Salary increments are a crucial aspect of employee compensation, reflecting economic conditions, company performance, and labour market trends. In Singapore, salary adjustments are influenced by various factors, including government regulations, industry benchmarks, and global economic conditions.

Projected Salary Increment in Singapore

According to recent HR reports and expert insights, salary increments for Singapore employees in 2025 are expected to range between 2% to 5%. This projection is based on economic recovery, inflation rates, and company performance. Industries such as technology, healthcare, and finance are likely to experience higher salary growth due to sustained demand and talent shortages.

The latest report from The Straits Times indicates that businesses are taking a cautious yet optimistic approach towards salary adjustments, balancing cost management with employee retention strategies.

Regulations Governing Salary Increment in Singapore

Unlike some countries where salary increments are mandated by law, Singapore follows a market-driven approach. However, companies must comply with Employment Act regulations, ensuring fair and timely salary adjustments. Key aspects include:

• Minimum salary benchmarks for foreign employees under the Employment Pass (EP) and S Pass schemes.
• Annual wage supplement (AWS) as a non-mandatory year-end bonus for employees.
• Collective agreements for unionised employees, which may include salary increment clauses.
• Fair employment practices, ensuring non-discriminatory pay adjustments.

Factors Affecting Salary Increment

Several factors influence salary adjustments in Singapore:

1. Economic Growth – Strong GDP growth encourages higher salary increments.
2. Inflation Rates – Rising living costs may lead to higher adjustments to maintain purchasing power.
3. Industry Trends – High-growth sectors experience better salary prospects.
4. Company Performance – Profitability and revenue impact increment decisions.
5. Individual Performance – Performance-based increments remain a key determinant.

Average Salary Increment by Industry

According to Mercer’s latest Total Remuneration Survey (TRS), the findings, derived from over 1,100 organisations spanning sectors such as technology, life sciences, manufacturing, and education, provide an estimation of Singapore’s employment salary increment. 

• Real estate & banking: up to 4.5%
• Aerospace, construction, & energy anticipate : 3.9% - 4.2%
•  Healthcare & education: 3.6% - 4%

How Employers Can Manage Salary Increment Effectively

For businesses, managing salary increments strategically ensures both employee satisfaction and financial sustainability. Employers can consider:

• Performance-based salary adjustments – Implementing a structured performance review system ensures that salary increments are directly tied to individual contributions. This fosters a culture of meritocracy, motivating employees to excel in their roles and contribute to business growth.
• Market benchmarking – Conducting regular salary benchmarking exercises helps businesses stay competitive. Employers should compare salary trends within their industry and geographic region to attract and retain top talent while maintaining payroll affordability.
• Non-monetary benefits – In cases where budget constraints limit salary increments, offering non-monetary benefits can help maintain employee satisfaction. Flexible work arrangements, professional development opportunities, wellness programmes, and enhanced medical coverage can serve as valuable alternatives to financial raises.
• Transparent communication – Employees value transparency when it comes to salary increments. Employers should communicate the rationale behind increment decisions, performance expectations, and future salary growth opportunities to build trust and engagement.
• Seamless salary increment processing – Ensuring compliance and efficiency in salary adjustments is crucial for businesses. Using GutsyHQ’s Payroll Service can help employers automate salary changes, maintain accurate payroll records, and comply with statutory requirements, reducing administrative workload and errors.

Ensure Accurate and Compliant Salary Increment

While there are no mandatory laws governing salary increments, businesses must navigate market trends and fair employment practices to stay competitive. A well-structured payroll system helps ensure seamless and accurate salary adjustments, reducing administrative complexity. With GutsyHQ’s Payroll Service, businesses can efficiently manage salary changes while staying compliant with regulations and industry standards.

What Are Ordinary Wages (OW)?

Examples of Ordinary Wages:

• Monthly basic salary
• Fixed allowances (e.g., transport, meal, or shift allowances)
• Overtime pay (if paid within the same month and within the OW ceiling)

CPF Contributions and Ordinary Wages (OW) Ceiling:

Source: Ministry of Finance

Overtime Pay Scenarios:

What Are Additional Wages (AW)?

