Hiring foreign talent changes your payroll in specific ways — and the rules differ sharply between an Employment Pass professional and a Work Permit worker. The two costliest mistakes are treating all foreigners the same, and forgetting the IR21 tax clearance until someone has already resigned.
This guide sets out how CPF, the Foreign Worker Levy, SDL, payslips and tax clearance apply across the three main pass types.
The one rule that's always true: no CPF for foreigners
CPF contributions apply only to Singapore Citizens and Permanent Residents. You never pay or deduct CPF for a foreign pass holder. What replaces it depends on the pass:
| CPF | Foreign Worker Levy | SDL | Quota / sector rules | IR21 on leaving | |
|---|---|---|---|---|---|
| Employment Pass (EP) | No | No | Yes | No | Yes |
| S Pass | No | Yes | Yes | Yes | Yes |
| Work Permit (WP) | No | Yes | Yes | Yes | Yes |
| Citizen / PR (for contrast) | Yes | No | Yes | No | No |
Employment Pass holders
EP holders are higher-salary professionals, managers and executives. For payroll: no CPF, no Foreign Worker Levy, no quota. You still pay SDL (it applies to all employees), issue itemised payslips, and must file IR21 tax clearance when they leave.
S Pass and Work Permit holders
Both attract the Foreign Worker Levy — a monthly cost set by MOM based on pass type, sector, skill level and your firm's tier — and both are subject to quota (the Dependency Ratio Ceiling) and sector rules. Neither attracts CPF. Both still attract SDL, need itemised payslips, and require IR21 on departure. MOM also sets a qualifying salary for S Pass (and minimum pay rules for Work Permits) that you must meet; confirm the current figure on MOM's site.
SDL applies to everyone
The Skills Development Levy is payable for all employees rendering services in Singapore — locals and foreigners, every pass type. It is charged at a low rate on the first portion of monthly wages, with a minimum and maximum per employee, and is paid together with CPF by the 14th.
IR21 — clear the tax before they go
When a non-citizen employee resigns, is posted overseas, or is about to leave Singapore, you must file IR21 tax clearance with IRAS — generally at least one month before their last day — and withhold monies due to them until IRAS issues clearance. This is the step most often missed, because the trigger (a resignation) sits in HR while the obligation (withholding final pay) sits in payroll. Once the person has left Singapore, recovering unpaid tax is the employer's problem.
Where it trips up Singapore SMEs
- Accidentally running CPF on a foreigner, or forgetting FWL on an S Pass holder — the system has to key off pass type.
- Treating EP and S Pass the same — only one carries the levy and quota.
- Missing IR21 until after the employee's final payroll, when the money has already been paid out.
- Letting a pass lapse below the qualifying salary after a salary change.
AimmPayroll Asia keys CPF, FWL and SDL off each employee's pass type and citizenship, flags work-pass data before a run is created, and keeps the IR21 trigger next to the payroll record. You can start free for up to three employees, or see full pricing.