What are employee savings schemes in Singapore and why are they important?
Healthy employer-employee relationships are the cornerstone of good business practices. Many countries have a dedicated set of legal regulations that govern this relationship, making sure it is maintained in a fair and stable manner.
The employee benefits Singapore government stipulates work to ensure that the employee rights Singapore’s working population deserves are upheld. While at the same time, they also ensure that businesses in the country are protected from unfair labor practices.
Are you sure your business is doing all it can to uphold employer-employee values? Are you investing in all the government schemes that are necessary in Singapore to save employees' expenses?
Regardless of where you stand on these questions a working knowledge of employee schemes could be potentially useful. Read on!
What are employee saving schemes?
Generally speaking, employee saving schemes are set up by governments to establish a system for helping employees secure their finances over their period of employment.
These schemes are launched by state and central governments, public/private sector banks, and financial institutions. For example, in Singapore, one of the forms in which employee savings schemes are available is the CPF relief or Central Provident Fund.
Employees can utilize savings generated from these schemes to fund cases of emergencies, higher education, retirement, job loss security, debt payoffs, and much more.
Why is it important to invest in saving schemes?
Employee saving schemes are sound investment options for both the employer and employee. Investing in company benefits for employees not only helps secure your workforce’s future but also brings positive returns for your company. Here’s how:
Benefits for employees
• Safety
The most obvious benefit of saving schemes is the safety that employees can get out of savings.
Savings schemes help employees save more money by reducing the amount of liquid cash they have at their disposal. It ensures that money is safely stored for your employees to utilize it in the future when they really need it.
• Retirement planning
Building a retirement fund by regularly depositing money in a savings scheme that is long-term is a smart way of securing the later stages of your life.
Especially if you start at an early age you may be rewarded with a large sum that can help you lead a life that is comfortable and secure.
• Reduced financial stress
The lack of funds in the present or the future can become a source of significant financial stress and burden. For an employee who does not have savings, the prospect of future emergencies, necessities, etc. can be seen as a major obstacle.
Having a system where money is automatically segregated and stored for future use can drastically reduce the financial stress an employee has to go through.
• Long-term benefits
Saving money via long-term schemes also comes with the added bonus of compound interest systems. These schemes increase the amount you save year-on-year, resulting in significant results at the time of maturity.
Benefits for employers
• Employee retention
Investing in company benefits for employees can boost your company’s reputation amongst your workforce.
When a company invests in and provides employee benefits over and above monthly salaries it sends a positive message of care to its employees - that the company does value its people.
This can help you retain your employees by keeping morale high and your workforce fairly compensated.
• Tax savings
Employee savings schemes often come with tax benefits for the employers making the investment. This can come in the form of tax deductions and/or exemptions.
Your savings will depend on the tax scheme under which you plan on getting your refunds or exemptions.
In some cases, employers can get percentage returns on investing a particular amount of money, or this can also come in the form of exemptions on the interest accrued investment, and maturity amount.
• Competitive talent acquisition
Nowadays salary is not the only metric that potential employees value when taking up a new job.
Factors like company benefits for employees also play a key role in their decision-making. Investing in sound savings schemes not only helps you retain talent but also gives you an edge over competing recruiters in terms of attracting top talent.
What does the Singapore employment act state?
The Singapore Employment Act (the Act, or the EA) is the primary source of regulations that govern all relationships between employers and employees in Singapore.
The Act establishes minimum standard regulations that must be followed by employers during the time of hiring and throughout the tenure of an employee at their company.
It outlines all the employee benefits Singapore workers are entitled to.
This includes regulations that set clear directions and minimum standards for factors such as employment contract, working-age, salary payments, paid leaves (sick and annual), working hours, overtime payments, termination, and penalties.
The EA also covers part-time employees through the Employment (Part-Time Employees) Regulations. However, the Employment Act is not applicable to the following groups:
• Accounting and Corporate Regulatory Authority (ACRA), Monetary Authority of Singapore (MAS), and other statutory boards’ employees who are civil servants.
• Domestic workers
• Sailors
• Supervisory or decision-making managers and executives
• Lawyers, accountants, doctors, and other professionals with tertiary education and specialized skills.
• Freelancers, independent contractors, and any entity working on their own terms.
What government schemes are available to employees through their employer?
