7 Benefits of Using Payroll Software in Singapore

When you ask a finance manager in Singapore what actually changed when they transitioned off spreadsheets, time savings is seldom the first response. Instead, it's more likely to be an anecdote: the incorrect CPF CPF calculation that persisted for three months until it was picked up, the payslip that was issued with a missing field stipulated by MOM, or the panicky rush come February in order to make it in on time for the IRAS submission deadline. More than simplifying and speeding up, the primary impact of using payroll software is about the type of errors that it becomes possible to make - and the types that cease to exist altogether.

This is a distinction of considerable consequence here compared to other markets, as payroll in Singapore isn't quite simply an HR filing exercise, but has a very solid foundation on statutory compliance to IRAS, CPF and MOM, with specific requirements for each as regard submission format, deadlines, and in some instances, penalty frameworks.

Here are seven benefits which stand true under closer examination of how Singapore payroll compliance works beyond marketing claims.

1. It removes the manual CPF and SDL calculation as a source of error

The CPF contribution rates are not a fixed single rate for everyone; they vary according to the various age brackets and the citizenship (or Singapore Permanent Resident, with the year of PR status), the wage ceiling, and whether the particular pay item is categorised as Additional Wage or Ordinary Wage. The Skill Development Levy (SDL) is then applied on the aggregate pay sum up to a monthly threshold and on to employees irrespective of whether they are CPF-liable or not. Manually processing these at the end of each month for a varied workforce of Singaporeans and PRs in differing ages and PR categories is precisely this kind of tedious and repetitive set of rules-based computations where small errors can slip in so easily and often only surface in a future CPF audit or an employee complaint: a copied formula down the row wrongly, failure to update the PR year of an employee for his contributions, to name two of the more common issues.

2. It takes the pressure off the annual IRAS AIS submission

Releases the annual burden of IRAS AIS submission employers that are required to file their employees employment income to IRAS electronically on the first day of March each year by employers that have five or more employees, or have been formally notified by the Inland Revenue Authority of Singapore (IRAS) in the past IRAS AIS submission deadlines: The filing doesn’t “soften”, and last year over 12,000 employers missed it - resulting in tax assessment delays for employees and risk of penalty for the company under the Income Tax Act. But where AIS becomes tricky isn’t the logic, it’s just how much has to flow. Everything – salary, bonus, benefits-in-kind,, share-based, and so on – has to correctly slot into IR8A and one of its annexes.

Payroll that integrates with IRAS's AIS API push that data automatically rather than relying on human, or even two human, minds to tally twelve months of payroll in the first week of January into a IRAS format.

If that’s not good enough, for companies that run a lean finance team, it’s the difference between the AIS being a half-day chore and a full-week of audit by any reasonable business definition.

3. It generates itemised payslips that actually meet the legal format, not just a reasonable-looking one

Since April 2016, all employers who fall under the Employment Act must give a payslip with specific prescribed details, to include pay, allowance, deductions, overtime and net salary to their employees within three business days of payment, as a civil contravention by the Act. This could result in administrative penalties for each employee affected; thus, if your entire workforce fails to receive correct payslip details, that could mean numerous violations. A classic pitfall could also be, due to the non-specialized look; a payslip may still be missing a certain required field, mostly on how overtime calculation is provided or itemization of casual deductions.

While most local payroll software in Singapore default to generating the required set of details, it is important to be weary of software that allows extensive customization of templates that do not conform to the Singapore Payslip layout.

In other words, a certain software may offer more customization than required and can be a risky proposition if not properly managed. Insist on viewing the default system payslip output before subscribing to any payroll Software package.

4. It creates a single, defensible record instead of scattered files

As MOM insists that payroll and employment records be stored for a minimum of 2 years (for current and past employees), and that MOM can at any time request for such records, with the minimum lead-time, a business using a blend of spreadsheets, email approvals and ad-hoc corrections will find that even if all individual payments are accurate, generating a clear, accurate, and ready records instantaneously will often be impossible.

Payroll software retains a timestamp history and running log of each payroll run, modification and approvals in one database. This may not seem very significant for every-day processing of paychecks, but it can be a huge life-saver in times that we rarely experience but the stakes are just as high: an MOM inspection, a CPF inquiry, or salary final settlement disputes after employment termination.

