Salary deduction is a common yet often misunderstood aspect of payroll in Singapore. Whether you’re an employer managing payroll or an employee trying to understand your rights, knowing the rules around salary deductions is essential to ensure fair and legal practices.

In this guide, we’ll cover everything you need to know about salary deductions in Singapore, including what is legally allowed, the limits imposed by the Ministry of Manpower (MOM), and best practices for compliance.

What is Salary Deduction?

Salary deduction refers to any amount withheld from an employee’s salary by an employer. Some deductions are mandatory, while others require employee consent. However, all deductions must comply with Singapore’s Employment Act and MOM regulations.

Employers cannot make arbitrary deductions. Any unauthorised salary deduction can result in penalties under the law.

To get the most up-to-date and detailed information, visit MOM’s official salary deduction guidelines.

Types of Salary Deductions Allowed in Singapore

The Ministry of Manpower (MOM) allows certain types of salary deductions, which fall into two categories: mandatory deductions and permissible deductions.

1. Mandatory Salary Deductions

Employers are legally required to make these deductions:

CPF Contributions

• The Central Provident Fund (CPF) is a compulsory social security savings scheme in Singapore.
• Employers must deduct an employee’s CPF contributions and submit them to the CPF Board.
• This applies to all Singapore Citizens and Permanent Residents earning more than $50 per month.

Tax Clearance for Foreign Employees (IR21)

• Before a foreign employee leaves Singapore permanently, employers must withhold part of their salary to ensure all taxes are paid.
• Employers need to file an IR21 tax clearance form at least one month before the employee leaves.

2. Permissible Salary Deductions (With Employee Consent)

These deductions can only be made if the employee provides written consent:

Absence from Work

• If an employee fails to report to work, employers can deduct their salary for the hours or days missed.
• This deduction must be proportionate to the time absent.

Damage or Loss of Goods

• If an employee causes damage to company property or loses company assets, employers can deduct the cost.
• However, the deduction cannot exceed 25% of the employee’s monthly salary per deduction.
• The employer must conduct an inquiry before making any deductions.

Employee Accommodation

• If an employer provides housing, rent can be deducted, but only if the employee agrees in writing.

Salary Advances and Loans

• Employers can deduct salary advances or loans, provided the deduction is reasonable.
• The total deduction cannot exceed 50% of the employee’s monthly salary.

Employee Benefits (Insurance, Medical Co-payment)

• Employees may opt for salary deductions to pay for company-sponsored insurance or co-payment for medical benefits.

Union Membership Fees

• Employees who are members of a registered trade union can have union fees deducted from their salary with their consent.

Salary Deduction Limits in Singapore

To protect employees from financial hardship, MOM has set strict limits on salary deductions:

• Total deductions (excluding CPF) cannot exceed 50% of an employee’s monthly salary.
• Deductions for damages or losses cannot exceed 25% of an employee’s monthly salary per deduction.
• CPF contributions do not count towards the 50% cap, as they are mandatory.

Employers must ensure they do not exceed these limits, or they could face penalties from MOM.

Is it Compulsory to Show Salary Deductions on My Employees’ Itemised Payslips?

Yes, it is compulsory to show salary deductions on your employees’ itemised payslips in Singapore.

Under the Employment Act, all employers must issue itemised payslips that include details of any salary deductions made. The payslip should clearly outline:

• The amount deducted
• The reason for the deduction
• The remaining salary after deduction

Failure to provide itemised payslips can result in penalties from the Ministry of Manpower (MOM).

Unauthorised Salary Deductions (What Employers Cannot Deduct)

MOM prohibits employers from making deductions for certain reasons, including:

• Failure to meet sales targets – Employers cannot deduct wages if an employee does not hit their KPIs.
• Poor performance – Salary deductions due to low performance or productivity are illegal.
• Training costs – Employers cannot deduct the cost of mandatory job training unless the employee has signed a training bond.
• Work equipment and uniforms – Employees should not be charged for work-related tools unless they have agreed in writing.
• Company-imposed fines – Employers cannot impose fines or penalties on employees through salary deductions.

Best Practices for Employers

To ensure compliance and avoid disputes, employers should:

• Provide clear breakdowns – Always issue itemised payslips detailing deductions.
• Obtain written consent – Non-mandatory deductions must have employee approval.
• Stay within legal limits – Never exceed the 50% deduction cap.
• Document everything – Maintain proper records of deductions and approvals.
• Follow due process – If deducting for damages, conduct an internal inquiry first.

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What Can Employees Do If They Face Unauthorised Deductions?

If an employer makes an unfair salary deduction, employees can:

• Request a breakdown of deductions – Employers must explain every deduction made.
• Refuse unauthorised deductions – If a deduction is not legally permitted, you can dispute it.
• Report the employer to MOM – Employees can file a complaint if deductions violate the law.
• Seek legal help – MOM protects employees under the Employment Act.

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