How much does it cost to hire a staff?


“Staff are easy to hire…and when business is bad, just fire them!”, said an ex-friend of mine when he was talking about starting a business.

This is the irresponsible attitudes that we must eradicate if Singapore was to evolve positively in worker’s rights. We need to respect the skills, the person and networks of family a staff brings abroad when he/she is hired.

When inexperienced SME bosses hire staff, many think that they just have to factor in the monthly salary and CPF contributions. So they think, “Hmmm…. $1200 + a little bit more for CPF…cheap what!” Now this is very unhealthy thinking and the boss could get into greater trouble if he is not aware of these other costs:

CPF contributions
The employer has to factor in an additional percentage on top of what he’s paying the employee already for CPF. A guide can be found here:

Employers who do not pay their CPF contributions may face prosecution and if convicted, shall be liable to a fine of up to $10,000, or to imprisonment, or both. And your employee doesn’t have to complain either, CPF has a whistleblower system that allows any member of the public to lodge a complaint against you. You can also lodge a complaint here: [email protected]

Annual Wage Supplement
The Employment Act provides for employees or unions to negotiate for an AWS. It is very normal these days for companies to pay this (sometimes known as the 13th month bonus) to staff.

If your company is unionised and there is a dispute on the payment of AWS, it could land you in arbitration court.

Progressive Wages
You will need to build in a career path chart to show your employees clearly how they can move up the career ladder. Each stage of progression needs to be demarcated by a minimum and maximum salary. If you are in the cleaning, security or landscaping industry, you might also want to do some research into the “Progressive Wage Model”, one of the requirements being a minimum starting wage.

Medical Claims
Although a company is not required by law to pay for medical treatments, if an employee gets injured or sick due the course of work, then the employer is liable to pay for these treatments. For this reason, you also need to factor in insurance policies.

Insurance Policies
If your business deals with chemicals, heights, machines and vehicles, you really want to think about factoring in budget to buy insurance policies. If a serious accident happens, or if an employee develops an adverse medical condition during his/her course of work, your business is liable to pay for this and the damages incurred.

Overtime Pay
Employees earning $4500 and below and covered by the Employment Act are entitled to receive overtime payments.

Pay increment
Pay increments do not just have to happen where there is promotion. You need to factor in inflationary pressures and factor in a 2%-5% natural increase of salary each year.

Poor business is not a good excuse for not paying increments either. In a recent case at the Industrial Arbitration Court, SMMWU (Singapore Manual & Mercantile Workers Union) v China Airlines Ltd, the judge suggested that the company should cut losses by looking at the big areas where cost over-runs are massive, and not by scrimping on increases for the employees which form a small component of total costs.

If your company is seen to be making money and the bosses are buying fancier cars and houses, you must be seen sharing the profit with the employees that made it all possible for you.

Retrenchment benefits
If you have to finally remove staff for whatever reason, you have to factor in retrenchment benefits. Today, a staff working with a company for more than three years is entitled by the Employment Act to such benefits.

Today when a staff reaches 62 years old, the Employment Act requires the company to offer him re-employment up until he is 65 years old. In other words, you cannot ask someone to leave a company on the basis that he/she is old.

Training and Transport
Put simply, an employee should not be paying anything to be working for you. If it is for the benefit of your business, you must pay. You cannot argue that the employee stands to gain also.

Maternity leave
Every female employee shall be entitled to absent herself from work during the 4 weeks immediately before her confinement and 8 weeks after her confinement. During this leave, she is entitled to receive payment.

You are also not allowed to terminate a pregnant employee. If it is for disciplinary issues, you are going to have to prove this rather extensively. The penalty for breach of this part of the Employment Act is a fine of $5,000 or imprisonment of up to 6 months.


So you see, setting up a business and hiring people is not easy. It has consequences and you will need a reserve of money to make good all these payments should businesses turn sour.

The purpose here is not to scare potential entrepreneurs, but rather to remind bosses not to treat employees as commodities and objects. We are all just fellow people who need to make money for our families, and we are doing so by working for you.








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