5. It scales without adding headcount to the finance or HR team

Here is where the benefit case begins to turn from compliance to operations. You could theoretically run a ten-person company’s payroll manually with relatively little pain. A company of fifty can usually not.

Not because the actual calculations get difficult, but because the exception load (prorates for joiners and leavers, changes to leaves and pay-related allowances, irregular monthly overtime) gets tremendous.

Manual payroll loads are more linear (more head count equals more than linear increase, if anything, with more complex exceptions taking more manual time), while software pay rolling's step function: adding person 51 still mostly adds value by the almost same level the 50 th person added, and requires almost the same marginal resources; and more than this-not taking the cost saving from reduced human error from the analysis. Singapore's SMEs hiring consistently are often there when they start needing payroll software not as a nice to have, but actually as an excuse for not hiring the additional person needed in the finance team. As a business which remained flat on headcount in for years before deciding to make the switch (due to its stable payroll workload and simple monthly payroll operations) to payroll software, the ROI calculation can and needs to be more critically framed.

6. It becomes the connective layer for regional and multi-entity operations

Given that Singapore often acts as the regional head office or a holding entity within ASEAN for group structures, the payroll discussion isn't simply Singapore-specific. For instance, a financial function overseeing both Singapore entity as well as those based in Malaysia, Indonesia or Vietnam would appreciate having their group entity reporting structure aligned, at a minimum, where statutory accounting and tax differences (and the differences for CPF to nearby markets is significant, there’s not a lot that mirrors CPF globally). This is also an area where the localization versus customization tradeoff is important.

While a global/regional system might address common areas like the GL report or general consistency between entity reports well, certain requirements unique toSingapore, like the specific formats for CPF, SDL, IRA forms, are unique enough to require authentic Singapore localization rather than a standard “ Asia” template.

Consider the Statutory requirements the priority area for Localization, and unique non standard operating procedures (specific approval flows or non-standard benefits )as Customization, and that will help you to avoid the common pitfall of conflating the two in a Singapore Payroll implementation.

7. It reduces the personal data exposure that comes with payroll spreadsheets

Payroll datais personal data according to the PDPA-so that includes each and every one of your employees’ NRICs, bank account details and salaries. When a payroll spreadsheet goes via email between the HR department and the finance department (or is saved onto a share drive without controls), it generates a data trail that the PDPA is intended to make a thing of the past. Spreadsheets aren't illegal of course, but they don't typically boast role-based permissions, encryption, and access logging that come standard with an ERP payroll module.

Many companies, especially those that have ever needed to answer, "Who can access employees' compensation data?"

are probably comfortable leaving value associated with improved security undervauled due to its daily intangibility.

What to actually evaluate before choosing a provider

Given the above, a shortlist conversation with any payroll software provider should go beyond "does it calculate CPF correctly." Worth asking directly:

• What integrations to IRAS AIS API are available, is there file export that one would have to upload via the user portal still?

• Do you have a default itemized payslip template available for me and whether it can restrict the fields I need to keep in the payslip or not?

• How is an employee that is leaving a company mid-month pro-rated? This is what needs to be adjusted by employer when calculating their final salary. CPF amount for employee that will be leaving and no longer will pay contribution

• Since you also function in Singapore, is your Singapore set up a real localized version or just some common regional templates with an added Singapore region module?

• What type of access controls and audit logs is implemented at the system level concerning pay data and NRIC data?

A business that just wants to pay salaries to Singapore employees may have a standalone Singapore-only payroll software solution that tick all the boxes, but adding a full-scale ERP layer beyond that will most likely lead to over-engineering the solution. If a business is managing its payroll process on top of a multi-currency accounting ledger or CRM with inventory, and especially if Singapore is treated as the regional hub, it makes sense to incorporate payroll within an ERP system to avoid double keying payroll figures into both the payroll system and general ledger. Such localisation - implementing solutions with CPF, SDL, IRAS, etc., for the country in the accounting and HR system - is one of the strengths of firms like SerpentCS within the Odoo Eco-System, but the suitability again ultimately depends on how intertwined the other elements of the finance stack actually are rather than just provider name.

Looking for an Odoo ERP development company in Singapore? Let’s discuss your business needs, explore the right Odoo solution, and have a cup of coffee.