Examples of Additional Wages:

• Annual bonuses
• Commissions (if paid at irregular intervals)
• Incentive payments
• Leave encashment
• Retrenchment benefits

CPF Ceiling for Additional Wages (AW):

Example 1: Employee earns less than $6,000 of Ordinary Wage (OW)

Example 2: Employee earns more than $7,400 of Ordinary Wage (OW)

Payments Not Considered Wages (No CPF Contributions)

• Termination or Retrenchment Benefits: Compensation provided upon employment termination is not considered wages since it is not payment for services rendered.
• Expense Reimbursements: Payments made to employees for work-related expenses are not subject to CPF, provided they do not exceed the actual amount spent. Examples include:
  • Entertainment expenses incurred while hosting clients on behalf of the company.
  • Training and examination fees covered as part of an employee’s professional development.
  • Meal expenses for employees working beyond regular hours.
• Benefits-in-Kind: Non-monetary perks such as company-provided housing, transport, or gifts are not considered wages.
• Flexible Benefits: Medical or dental expense reimbursements for employees and their dependents (spouse and child) are also exempt from CPF contributions.

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The Annual Wage Supplement (AWS) is a common component of employee compensation in Singapore. Often referred to as the "13th-month bonus," AWS is an additional payment given to employees at the end of the year. However, there are key differences between AWS and performance-based bonuses, and it is crucial for both employers and employees to understand its regulations and implications.

What is the AWS Bonus?

The Annual Wage Supplement (AWS) is a form of additional salary given to employees on top of their regular wages. Unlike performance-based bonuses, AWS is meant to help employees cope with year-end expenses and is usually equal to one month’s salary.

Is AWS Mandatory in Singapore?

AWS is not mandated by law in Singapore. Instead, it is subject to the terms of the employment contract or collective agreements between employers and employees. Employers who have agreed to AWS payments in their employment contracts must honour them, unless there are exceptional financial difficulties preventing them from doing so.

The Ministry of Manpower (MOM) encourages employers to provide AWS as a means of sharing economic prosperity with employees, but it is ultimately a discretionary payment unless stipulated otherwise.

Rules and Regulations on AWS in Singapore

Employers and employees should be aware of the following key regulations:

1. No Legal Obligation: AWS is not a statutory requirement under the Employment Act. However, if stated in an employment contract, it becomes a contractual obligation.
2. Collective Agreements: In some industries, unions negotiate AWS as part of collective agreements. Employers must comply with these agreements if they apply.
3. Pro-Rated AWS: Employees who have worked for less than a full year may receive a pro-rated AWS payment, based on the number of months worked.
4. Withholding AWS Payments: Employers facing financial difficulties may negotiate with employees or unions to reduce or withhold AWS payments. Such measures should be taken only when necessary and with proper communication.
5. AWS and CPF Contributions: AWS is subject to CPF contributions, just like monthly wages.

For official regulations, refer to the MOM website on Variable Wage Components.

How AWS Differs from Other Bonuses

AWS is often mistaken for performance bonuses or profit-sharing incentives, but they serve different purposes:

While AWS is more predictable, performance bonuses fluctuate based on business outcomes and individual contributions.

Forms of AWS Payments

Employers may structure AWS payments in different ways, including:

• Full AWS Payment: A one-month salary bonus paid in December.
• Pro-Rated AWS: Given to employees who joined mid-year or worked part-time.
• AWS Plus Performance Bonus: Some employers provide AWS alongside performance bonuses, making total year-end bonuses higher.

Employers should ensure AWS payment structures are clearly communicated in employment contracts and employee handbooks.

How to Prorate Annual Wage Supplement (AWS)

Since AWS is not a statutory requirement, the method of prorating AWS depends on the terms outlined in the employment contract. Here are two commonly used methods for prorating AWS for employees who join mid-year:

1. Basic salary ÷ 365 days × Days worked in the year
2. Basic salary ÷ 12 months × Months worked in the year

Employers should ensure transparency in their calculations and communicate the prorated AWS amount clearly to employees.