Central Provident Fund or CPF
Funded by contributions from both employers and employees, the Central Provident Fund or CPF relief is a mandatory social security savings scheme run by the Ministry of Manpower in Singapore.
Depending on the age of the employee, Singapore employer CPF contribution rates range between 17% to 7.5% of the employee’s monthly wages. On the other hand, employees’ CPF relief contribution, depending on age, ranges from 20% to 5%.
Portable medical benefits scheme
This scheme is one that is particularly useful for both employers and employees. The Portable medical benefits scheme allows employees to carry over their medical benefits even if they change employers.
At the same time, by implementing the medical benefits for employees scheme businesses can avail of tax deductions or exemptions.
This scheme is available in 3 options - Portable Medical Benefits Scheme (PMBS), Transferable Medical Insurance Scheme (TMIS), and providing a Shield plan.
Annual wage supplement
Also known as the “13th-month payment”, the Annual wage supplement or AWS is paid to employees as an addition to their annual wage.
It is a voluntary single annual payment that employers are expected to pay their employees in recognition of their contributions towards organizational growth in that year.
The AWS works as an employee assistance program Singapore has introduced to help meet employees’ yearly needs and requirements.
Reimbursement of medical consultation fees
As per the Ministry of Manpower, employee benefits Singapore companies provide must include paid sick leaves, i.e. employers must pay salaries for sick leaves taken by employees.
Moreover, medical consultation fees must also be reimbursed by employers if the medical certificate was issued by a public institution medical practitioner or one that is appointed by the company.
Work injury compensation
Social benefits in Singapore include compensations for injuries sustained during work as well. This compensation is present in the form of the WICA or Work Injury Compensation Act.
The WICA gives employees a channel for claiming compensation for work-related injuries or diseases, without the need to take any legal action. Excluding special cases, the WICA applies to all employees regardless of salary level.
Employees can utilize the WICA to claim medical expenses, medical leave wages, and/or complete compensation for death or permanent incapacity.
MSO scheme
The MSO or Medisave-cum-Subsidised Outpatient scheme is a special medical benefits scheme that works like a job support scheme for public sector employees in Singapore.
Overtime working hours
According to Singapore’s Ministry of manpower, normal working hours for employees cannot exceed 44 hours per week.
If, however, work does go into overtime employers are legally bound to pay 1.5 times the employee’s hourly rate of pay for every hour worked overtime. Moreover, overtime hours in Singapore are capped at 72 hours a month.
How can you avail maximum benefits from government saving schemes?
There are a number of steps you can take to make sure both you and your employees get the most out of the government saving schemes available in Singapore. Given below are some examples of the same:
If you're an employer
• Hiring a dedicated Human Resource (HR) manager to effectively manage employee benefits schemes and employee welfare, in general, is tried and tested strategy for maximizing returns.
Getting an HR manager on board means that you have the authority to oversee everything related to savings schemes, from deciding which employee gets how much for overtime to staying legally compliant.
• To avoid missing out on key details and parameters try to use standardized contracts and templates wherever possible.
Employee insurance Singapore is a good example of this; because insurance is applicable for nearly every employee having a standard document ready beforehand can save you a lot of trouble during hiring.
• Outsourcing mundane administrative tasks related to savings schemes, like managing payroll, can be easily done by payroll management software. Getting one onboard has proven to be a useful tactic, especially for companies working with sizeable workforces.
If you’re an employee
• Make sure you keep track of your working hours. Employees benefits in Singapore have a clear policy on overtime and employees are entitled to a fair share of payment for every hour worked above the 44 hours per week limit.
• Keep all reimbursement-related documents, e.g. invoices, medical certificates, etc. safely secured. While managing these documents manually can be troublesome, it is much easier if your company has a system that lets you store them digitally.
• At the time of changing jobs or retirement make sure you withdraw the savings schemes amount you are owed by your employer or the government, whichever is relevant. An example here is CPF relief.
Suggested read: How to get a startup business loan without collateral in Singapore?
As we have seen, the employee benefits in Singapore that are available are beneficial for both employers as well as their employees.
Keeping track of all the savings schemes, related documents, and important payroll details, in particular, has not made it easy for companies to get the best out of these savings schemes.
The saving grace in this situation, however, has been the payroll and expense management software that are currently available.
Trying one out for your own company might not be a bad idea, especially when most of the finance world is already experiencing its benefits.