Penalties for Payroll Non-Compliance to Avoid in Singapore

Payroll compliance is a critical aspect of business operations in Singapore. Employers must adhere to specific regulations, and non-compliance can result in severe penalties that impact the company's financial health and reputation. Below are key payroll-related compliance pitfalls and associated penalties that businesses should avoid.

1. Failure to Issue Itemized Payslips

According to Section 96 of the Employment Act, employers must issue itemized payslips to employees at least once a month. Payslips must include essential details such as basic salary, allowances, and deductions. Non-compliance can result in fines of up to SGD 1,000 for the first offense and SGD 2,000 for subsequent offenses.

2. Non-Compliance with CPF Contributions

Under the Central Provident Fund Act (Chapter 36, Section 7), employers are required to make timely and accurate CPF contributions. Late payments or underpayments can attract penalties, including interest charges and fines. Repeated violations can lead to prosecution and imprisonment of up to 6 months.

3. Breach of Working Hours and Overtime Pay Regulations

As stipulated in Part IV, Section 38 of the Employment Act, working hours should not exceed 44 hours per week, and any overtime must be compensated at a rate of at least 1.5 times the hourly basic rate. Violations can result in fines of up to SGD 5,000 per offense, with repeated breaches leading to imprisonment.

4. Non-Adherence to Salary Payment Schedules

The Employment Act mandates that salary payments must be made within 7 days after the end of the salary period. Delayed or partial payments can result in fines, and persistent offenders may face legal action from the Ministry of Manpower (MOM).

5. Inadequate Payroll Record-Keeping

Section 95 of the Employment Act requires employers to maintain accurate payroll records, including work hours, salaries, and deductions, for at least two years. Inadequate record-keeping can result in fines and legal challenges during audits or employee disputes, compromising the company’s ability to defend itself against claims.

Payroll compliance in Singapore is complex and requires careful attention to detail. Failure to adhere to the regulations can lead to significant penalties that may affect your business. To ensure your payroll processes are compliant and up-to-date, get in touch with HR professionals for more consultation and guidance.