# What do employers typically cover in Singapore?



## SunnyBreeze (Jul 11, 2009)

Hi, I'm an Aussie considering a move to Singapore. I am considering an offer and would like to get all my facts straight.

Can anyone tell me if there are any employment laws/requirements around standard health and retirement offers? ie. Do employers have to contribute to some sort of health fund for or in conjunction with empoyees? Same question for retirement savings (ie. similar to Australia Superannuation, Canadian RRSP, or US 401K)?

If there are no mandated requirements, do Singaporean companies typically (or sometimes) offer these benefits as part of a well rounded compensation package?

As background, I have been given an offer that includes a clause about my employer contributing 1% of my salary to Medishield or Medisave. I'm not really sure what that means or if that's better or worse than average? 

Finally, my office is near City Hall/Clarke Quay. How much (rough average) would a furnished 1 bedroom apartment within walking distance or 20 minute commute be?

Thanks!


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## BBCWatcher (Dec 28, 2012)

SunnyBreeze said:


> Can anyone tell me if there are any employment laws/requirements around standard health and retirement offers? ie. Do employers have to contribute to some sort of health fund for or in conjunction with empoyees? Same question for retirement savings (ie. similar to Australia Superannuation, Canadian RRSP, or US 401K)?


Retirement, no. Singapore offers a Singapore tax-advantaged retirement savings program to Employment Pass and other foreign workers (among others) called the Supplemental Retirement Scheme (SRS), but there is no requirement for either employer or employee to contribute. I would not recommend SRS if the proceeds are going to be subject to home or retirement country taxation, and that's generally true. If you can continue contributing to a home country tax-advantaged retirement savings account while working in Singapore then you're better off doing that, I'd say.

Employers are legally required to pay for a very basic level of medical insurance for Work Permit holders (lower income foreign workers). The employers of EP holders do not have that legal requirement. Some foreign workers, including many EP holders, have limited workplace injury coverage under Singapore law. Also, employers must pay for repatriation of foreign workers at the end of their terms.

The direct, short answer to your question is no, employers do not have these _obligations_.



> If there are no mandated requirements, do Singaporean companies typically (or sometimes) offer these benefits as part of a well rounded compensation package?


Medical insurance, yes. Retirement, no. Disability, maybe. Life insurance, maybe. Housing assistance, maybe. Home leave travel, maybe. Childcare and child education assistance, maybe.

It's all negotiable, really. There are very few legal requirements in terms of specific compensation elements. (On edit: "Negotiable" doesn't mean your prospective employer will agree to any of your demands.)

Singaporean citizens and Permanent Residents -- the latter after a grace period after becoming PRs -- are required to participate in the Central Provident Fund (CPF). CPF serves many savings functions including retirement savings. Employers are required to contribute their share into CPF. Foreign workers are not permitted to participate in CPF.



> As background, I have been given an offer that includes a clause about my employer contributing 1% of my salary to Medishield or Medisave. I'm not really sure what that means or if that's better or worse than average?


It means nothing unless you're a Singaporean citizen or Singapore Permanent Resident. (Or possibly married to one.)



> Finally, my office is near City Hall/Clarke Quay. How much (rough average) would a furnished 1 bedroom apartment within walking distance or 20 minute commute be?


You've just limited yourself to some of the most expensive real estate on the planet. I would estimate S$3500 and up monthly for private accommodation and maybe S$2800 and up if you happen to get lucky and find a suitable HDB (public housing) rental unit in that zone. (There are a few.) But this is easily determinable at the various rental apartment Web sites in Singapore.


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## anonserg (May 13, 2014)

Try look for few condo complex near Ferrer Park MRT. There's one complex just right in front of the MRT entrance but I forgot the name. Semi-furnished studio will cost u around sgd2500 (then furnished it urself with ikea furnitures u save a lot here if u stay longer than a year or so). Being nearby MRT basically means ure well connected to every part of the island (plus theres a community mall in the area with all the shops u need)

Clarke Quay is in city center so even the smallest comfortable unit will easily set u back about sgd4k a month.


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## BBCWatcher (Dec 28, 2012)

I'd like to elaborate a bit on Singapore's Supplementary Retirement Scheme (SRS) accounts. I'll limit my comments to how they work for foreign workers.

You can open an SRS account with one (and only one) of the three local banks: DBS, UOB, or OCBC. (I prefer OCBC for this purpose since their "Blue Chip Investment Plan" is not too awful, but they're all about the same.) Foreign workers can contribute up to S$29,750 per year into the account but never more than 35% of the worker's income earned in Singapore. Contributions must be made by December 31 for that particular calendar/tax year. You cannot contribute for a spouse or child -- they are individual accounts. Employer contributions are considered ordinary taxable income, so it's far better for the employer to pay you that money then for you to decide whether to contribute to an SRS.

The amount of your qualified contribution is subtracted from your taxable income. For example, if you receive S$80,000 in total salary, and you contribute S$20,000 to an SRS, then your taxable income in that year is reduced to S$60,000. That contribution would be 25% of earned income, so it's within the 35% limit and thus allowed.

