Simple & effective payroll, it exists in Singapore
For an organization that is in the process of establishing in a new country the degree of payroll complexity in this country will give companies a good indication of how difficult or easy it will be to manage people costs when starting operations in a country. The new firms enter a market, create new jobs and contribute to the socio-economic development of the economy. At same time they encounter challenges such as: sourcing talent and employee payroll administration. A high degree of payroll complexity may act as an entry barrier for a company that should have many other priorities to address in the new market environment. So how does payroll complexity impact the organizations ability to enter a new market? There are multiple factors that determine how complex a country is to run payroll, ranging from infrastructure and legislation to culture and degree of administrative automation.
NGA’s research paper ‘Payroll Complexity Index 2013’ has explored the fundamentals complexity drivers in detail using a set of criteria’s such as complexity of gross-to-net calculation, union involvement and collective agreement. The study concludes that France is the most complex country in terms of payroll process and Singapore, Hong Kong, China are the least complex ones out of the countries surveyed.
In countries that focus on promoting economic growth & development the government plays a crucial role in supporting a dynamic business environment. Rules are set to eg. reduce the cost of resolving disputes, increase the predictability of economic transactions and make a country “foreign investor friendly”.
The World Bank issues a report called “Doing Business” In the 2014 report, Singapore is ranked the least complex market for starting a business. The low Payroll Complexity (as indicated in the NGA study) contributes to this good ranking by lowering entry barriers for new companies.
Singapore is a tiger economy and the government has invested heavily to create a business-friendly environment. Organization-friendly employment laws, a “light” social security structure, openness to foreign workforce, and skills development levies are a result of some of the initiatives taken by the government.
Employee & employer friendly regulation ensures straightforward payroll calculation processes. Limited union involvement, simple gross-to-net calculation, a flat salary structure (consisting of base pay and allowances), deduction limited to the Central Provident Fund & additional social fund contribution (such as the Singapore Indian Development Association (SINDA), Chinese Development Assistance Council (CDAC), and the Eurasian Fund (ECF)), along with no tax withholding via payroll, simple tax slabs, and infrequent legal changes make the payroll management & execution process simple, which in turn, reduces the probability of disputes.
Liability of the employer is limited to reporting of employee earnings under the Income Tax Act.
The revenue authority also has a well-developed electronic tax reporting process and portal for both employer and employee to manage the process.
Singapore was one of the first economies to adopt electronic systems in its public administration. In 1992 the Inland Revenue Authority of Singapore (IRAS) developed an integrated, computerized tax administration system. Going electronic allowed for automated standard taxation procedures and made the system less dependent on the subjective expertise of individual tax officers, reducing the potential for human error and corruption. IRAS encourages employers to join an Auto-Inclusion Scheme (AIS) for Employment Income reporting. Over the years the number of electronic fillings has increased and now 80% of major returns are filed electronically (IRAS, 2012) making the year-end process hassle-free.
I would say Singapore has one more feather to add to its hat, simple and effective administration which is reality and not myth.