Running payroll Singapore first-time employers must navigate involves more moving parts than most people expect. The moment you hire your first employee, you become responsible for CPF submissions, itemised payslips, and IR8A filing on a fixed monthly deadline. Miss the deadline and interest charges start immediately. This guide walks through everything a first-time employer needs to set up before the first payroll run.
Before you run payroll: what needs to be in place
1. An employment contract
Before the employee starts, you need a written employment contract. Key Employment Terms (KETs) must be provided in writing within 14 days of the employee’s start date and must cover: full name of both parties, job title, start date, salary and payment period, working hours, annual and sick leave entitlement, and notice period.
2. IRAS registration
As an employer, register with IRAS for employee tax purposes via myTax Portal using Singpass. You’ll need to submit IR8A forms for each employee by 1 March of the following year. If you have five or more employees, you’re required to join the Auto-Inclusion Scheme (AIS).
3. CPF registration
If hiring Singapore citizens or permanent residents, register at cpf.gov.sg as an employer. You’ll receive a CPF Submission Number (CSN) used for monthly CPF submissions. Foreign employees (on EP, S Pass, Work Permit) don’t require CPF but still attract the Skills Development Levy.
4. Skills Development Levy setup
SDL applies to all employees regardless of nationality. It’s submitted alongside CPF contributions at 0.25% of gross wages, subject to a minimum of S$2 and maximum of S$11.25 per employee per month.
5. Foreign Worker Levy (if applicable)
If hiring Work Permit or S Pass holders, you’ll pay FWL to MOM. Set up GIRO when you apply for the work passes.
Running payroll Singapore employers need to do each month: 6 steps
Step 1: Calculate gross pay
Include base salary plus any overtime, allowances, or pro-rated pay. For a new hire starting mid-month, pro-rate based on working days: Monthly salary ÷ number of working days in the month × number of days worked.
Step 2: Apply CPF deductions (for citizens and PRs)
Calculate both the employee’s CPF contribution (deducted from their pay) and the employer’s CPF contribution (your additional cost). Use the correct rate for the employee’s age bracket and PR status year.
Step 3: Calculate SDL for all employees
SDL = 0.25% of gross wages, minimum S$2, maximum S$11.25.
Step 4: Generate itemised payslip
The Employment Act requires itemised payslips for each employee, showing: employer and employee name, date of payment, basic salary, salary period, allowances, deductions (including employee CPF), net salary, and employer CPF contributions. Payslips can be paper or electronic. Keep records for at least two years.
Step 5: Transfer salary to employee
Salary must be paid at least once a month, within 7 days of the end of the salary period. Keep records of all transfers.
Step 6: Submit CPF and SDL by the 14th
Submit via CPF e-Submit@web by the 14th of the following month. Set up GIRO early as it takes a few days to activate.
Common first-time mistakes
- Forgetting employer CPF when budgeting. The employer’s 17% contribution is a real cost. Budget S$5,862 per month when hiring at S$5,000/month salary.
- Wrong CPF rate for PRs. 1st and 2nd year PRs pay at lower rates. Using full citizen rates for a 1st year PR means overpaying; an error either way creates a correction headache.
- Missing the 14th. CPF interest charges are 1.5% per month from the due date. Set a calendar reminder.
- Not issuing itemised payslips. Failure to issue payslips is a breach of the Employment Act even if the employee doesn’t ask.
- Treating bonuses as outside CPF. Bonuses are Additional Wages and attract CPF up to the Annual Wage ceiling.
When to consider outsourcing payroll
If you’re hiring more than two or three employees, or if your payroll has variable components, outsourcing saves meaningful time and reduces compliance risk. The cost (S$15 to S$40 per employee per month) is almost always less than the time you’d spend doing it yourself, and considerably less than the cost of a late CPF submission.
Getting payroll Singapore set up correctly from the start
Abacus provides payroll services for first-time employers: monthly processing, CPF submissions, payslip generation, and year-end IR8A filing. Get in touch if you’re about to take on your first hire.
For a complete overview of ongoing payroll obligations, see our payroll services Singapore guide.
