The Best Ways to Pay Contractors in Singapore in 2024

The Best Ways to Pay Contractors in Singapore in 2024

The Best Ways to Pay Contractors in Singapore in 2024

September 18, 2023

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Key Takeaways

  1. Remote work has gained popularity in Singapore’s highly technically proficient workforce over the last few years
  2. Hiring independent contractors in Singapore comes with a variety of financial and operational benefits, but also added risk
  3. Working with an EOR can help recruit, manage, and pay contractors in Singapore while staying compliant with local laws
Summary

 

 

Singapore is an excellent destination for foreign companies seeking to employ skilled and professional workers. In this article, we will detail the steps to recruit and pay contractors in Singapore securely and efficiently. Additionally, we will emphasize essential tax and payroll considerations that you should always keep in mind.

Working as a freelancer or self-employed worker is a popular choice in Singapore. These roles are typically remote, providing individuals with greater flexibility than traditional full-time employment. The number of freelance contractors has grown significantly in recent years. This makes it an opportune moment to extend your workforce by hiring independent contractors in Singapore.

 

What is an Independent Contractor in Singapore?

 

Under Singaporean labor law, an independent contractor is an external business or individual that provides services based on a service contract. The key aspect of this relationship is that the contractor should operate with independence and autonomy.

The independent contractor should also be wholly self-employed and be willing to take on more than one client. Additionally, the nature of their role should entail some level of business risk. This indicates they are operating as an external entity, not an employee under contract.

 

 

 

 

The Risk and Dangers of Hiring Independent Contractors in Singapore

 

 

When you’re considering hiring an independent contractor in Singapore, it’s essential to have a good grasp of how the local labor laws view this type of working relationship. In Singapore, full-time employees receive certain protections and entail extra duties for the employer.

The Singaporean government closely watches how businesses class their workers to ensure fair treatment. They want to prevent any intentional or unintended misclassification that might lead to workers lacking benefits that should belong to employees.

If a business is found to be misclassifying employees, knowingly or not, it could face hefty fines or penalties. In some cases, they may even need to backpay social security contributions on behalf of the employee in question.

 

 

How to Find Contractors as Remote Workers in Singapore

 

 

Finding remote workers in Singapore can be tough, especially for those lacking local experience. Although various platforms and websites exist to help businesses discover talent, they may not always be the most reliable sources for finding skilled professionals.

Fortunately, partnering with a global Employer of Record, or EOR in Singapore, simplifies the entire recruitment process. EORs have networks of workers and partners in key markets, providing access to experienced talent worldwide. This approach could be the most efficient and effective way for you to hire remote workers in Singapore without a local entity.

EOR services extend beyond the recruitment phase; they also aid in managing contractors and contractor payments. From payroll processing to contract management, these services take care of essential but complex administrative tasks. This way, you can focus on business growth without worrying about compliance or HR-related matters.

 

 

Payroll and Taxes in Singapore

 

 

Like in many other regions globally, self-employed individuals in Singapore do not enjoy the same benefits and protections as full-time employees. Consequently, they are responsible for independently fulfilling their tax obligations and social security contributions.

Nevertheless, this doesn’t imply that freelance workers or independent contractors are altogether disqualified from social security benefits. Instead, it simply means they must manage the entire process themselves.

When you hire an independent contractor in Singapore, it all starts with a contract between both parties. This agreement should clearly spell out the services required and the payment arrangements.

The great thing about working with independent contractors in Singapore is that you don’t have to handle their payroll and taxes.

 

Independent Contractors in Singapore and Tax Concerns

 

Since these contractors operate as external entities, they handle their income tax based on their net earnings. They also file their annual tax returns, including their total income, deductions, and profits.

In some cases, independent contractors might choose to register as legal businesses. This can make it even easier for them to manage their finances and claim back relevant business expenses.

As you aren’t their employer, you don’t have to worry about tax deductions or social security contributions for the independent contractor. Your main responsibility is to ensure that the contractor’s status is accurate and compliant.

However, for companies in some countries like the US, there may be additional paperwork to manage. Seeking legal expertise before you start to pay contractors in Singapore will help you avoid any unwanted penalties or fines down the road.

 

 

The Most Effective Ways to Pay Contractors in Singapore in 2024

 

 

Payment arrangements for independent contractors differ from those for full-time employees. You mustn’t pay contractors in Singapore with a fixed salary to prevent potential misclassification risks. Instead, you should pay contractors in Singapore an agreed-upon amount as stipulated in the contract.

In general, you can pay contractors in Singapore based on an hourly, weekly, monthly, or per-project basis. The specific payment arrangement should be explicitly outlined in the contract signed with the contractor.

As for the payment methods, several effective solutions are available to pay contractors in Singapore. Here, we compile a list of the most suitable options:

 

 

Digital Wallets

 

 

Digital wallets present a highly efficient method of conducting online payments. The setup process is generally straightforward, allowing you to transfer funds to recipients within seconds seamlessly.

However, it’s important to note that these wallets often come with fees. Service fees like these can be a concern for businesses making constant larger payments to employees or vendors. Moreover, security considerations may arise when you need to pay contractors in Singapore or elsewhere from another country.

 

In Singapore, 35% of consumers use GrabPay as their payment method of choice, with Google Pay and Apple Pay also being popular options.

 

 

Direct Bank Transfers

 

 

Direct bank transfers offer a safe and secure payment option for both local and international transactions . This method directly sends funds into an international bank account when you need to regularly pay contractors in Singapore.

However, when it comes to international transfers, the process may take a lot longer compared to local transfers. Additional factors to consider are potential fees and foreign exchange rates. These could lead to a payroll system delay of up to a week for the transfer to be completed and reflected.

 

 

3. Partnering with an Employer of Record in Singapore (EOR) 

 

 

Running your own payroll internationally or opening your own local entity to employ workers or pay contractors in Singapore opens your operations up to extra risk. Instead, why not let a professional global EOR in Singapore handle all the complications for you?

This total service seamlessly brings together hiring, management, and payroll service aspects, helping you manage your business operations simply. By handing over the payment process to a Global EOR, you ensure efficient and localized payments to contractors. All the while, EORs manage payroll processing, administrative tasks, and compliance on your behalf.

EOR services empower you to focus on running your business in the most productive way possible.