Is Annual Wage Supplement Subject to CPF and Taxes?

According to the Central Provident Fund (CPF) Board, AWS is classified as "remuneration in money," which includes bonuses and other salary components. As a result, AWS is subject to CPF contributions, just like regular wages.

Similarly, the Inland Revenue Authority of Singapore (IRAS) considers AWS as taxable income. It is treated in the same way as regular salary and other forms of remuneration, meaning employees should account for AWS in their annual tax declarations.

AWS and Payroll Considerations

When managing payroll, employers must consider AWS’s impact on:

1. Salary Deductions: Since AWS is part of an employee’s taxable income, it may impact CPF contributions and income tax calculations.
2. Payroll Processing: Employers should ensure AWS is calculated accurately and disbursed in a timely manner.
3. Budgeting for AWS: Employers should plan finances accordingly, as AWS represents a significant year-end expense.

For businesses looking for efficient payroll management, consider using GutsyHQ’s payroll services to streamline AWS and other salary components.

Common Misconceptions about AWS

1. AWS is the same as a bonus.

• Fact: AWS is a fixed supplement, whereas bonuses are discretionary.

2. AWS is compulsory.

• Fact: AWS is not required by law but may be contractually obligated.

3. AWS must always be equal to one month’s salary.

• Fact: While traditionally one month, AWS amounts can vary or be prorated.

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Understanding AWS is essential for both employers and employees. While it is not a legal requirement, many companies provide it to boost employee satisfaction and financial security. Employers should clearly outline AWS policies in employment contracts, while employees should be aware of their entitlements and how AWS affects their overall earnings.

Managing AWS calculations, payroll processing, and CPF contributions can be complex and time-consuming. At GutsyHQ, we offer expert payroll solutions to ensure seamless compliance with AWS payments, CPF deductions, and tax regulations. Let us help you simplify your payroll processes, so you can focus on growing your business with confidence!

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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Managing salary deductions can be complex, but with the right system in place, you can ensure full compliance with MOM regulations while maintaining transparency with your employees. Let GutsyHQ’s Singapore Payroll Services handle auto-calculated salary deductions, generating itemised payslips, and keeping you compliant effortlessly. Simplify your payroll process today! 

Ensuring transparency and compliance in payroll management is crucial for businesses in Singapore. One of the key requirements set by the Ministry of Manpower (MOM) is the provision of itemised payslips to employees. In this guide, we will explore the definition, key components, regulations, and employer obligations related to itemised payslips in Singapore.

What is an Itemised Payslip?

An itemised payslip is a detailed breakdown of an employee’s salary, allowances, deductions, and net pay for a specific pay period. It serves as a formal record of salary payments and ensures that employees receive transparent and accurate compensation.

Under Singapore’s Employment Act, all employers must issue itemised payslips to employees covered under the Act, ensuring fair labour practices and proper documentation of salary-related transactions.

For an official itemised payslip template from the Ministry of Manpower, you can refer to this template  PDF.

What are the Key Components Inside the Itemised Payslip?

An itemised payslip must contain essential details to ensure clarity in salary calculations. According to MOM guidelines, the key components include:

• Employer and Employee Information: Name of employer and employee, as well as the employee’s identification number (if applicable).
• Payment Date: The exact date the salary is paid.
• Basic Salary: The agreed-upon base salary before any deductions or allowances.
• Allowances and Additional Payments: Any fixed or variable allowances, such as transport, housing, or meal allowances.
• Overtime Payment: If applicable, the amount paid for overtime work.
• Deductions: Any CPF contributions, taxes, or other deductions.
• Net Salary: The final take-home salary after deductions.
• Work Period: The specific period for which the salary is being paid.

These details help both employers and employees track payments accurately and resolve discrepancies when necessary.

Why is an Itemised Payslip Mandatory for All Employees?

