Singapore’s employer tax obligations centre on CPF contributions for citizens and permanent residents, Foreign Worker Levy for pass holders, and the Skills Development Levy for all employees. There’s no general payroll tax and no monthly income tax withholding requirement. If you’re a foreign company figuring out what hiring in Singapore will cost, this guide covers every employer-side obligation.
Overview of singapore’s employer contribution framework
Singapore splits employer obligations cleanly by worker type. If you hire a Singapore citizen or permanent resident (PR), your main cost beyond salary is the Central Provident Fund (CPF) contribution. If you hire a foreign national on an S Pass or Work Permit, you pay a Foreign Worker Levy instead of CPF. Every employee, regardless of nationality or pass type, is also covered by the Skills Development Levy (SDL). Understanding which regime applies to each worker is the starting point for accurate headcount cost modelling.
Cpf contributions
CPF is Singapore’s mandatory savings scheme for retirement, healthcare, and housing. Employers and employees both contribute, and the rates vary by the employee’s age.
Who pays cpf
CPF contributions apply only to Singapore citizens and permanent residents. Foreign employees on Employment Passes, S Passes, Work Permits, or other passes are exempt from CPF. For those workers, the Foreign Worker Levy applies instead (covered below).
CPF contributions are required for employees earning more than SGD $750 per month. Employees earning SGD $750 or less in a given month are not subject to CPF for that month.
Contribution rates by age
The rates below apply to employees earning more than SGD $750/month and are effective from 1 January 2026.
| Employee age | Employer rate | Employee rate | Total |
|---|---|---|---|
| 55 and below | 17% | 20% | 37% |
| Above 55 to 60 | 16% | 18% | 34% |
| Above 60 to 65 | 12.5% | 12.5% | 25% |
| Above 65 to 70 | 9% | 7.5% | 16.5% |
| Above 70 | 7.5% | 5% | 12.5% |
As an employer, your contribution is the employer rate column only. The employee’s share is deducted from their salary and remitted alongside your contribution.
What cpf funds
CPF contributions flow into three accounts. The Ordinary Account covers housing, education, and approved investments. The Special Account and, from age 55, the Retirement Account fund retirement savings. MediSave covers healthcare costs and medical insurance premiums. The split between accounts shifts at different life stages, but employers don’t manage that allocation directly; the CPF Board handles it.
Skills development levy
Every employer in Singapore must pay the Skills Development Levy for every employee, including foreigners. The SDL funds national workforce training programmes administered by SkillsFuture Singapore.
The rate is 0.25% of each employee’s monthly gross wages. There’s a floor of SGD $2 per employee per month and a cap of SGD $11.25 per employee per month. The cap kicks in once monthly wages reach SGD $4,500, so employees earning SGD $4,500 or more all generate the same SDL cost of SGD $11.25.
SDL is collected by the CPF Board alongside CPF contributions and is due by the 14th of the following month.
Foreign worker levy
The Foreign Worker Levy applies to S Pass and Work Permit holders. It replaces the CPF obligation for these employees. You pay the levy to the Ministry of Manpower (MOM), and it doesn’t go to the employee.
S pass
The levy for S Pass holders is SGD $650 per month, standardised across all quota tiers as of 2026. S Pass holders are mid-skilled foreign employees who must meet a minimum salary threshold set by MOM.
Work permit
Work Permit levy rates vary by sector and quota tier. The rates below reflect the current structure.
| Sector | Monthly levy |
|---|---|
| Construction (basic-skilled) | SGD $900 |
| Services (quota tier-based) | SGD $450–$800 |
| Manufacturing (quota tier-based) | SGD $450–$800 |
Within the services and manufacturing sectors, the levy increases as your proportion of foreign workers rises relative to your local workforce. Companies that rely more heavily on foreign workers pay higher per-worker levies.
Income tax and withholding obligations
Singapore doesn’t require employers to withhold income tax from employee salaries on a monthly basis. Resident employees file and pay their own income tax annually through the Inland Revenue Authority of Singapore (IRAS).
