For a business to run smoothly, the payroll process must be streamlined and error-free.It is easy to streamline and optimize your payroll and other back-office processes within your SMB. Did you know that this can improve your cash flow?
Despite the fact that payroll involves money paid out by an organization, it is viewed as distinct from accounts payable because it involves both expenses and liabilities.
Although payroll is separate from accounts payable, you can use payroll to boost your cash flow just as you can by streamlining your accounts payable process. If you need further advice from a trusted accountant in Singapore on improving your payroll process, have a chat with us. Otherwise, do read on for our top 5 tips to handle your business’s payroll accurately and efficiently.
Be Aware of The Singapore Payroll Process
Make your payroll process a breeze by familiarising yourself with Singapore’s payroll management. This is what you need to know:
Wages Must Be Paid At Least Once A Month
Your employees’ wages include basic pay and allowances for work done under a contract of service. It does not include housing, food, travel allowances, pension, or retrenchment benefits.
Employees must be paid at least once a month, but employers can also choose to pay salaries at shorter intervals. Non-payment of wages is an offence in Singapore, and employees' wages will have to be made within 7 days after the salary period's end date.
Itemised Pay Slips Should Be Issued to All Employees
Under the Employment Act, all employers are required to issue their employees itemised payslips. This should include essential details including the date of payment, basic salary, overtime pay, allowance, salary period, and all deductions made. Hard or soft copies are acceptable, and failure to do so will lead to a fine.
Pro-Rate Your Employees’ Annual Leave and Salary
For incomplete work months, your employee’s wage and annual leave should be pro-rated in accordance with the contract. This means that your employee will only be eligible for the pro-rated portion of his wage for that part of the month that he worked.
Calculate Your Employees’ Overtime Pay
Overtime work is defined as any work done outside the normal working hours (excluding breaks). For overtime work, you will have to pay at least 1.5 to 2 times the hourly basic rate of pay. Your employees can only work up to 72 overtime hours in a month, and payment for overtime work should be made within 14 days after the salary period's end date.
Maintain Employment Records
You are expected to maintain two years of detailed employment and salary records for all your employees for tax purposes. For ex-employees, their records should still be kept for a year after their departure from your company.
Be Aware of Mandatory Contributions, Levies and Statutory Requirements
Stay compliant with the law by adhering to the necessary contributions, levies and statutory requirements. Other than Central Provident Fund (CPF) contributions, you will also have to make these monthly contributions:
- Skills Development Levy (SDL) that provides you with training grants when you send your employees for work-related training
- Ethnic funds to help the less privileged in the respective ethnic communities, such as CDAC, ECF, MBMF and SINDA
- CPF contributions for National Servicemen. This is applicable even when they undergo NS training periodically. However, employers are not required to pay NS men for the days they are away.
- Monthly levies for foreign workers with Work Permits
Comply with Statutory Reporting Requirement
Starting from the Year of Assessment 2017, the Inland Revenue Authority of Singapore (IRAS) requires employers to submit their employees’ income (IR8A) information to IRAS electronically by 1 March every year if they have:
- 10 or more employees under their employment during the entire year
- received notice to file their employment income electronically
Additionally, if you have foreign employees, you are required to seek tax clearance for your foreign employees by filing Form IR21 at least a month before your employee ends their employment, start an overseas posting, or depart from Singapore for three months or more.
In a nutshell, the payroll processing steps involve the following:
- Setup of payroll
- Processing payroll
- Payroll payslip
- Statutory submission
- Filing annual report for individual income tax
- Maintenance of employee payroll data
- Year-end payments such as bonuses and the like
Set Up a Payroll Calendar
Having a payroll calendar in place allows your employees to understand when they will receive their salary. Additionally, it helps your payroll employees with the planning and execution of payroll tasks. You can take your pick from the payroll calendars available online, or simply create a spreadsheet or use an Office Suite program to make your own.
Some handy tips before you create your calendar:
- Base your payroll calendar on a regular calendar to act as your guide for certain periods in the year that you may need more lead time for payroll processing
- Use colours to differentiate dates including early time card deadlines as a result of a holiday
- Disseminate a copy of the payroll calendar to your managers and supervisors so they can pass it on to their staff
All fiscal year pay dates should be reflected in the payroll calendar, which makes processing of payment easier and eliminates your employee’s confusion on when they will get their salary. After you have created a calendar template, remember to save it in your cloud space or hard drive for updating as and when necessary.
Document Your Payroll Processing Procedures
Recording your payroll process is a crucial step in managing payroll. Since every step is being documented, it is easier for you to analyse and audit your payroll procedure and identify weak areas in the process. Once you have figured out a payroll procedure that works best for your company, document the steps and share them with your payroll staff to ensure that everyone is on the same page.
Upkeep a standard operating procedure for your payroll processing. This manual should detail all the steps in payroll processing, including the reporting and check handling procedures. It will also be beneficial for you to include instructions on ways to process payroll manually in the event of an emergency.
Make Use of Modern Technology and Automate Your Payroll
With the prevalence of modern technology, you can make use of available tools to manage your payroll processing procedures more efficiently. With a variety of payroll management software in the market, you can choose one that is most ideal to help you optimise your payroll functions.
Processing payroll requires a lot of time and money, and when executed manually, is easily prone to errors that can lead to severe penalties. Investing in a payroll software can help to automate the entire process for you, factoring in tax calculations, generating employees’ payslips, complying with legislation and giving you up-to-date information for end-of-year tax returns. Remember to streamline your payroll management process by using the latest software for higher accuracy.
Outsource Your Payroll
Tasks When it comes to running your own business, it is not easy to juggle everything from marketing to payroll management – we get it. Fortunately, you don’t have to struggle with everything on your own! We help automate administrative, accounting, payroll and tax-related work that all business owners have to deal with.
Instead of scrambling at the last minute, consider outsourcing to a trusted partner who will take care of your back-end administrative work. Details are important to us — only by paying attention and precisely following the process, can we see the bigger picture and spot opportunities to improve. Let our e-commerce accounting experts in Singapore handle everything from payroll, invoices, reports, and taxes while you grow your business.