Employer of Record in Singapore

published on 9 April 2024 | reading time approx. 3 minutes

Employer of Record solutions offer foreign companies without a local entity in Singapore the ability to quickly and easily hire employees in Singapore. This article examines the legal and tax peculiarities of EoR.

Is the concept of EoR known in Singapore and is there a law governing it? »
Is the concept of EoR similar to employee leasing in Singapore? »
Are there any special features of operating under the EoR concept in Singapore? »
What are the tax implications of the EoR concept in Singapore? »
How is the EoR concept evolving in Singapore? »

Is the concept of EoR known in Singapore and is there a law governing it?

The concept is known as “Employer of Record” (EoR) and sometimes as “Professional Employer Organisation” (PEO). There are several companies in Singapore that offer this service. Foreign companies are more keen to engage in EoR services than local companies. This applies in particular to foreign companies that initially do not plan to establish a legal presence in Singapore and may therefore wish to engage an EoR to fulfil the legal requirements of complying with Singapore employment laws and sponsor work visas for the employee.

Much of Singapore's employment law is based on the Employment Act 1968, the Employment of Foreign Manpower Act 1990, the Work Injury Compensation Act 2019, the Workplace Safety and Health Act 2006 and subsidiary legislation to these acts. The concept of EoR is not explicitly regulated by law. The Ministry of Manpower considers persons working under a contract of service to be regular employees, even if they work for an EoR.

Is the concept of EoR similar to employee leasing in Singapore?

In Singapore, the concepts of EoR and employee leasing differ in their purpose, the contractual relationships involved, the scope of services provided and other key aspects. Employee leasing is where a PEO hires employees and then leases them to other companies. Employee leasing is similar to EoR services in the way that in both cases certain functions are outsourced. In the case of a PEO, the PEO has more control over the employee's activities, whereas in the case of an EoR, the company engaging the EoR would have more direct or day-to-day control over what the employee does. The extent of the company's control and involvement is to be determined by contract.

Are there any special features of operating under the EoR concept in Singapore?

No general license or special permit is required to operate as an EoR or to use the services of workers employed by a third party (i.e. the EoR) in Singapore. However, the work performed by the employee in Singapore could still be attributed to the economic employer. Depending on the actual work performed by the economic employer, a licence or permit would be required for the specific business activity of the economic employer. For example, certain financial activities are regulated by the Monetary Authority of Singapore (MAS) and if the services of the economic employer are offered to an end customer in Singapore, a MAS licence may be required. A licence is however required for employment agency services in which job seekers are placed with employers.

In terms of any restrictions on the possible duration of such arrangements, Singapore employment law does not distinguish between employee leasing, contract employees, daily rate employees or employees on a tenure basis. There is no limit on the possible duration of EoR employment or employee leasing contracts. However, depending on the contractual arrangement, it may be specified that the EoR or employee leasing is limited to a certain period of time.

Under Singapore employment law, the employee must be provided with certain employment benefits as required under the Employment Act. It is up to the client company to determine whether there should be parity between the conditions of employment of the EoR employee and its own regular employees, as long as Singapore’s mandatory employment law is respected.

What are the tax implications of the EoR concept in Singapore?

The risk of a creating a Permanent Establishment (PE) will ultimately depend on what the employee is doing for the economic employer. This risk will not be completely excluded solely by engaging an EoR.

Singapore has concluded a double taxation agreement (DTA) with Germany, which does not explicitly cover Employers of Record or employee leasing. Depending on the structure, the Singapore tax authorities may see through an EoR structure and deem that there is a PE in Singapore.

How is the EoR concept evolving in Singapore?

Singapore, like most smaller countries, faces labour shortages in different areas to varying degrees. Historically, Singapore has dealt with such shortages by adjusting its visa and employment laws. Therefore, the concept of EoR is well and alive in Singapore, as evidenced by the various EoR organisations that market their services to potential client companies. From a legal perspective, it is unlikely that an EoR legal framework will be enacted as Singapore legislation in the near future.