Startup FAQs: Requirements for companies employing Employment Pass holders

Sep 18

Startup FAQs: Requirements for companies employing Employment Pass holders

There are conditions in the statutory laws of Singapore that the employer must comply once the company has successfully applied for, and issued the Employment Pass of the startup founder or the company’s new employee.

In a brief overview, here some questions that you might have, as the employer, when you have Employment Pass holders on your payroll:

1. What’s in a payslip? Is this necessary?
2. Do I need to get insurance for the employees?
3. What is the extent of my involvement in the employee’s personal taxes?
4. Can an Employment Pass holder be a Director of the company, too?
5. What are the considerations for the Employment Pass renewal?
6. How do I go about the pass cancellation of an EP Holder?

I. Payslip Issuance

While issuing an itemised payslip is not a requirement for employees who are not covered by the Employment Act i.e. employees earning more than SGD 4,500, it is recommended that the company issues an itemised payslip to all staff, including Employment Pass holders.

A pay slip must include, but is not limited to, the following information:

  • Employer’s full name
  • Employee’s full name
  • Payment date
  • Salary period
  • Basic salary
  • Allowances for the salary period
  • Deductions made
  • Overtime hours worked, when applicable
  • Overtime pay, when applicable
  • Net salary paid in total

The Ministry has detailed here all the items required in a pay slip.

Small companies can utilise an IRAS-accredited payroll software that auto-computes and generates pay slips, such as SimplePay, or outsource this function to a good payroll partner who can provide such service, as well as guidance and advice, for reasonable fee.

II. Medical Insurance

Employers are not mandated to provide medical insurance for Employment Pass (EP) holders in their company as in most cases, EP holders have their own personal medical insurance. However, it is in the discretion of the company to provide insurance coverage as part of their contract of employment.

Do note that in the event of accident or injury arising out of and in the course of employment, all employees are entitled to claim for compensation. The compensation as per Singapore’s Work Injury Compensation Act (WICA), is payable by the company. The insurance purchased by the company can be used to settle such claim, therefore it is ideal to have the employees insured under the company.

III. Personal Tax

It is the responsibility of the employee to file and pay his/her personal taxes, while the employing company is required to give all employees a Statement of Annual Employment Income every year. We have detailed in our earlier article the company and employee’s responsibility regarding personal taxes.

Employees can also engage a third-party service provider to compute and file personal income tax return on their behalf.

Did you know? There are ways to reduce your personal tax via the allowable tax reliefs and rebates.

IV. Local directorship on Employment Pass

An Employment Pass holder can be appointed to the Board of Directors to the same company he/she is currently employed without the need to notify the Ministry of Manpower.

The emphasis is on “the same company”, as in the event that the EP holder must take a directorship position in another company, he/she must first obtain a Letter of Consent (LOC) from MOM before the appointment. MOM will generally grant the LOC if the companies are related by shareholding and the secondary directorship is related to the primary employment of the EP holder.

V. Considerations for Pass Renewal

Earlier in 2016, the Singapore government has implemented stricter rules for Employment Pass approval, whether it be a fresh application or renewal.

Following the requirements as laid out in the Employment of Foreign Manpower and Income Tax Act will ensure that your company, and the pass holder, remain in the good books of the Ministry.

One important thing to consider: if you are an entrepreneur on Employment Pass but spend less than 183 days in Singapore, your tax residency status is considered as non-resident in Singapore. This may also mean that MOM has the grounds to reject your EP renewal application since the Employment Pass is a permission to work locally which you have not utilised.

Did you know? There is no restriction on an Employment Pass holder starting or working in a company outside Singapore by MOM.

VI. Pass Cancellation

We have clearly mapped out in this article how companies onboard or exit Employment Pass holders in the company as well as the steps on tax clearance for departing foreign employees.

In a nutshell, before the foreign employee departs the company, the company is required to withhold the final month’s salary and file a tax clearance with IRAS prior to the employee’s departure. Last pay must be made to the employee on his/her last day and the pass must be cancelled on the last day.

Drop us a message if you would like to speak to our immigration specialists about your company’s employment pass hires.

Speak to us about your corporate immigration concerns and clarity on Employment Pass conditions.