Itemised payslips are not just a formality—they serve crucial purposes such as:

• Transparency and Accountability: Employees have a clear understanding of how their salary is calculated.
• Legal Compliance: Ensures employers adhere to MOM regulations, preventing disputes and legal complications.
• Record Keeping: Helps both employers and employees maintain proper financial records.
• Dispute Resolution: Provides documented proof in case of salary disputes or misunderstandings.

The requirement for itemised payslips is part of Singapore’s effort to protect employees’ rights and promote fair employment practices.

When Should the Employer Issue Payslips to the Employees?

Employers are required to provide itemised payslips at the time of salary payment or within three working days after payment. If an employee is terminated, their final payslip must be provided along with their last salary payment.

Payslips can be issued in either hardcopy or softcopy format (e.g., PDF or email). However, they must be easily accessible for employees to review and retain.

How to Generate Itemised Payslips for Employees?

Employers can generate itemised payslips through various methods, including:

1. Manual Payslips: Small businesses with a few employees may use Excel templates or printed forms to create payslips manually.
2. Payroll Software: Automated payroll systems streamline the process, ensuring compliance with MOM requirements while reducing errors. Employers can use payroll software like GutsyHQ to automatically generate payslips and calculate salaries effortlessly.
3. HR and Payroll Service Providers: Outsourcing to professional payroll firms can help businesses ensure compliance without handling payroll in-house.

Using payroll software or outsourcing services can significantly reduce administrative burdens and ensure timely salary processing.

What are the Penalties if an Employer Fails to Provide Itemised Payslips?

Non-compliance with MOM’s payslip requirements can lead to severe penalties, including:

• First-time Offence: Employers may receive a warning or be fined up to $1,000 for the first offence.
• Repeated Offences: Fines can go up to $2,000 per offence or even result in legal prosecution.

In addition, if an employer submits false payslips after the deadline, they could face a hefty penalty of up to $5,000 and court charges. Ensuring compliance with itemised payslip regulations helps businesses avoid legal issues and maintain a positive reputation in the job market.

As an Employer, How Long Should I Keep the Records of the Payslips?

For Current Employees: Employers must retain payslip records for the past two years to ensure proper documentation and compliance. Keeping these records organised helps maintain accurate payroll records and simplifies audits.

For Former Employees: Payslip records for ex-employees should be kept for up to two years, with an additional one-year retention period after their departure. This ensures that any payroll-related queries or disputes can be addressed effectively.

Maintaining proper payroll records not only ensures compliance with MOM regulations but also helps businesses manage financial audits and employee disputes efficiently.

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Understanding and implementing itemised payslips is essential for both employers and employees in Singapore. Compliance with MOM regulations ensures transparency, accountability, and smooth payroll management. Employers should leverage payroll software or services to streamline payslip generation while maintaining accurate financial records.

For a hassle-free payroll process, employers can use Gutsy’ Payroll Service to automatically generate itemised payslips and calculate salaries like a breeze. By adhering to itemised payslip requirements, businesses can build a more trustworthy and legally compliant work environment while avoiding unnecessary legal risks.

Backdated pay is a crucial aspect of payroll management that employers in Singapore must handle correctly. It refers to payments made to employees for wages earned in a previous payroll period but processed at a later date. Employers need to understand the legal, tax, and CPF contribution implications of backdated payments to ensure compliance with Singapore's employment laws. This guide provides insights into backdated pay, its classification, and best practices for handling it efficiently.

What is Backdated Pay?

Backdated pay refers to wages paid to an employee for work performed in a previous payroll period but not processed in the regular payroll cycle. This can occur due to payroll errors, salary adjustments, or contract revisions. Employers in Singapore must ensure backdated payments comply with local employment laws and regulations.

The Reasons for Backdated Pay

Backdated pay can arise from various circumstances, including:

1. Payroll Errors – Mistakes in payroll processing can lead to unpaid wages, which must be corrected through a backdated payment.
2. Salary Increments – Employers may decide to increase an employee’s salary retrospectively, necessitating a backdated payment.
3. Bonuses and Incentives – Performance-based rewards may sometimes be paid out later than the intended date.
4. Contract Adjustments – Changes in employment terms, such as promotions or revised compensation agreements, can result in backdated payments.
5. Late Approvals – Delays in managerial approval of overtime or commissions can lead to payments being pushed into a later payroll cycle.