You can invest your funds in a limited range of Singaporean financial assets. Those can includ bank fixed deposits (which pay very little interest), Singapore Government Securities (a bit better, at least on the long side), some equities traded on the Singapore Stock Exchange, and some unit trusts (mutual funds), as examples. None of these are spectacular in my opinion due low yields and/or high costs/fees, but your mileage may vary.

You can withdraw funds without penalty if you have a serious medical condition, if you reach retirement age (age 62 as I recall), or if you have left Singapore and 10 years have elapsed from account opening. Once you start withdrawing you cannot contribute more. Singapore then taxes _50% of the funds_ as you withdraw them at then-current income tax rates _including all the accumulated dividends, interest, and capital gains_. Foreigners are subject to withholding but may be able to claim a partial refund depending on their real Singapore tax bracket by filing a non-resident tax return in Singapore. If you make an unqualified (i.e. early) withdrawal you pay income tax on 100% of the withdrawal (including accumulated dividends, interest, and capital gains) plus a 5% penalty, so you really want to try to avoid that.

Singapore has few if any tax treaties with other countries, so it's unlikely your other country of future residence will respect Singapore's tax treatment of the SRS account. Moreover, Singapore currently has no personal income tax on interest, dividends, and capital gains, so the fact 50% of your gain-inclusive SRS proceeds are taxed is, shall we say, "interesting." The higher the actual gains achieved, the worse the SRS looks, I'd say. I think it's reasonable to assume Singapore's income tax rates will increase, so the future tax on the 50% of the total withdrawal might be higher than currently suggested. You've also got exchange rate risk to consider.

All that said, you might be able to thread the needle and get some tax benefit. Let's suppose, for example, that you work 3 years in Singapore and then head back to your home country. Let's assume that home country is not the United States -- that you are not a U.S. citizen. (I think the SRS account is an even more dubious proposition for a U.S. citizen or national.) Let's use that S$80,000/year and S$20,000/year SRS contribution hypothetical from above. Thus you have S$60,000 in total SRS contributions, and you've reduced your S$80,000 to S$60,000 in immediately taxable income. Let's assume you find an investment that pays 5% (net) per year -- and I'm going to simplify here and assume the S$60,000 is all at once and then 5% from there. (It's just an example.)

OK, one possible strategy to execute just before you go home is to "churn" the investment(s) in your SRS account. That is, you sell Holding X and buy Holding Y, still assuming a 5%/year return in this example. That's a fully tax deferred event in Singapore -- you can trade as often as you want within the SRS account. But you've raised the cost basis of that account from S$60,000 to S$69,458 (5% yield compounded over 3 years). When you move back to your home country, you've now got a S$69,458 foreign financial account holding with a S$69,458 cost basis. Assuming your home country's tax system is OK with that revised cost basis, that helps.

Fast forward 7 more years. The account now has a value of S$97,734 if my simplified math is right. You've reached the 10 year mark since the account was open, and you can now withdraw the funds. Let's suppose Singapore's effective tax rate is 20% at that time -- that's probably about right. That means you'd pay S$9773 in tax to Singapore when you withdraw that full amount. (And let's assume you do that.) You pay the then-current tax rate on 50% of the withdrawal, or in other words you pay half the tax rate (10%) on the full withdrawal. That also equates to a 34.6% tax rate against the 7 year gain. If your home country's tax system views things that same way, as a 34.6% foreign tax rate, then that's probably great. You might even get a foreign tax credit to "spend" back in your home country. The S$9773 in tax equates to a 16.3% tax rate against the original S$60,000 you contributed, and that's not so great from the Singapore point of view, in my opinion, in this hypothetical. In this hypothetical you probably have saved anything in Singapore income tax. You've just deferred the tax.

This is a weird account, basically. Oddly enough it might make some sense to invest the funds in a 10 year Singapore government bond. That bond yield should basically cancel out inflation -- that's a reasonable prediction anyway -- but not do anything more than that. So you then get some benefit in reducing your Singapore income tax and, assuming it works in your home country, you get some future foreign tax credit as you pay Singapore income tax when you cash out. The gains are more modest, but gains actually hurt you a bit on the Singapore side. In other words, if you want to keep a portion of your savings in something safe (excluding the exchange rate risk), then an SRS might work as the vehicle for such funds.

As you can probably guess, I'm not entirely convinced these SRS accounts are good savings vehicles for most foreigners, though. I'd also say you should forget about them entirely if you're a U.S. citizen or national. (Perhaps also if you're a Hungarian citizen.) For Singaporean citizens and Singapore Permanent Residents who plan to stay in Singapore, yes, the SRS accounts look pretty good. Of course the Singaporean government knows that, and the contribution limits are lower for citizens and PRs.


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## badsector (May 23, 2014)

another option was ..top up CPF


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## BBCWatcher (Dec 28, 2012)

CPF is only open to Singaporean citizens and Singapore Permanent Residents.


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## SunnyBreeze (Jul 11, 2009)

Thanks for all the replies. 

I'm definitely not going to be doing anything complicated accounting wise as I will likely only be in Singapore 6 months - 1 year. I just wanted to make sure that I was going to be offered what is standard for employment in the country.

thanks!


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