic work.

Maternity and paternity leave benefits

In efforts to foster a pro-family environment in Singapore and raise the declining birth rate, the government has implemented maternity and paternity benefits schemes to support working parents in having and raising children.

Government-paid maternity leave (GPML)

Working mothers are entitled to either 16 weeks of government-paid maternity leave or 12 weeks of unpaid maternity leave, depending on whether the child is a Singapore citizen, whether both parents are legally married, and whether the mother works for an employer or has been self-employed for at least 3 continuous months before the birth of her child (i.e. covered by the Employment Act).

Pregnant employees can start their maternity leave 4 weeks before the delivery date, and no later than the delivery date. Also, maternity leave can only be taken within 12 months from the child’s date of birth, inclusive of the date of birth.

The government funding available for an employee’s maternity leave will depend on the number of children she already has. The rates are as follows:

Government-paid paternity leave (GPPL)

Working fathers are eligible for up to 2 weeks of government-paid paternity leave, to be taken within 12 months from the child’s date of birth, inclusive of the date of birth. It can be taken continuously, or non-continuously with mutual agreement between the employer and employee.

The government will pay for all 2 weeks of GPPL, capped at $2,500 per week or a total of $5,000.

Skills Development Levy

Every month, employers are required to make 3 types of CPF contributions:

1. Both the employer and employee’s share of CPF contributions
2. The Skills Development Levy (SDL)
3. The employee’s respective Self-Help Group

The Skills Development Levy (SDL) is compulsory for all your employees, regardless of whether they are Singapore citizens or foreign nationals. The CPF Board collects the SDL on behalf of the SkillsFuture Singapore Agency.

If you’re wondering what it’s used for, the SDL amount collected is actually channeled to the Skills Development Fund, which is used to support workforce upgrading programmes and provides training grants to businesses, when they send their employees for training under the National Continuing Education Training system.

The levy payable for each employee is 0.25% of their total monthly wage — the minimum payable is $2 for employees earning less than $800 a month, and the maximum payable is $11.25 for employees earning more than $4,500 a month.

The total amount of SDL payable to the CPF board can be obtained by computing the SDL for each employee respectively, adding them all together, and rounding the total amount down to the nearest dollar.

Contributions to self-help group funds

As mentioned above, contributions to self-help group funds are one of the additional contributions employers are required to make (on behalf of their employees), aside from the regular CPF contributions and Skills Development Levy.

So what are self-help groups (SHGs) exactly? SHGs were created to help less privileged and low-income households in the Chinese, Eurasian, Muslim, and Indian communities in Singapore. These non-profit SHGs generally offer programmes and assistance schemes to low-income families, single parents, youth at risk, and the elderly in the community, enabling them to maximise their own potential and strive for social mobility through self-help and mutual support.

There are a total of 4 SHGs in Singapore, and employees of the four different races in Singapore contribute to their respective SHGs:

1. The Chinese Development Assistance Council (CDAC) Fund: for Chinese employees who are Singaporeans and PRs;
2. The Euroasian Community Fund (ECF): for Eurasian employees who are Singaporeans and PRs;
3. The Mosque Building and Mendaki Fund (MBMF): for Muslim employees who are Singaporeans, PRs, and foreign employees on Employment Pass (EP) or Work Permits; and
4. The Singapore Indian Development Association (SINDA) Fund: for Indian employees who are Singaporeans, PRs and foreign employees on Employment Pass (EP).

Contributions are based on an employee’s race or religion, and contribution rates differ for each SHG — they are also dependent on an employee’s salary amount.

Since Singapore is a multiracial country, some employees might have ‘double-barrelled’ race stated on their NRIC, like Indian-Chinese. In instances like this, employers should take the first race displayed to determine their contribution to SHGs.

However, employers also have to take note that Muslim employees need to contribute to the Mosque Building and Mendaki Fund (MBMF) regardless of what their race states. For example, a Chinese employee who is Muslim will have to contribute to both MBMF and CDAC, whilst an Indian employee who is Muslim will have to contribute to both MBMF and SINDA.

So what do all these have in common?

Complex calculations! With maternity and paternity leave benefits, Skills Development Levy dependent on an employee’s salary amount, and self-help group contributions dependent on an employee’s race and religion — there are just so many aspects your team needs to be aware of when providing payroll services to your clients.

Not to mention the fact that these 3 factors could all affect a single employee — an employee could be a working parent, earning $3,550, and Chinese Muslim. How long will your team take to do the calculations for his or her salary that month?

Manual calculations just don’t cut it anymore — it will be too complicated and time-consuming to manage these for your clients, especially for those with over 100 employees. It’s all about working smarter, not harder. Let Employment Hero Payroll take on that burden for you by automating those tricky calculations.

Build specific rules into Employment Hero Payroll to automate unique pay conditions, so you can enjoy a fuss-free pay run in just a few clicks! With streamlined processes, you can focus on building client relationships and expanding your client base — not bent over in frustration struggling with calculations, and putting a strain on your resources.