There is one exception you need to know about. When a foreign employee is leaving Singapore permanently or for an extended period, you must notify IRAS and withhold any outstanding tax from their final salary payments. This is called the tax clearance obligation, and it applies even if the employee’s departure is voluntary. You must withhold salary from the date you receive notification until IRAS gives clearance. Failing to do this makes you personally liable for the outstanding tax.
Local qualifying salary
The Local Qualifying Salary (LQS) is the minimum wage you must pay Singapore citizens and PRs for them to count toward your local workforce quota. Your quota determines how many foreign workers you can hire on S Passes and Work Permits.
The LQS is currently SGD $1,600 per month. It rises to SGD $1,800 per month from 1 July 2026.
If a local employee earns below the LQS threshold, they don’t count toward your local headcount for quota purposes. This matters if you’re planning to hire foreign workers at volume. To maximise your Foreign Worker Levy quota headroom, all local employees need to be paid at or above the LQS.
Total cost of employment
The table below shows the full employer cost for two scenarios: a Singapore citizen aged 35 on a SGD $6,000 salary, and an S Pass holder on the same salary.
| Cost component | Singapore citizen (age 35) | S Pass holder |
|---|---|---|
| Monthly salary | SGD $6,000 | SGD $6,000 |
| CPF contribution (employer) | SGD $1,020 (17%) | Not applicable |
| Foreign Worker Levy | Not applicable | SGD $650 |
| Skills Development Levy | SGD $11.25 | SGD $11.25 |
| Total employer cost | SGD $7,031.25 | SGD $6,661.25 |
For the citizen, CPF adds 17% on top of salary. For the S Pass holder, the levy is a fixed cost that doesn’t scale with salary beyond its flat monthly rate. At SGD $6,000, the citizen is modestly more expensive at employer cost level. The gap widens further at higher salaries because CPF scales with wages while the levy stays flat.
Hiring in singapore without a local entity
Singapore requires a locally registered employer to sponsor work passes and process CPF contributions. Foreign companies without a Singapore entity can’t hire employees directly. You need either to incorporate locally or to engage an Employer of Record (EOR) that has an established Singapore entity.
An employer of record formally employs your Singapore workers on your behalf. The EOR handles CPF registration and remittance, SDL filing, Foreign Worker Levy payments, work pass sponsorship, and tax clearance when employees leave. Your team members work for you day to day, but the EOR manages all employer-side compliance. This removes the need to incorporate, which can take months and requires a local director.
If you’re evaluating EOR services for Singapore, look for a provider with an existing Singapore entity and demonstrated experience managing CPF and work pass obligations.
FAQs
Do employers in Singapore withhold income tax from salaries?
No. Singapore doesn’t operate a pay-as-you-earn (PAYE) system. Employees file and pay their own income tax directly with IRAS once a year. The one exception is the tax clearance obligation: when a foreign employee leaves Singapore permanently, you must withhold their salary and notify IRAS until clearance is granted.
Do foreign employees pay CPF?
No. CPF applies only to Singapore citizens and permanent residents. Foreign employees on any work pass, including Employment Passes, S Passes, and Work Permits, don’t contribute to CPF and aren’t entitled to CPF benefits.
Does the Skills Development Levy apply to foreign workers?
Yes. SDL applies to all employees, regardless of nationality or pass type. The rate is 0.25% of monthly gross wages, capped at SGD $11.25 per employee per month.
What is the levy rate for S Pass holders?
The Foreign Worker Levy for S Pass holders is SGD $650 per month, standardised across quota tiers from 2026.
What is the Local Qualifying Salary and why does it matter?
The LQS is the minimum monthly salary a local employee must earn to count toward your headcount quota for foreign worker pass applications. It’s currently SGD $1,600 and rises to SGD $1,800 from 1 July 2026. If any of your local employees earn below the LQS, they don’t count toward your quota, which reduces the number of foreign workers you’re permitted to hire.