Is Backdated Pay Classified as Ordinary Wages (OW) or Additional Wages (AW)?

In Singapore, wages are categorised into Ordinary Wages (OW) and Additional Wages (AW) under the Central Provident Fund (CPF) framework:

• Ordinary Wages (OW): Regular wages earned for work done in the current month and subject to CPF contributions.
• Additional Wages (AW): Payments made outside regular wages, such as bonuses or commissions, subject to an AW ceiling for CPF contributions.

Backdated pay can be classified as OW or AW, depending on the nature of the payment:

• If it is part of the employee’s regular salary but delayed due to payroll errors, it is considered Ordinary Wages (OW).
• If it is a one-off lump sum payment, such as a retroactive salary increment, it falls under Additional Wages (AW).

Can a Salary Increment Payment Be Backdated?

Yes, salary increments can be backdated if the employer decides to adjust an employee’s salary retrospectively. However, the following factors should be considered:

• Employment Contract Terms – The employer should formalise the backdated salary change in writing to avoid disputes.
• Payroll Compliance – Employers must ensure CPF contributions, income tax, and other statutory deductions are correctly processed.
• Fairness and Transparency – Employees should be informed about the backdated payment, including calculations and applicable CPF contributions.

Is Backdated Pay Subjected to CPF Contribution?

Yes, backdated pay is subject to CPF contributions based on the CPF Board’s regulations. The treatment of CPF contributions depends on the classification of the payment:

• If the backdated pay relates to Ordinary Wages (OW), CPF contributions are calculated for the month the wages should have been paid.
• If the backdated pay is classified as Additional Wages (AW), the AW ceiling applies, and CPF contributions are adjusted accordingly.

Employers must report backdated wages correctly in their payroll records and submit CPF contributions to the CPF Board promptly. For seamless payroll compliance, businesses can use automated payroll software like GutsyHQ Payroll to avoid calculation errors.

Can an Employer Pay for New Hires Who Joined After the Payroll Cut-Off Date as Backdated Pay?

Yes, employers can process backdated pay for new hires who miss the payroll cut-off date. This typically happens when an employee starts work late in the month, but payroll has already been processed. Here’s an example:

Example:

New Hire: Josh

Joining Date: 25th February 2025

Payroll cut-off date for each salary month: 20th of every month 

Monthly Salary: $5,000

Sarah’s prorated salary in February 2025 =

5/20 working days x $5,000 = $1,250

Josh' CPF Contribution in February 2025 is therefore $1,250.

• Employee Contribution: $1,250 * 20% = $250
• Employer Contribution: $1,250 * 17% = $212.5
• Total CPF Contribution for February 2025 = $250 (Employee) +$212.5 (Employer) = $462.5

Even though Josh joined after the payroll cut-off date, his prorated salary for February 2025 should still be paid by the latest 7 March 2025 to comply with the Employment Act. His prorated salary for February is $1,250, resulting in a CPF contribution of $462.5.

Considerations for Employers:

• Ensure backdated salary payments are accurately recorded in payroll systems.
• CPF contributions must be calculated based on when the wages were earned.
• Clearly communicate the payment timeline to the employee.

For employers looking for a payroll system that automates salary calculations, CPF contributions, and tax compliance, GutsyHQ Payroll provides an efficient solution.

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Backdated pay is a common payroll issue that employers must manage with accuracy and compliance. Mismanagement can lead to payroll discrepancies, CPF miscalculations, and employee dissatisfaction. By understanding backdated pay classifications, CPF contribution requirements, and best payroll practices, businesses can ensure smooth and transparent payroll processing. Employers can also leverage GutsyHQ Payroll for automated calculations and compliance, reducing the risk of payroll errors and ensuring timely payments to employees.