Hire a Director of Marketing, can we just pay Director Fee only

[lkh66]

Dear all

my company is singapore pte ltd ($1 type) and my partner n me are singaporean and both also director of this company with shareholder of 50/50 share.

my questions
we want to hire a director of marketing (singaporean).
we plan to pay him director fee ONLY as director of marketing because he does not want to pay cpf.
his main role is to planing, development of business etc.
he does not has any of our company shareholding

is this practice allow or exist ?
or does he must have our company shares of certain percentage in order for us to pay him under director fee?

please kindly advise

[sundaymorningstaple]

Sure he can be a director, but if he's a "working" director, he has to have a salary commensurate with his position as a Marketing Lead in addition to his director's fees.

[lkh66]

hi sundaymorningstaple

thanks for replying

if he is just providing advise on planing , development business etc where he might be only 1 day in office per month.

does we still need to pay him salary ?

please kindly advise

[Strong Eagle]

hi sundaymorningstaple

thanks for replying

if he is just providing advise on planing , development business etc where he might be only 1 day in office per month.

does we still need to pay him salary ?

please kindly advise

Probably not, and, IRAS will make the final decision. If he really is working only in an advisory capacity, and especially if he has employment income elsewhere, I don't see any issue with a fee only director. Lots of companies utilize outside directors on a fee basis.

Do be sure to keep accurate records of his time involved and make sure that you have a consistent fee pay schedule... for example, a fixed monthly fee in exchange for up to X hours of consulting per month. If this is in place contractually, it would be even better.

I add that if he is working one day a month and you are paying him $10,000 in fees each month, you'll probably need plenty of justification and proof that he's not actually a working executive in the company.

[lkh66]

hi strong eagle

noted with thanks

[Strong Eagle]

I would add one additional item. If he is only working 1 day a month, I would be reluctant to name him "Director of Marketing". Such a title normally implies a company executive with specific internal roles and MoM may well question as to why he is a fee only executive. Besides, how can you actually be a director of marketing one day per month?

If you have to give a title on ACRA when you register him in Bizfile, use something like "Outside Director".

[lkh66]

hi strong eagle

can we do the following option...

1.pay him a certain commission of our annual net profit without any basic pay under employee term then we will also pay his cpf under additional wages where IF he also agreed above arrangement

2.hire him as director of marketing but he does not hold any company stakeholder shares where he is just under an employee term.

3. can he hold director of marketing where he does not has shares in the company, if cannot, what post is your suggestion

fyi, our company already has 2 directors with stakeholder shares of 50/50.

we want to hire him because he has good experience and good network in marketing field

please kindly advise

[Strong Eagle]

hi strong eagle

can we do the following option...

1.pay him a certain commission of our annual net profit without any basic pay under employee term then we will also pay his cpf under additional wages where IF he also agreed above arrangement

Yes, this is certainly a permissible way to compensate a director. You could also consider a bonus scheme, whereby, if certain targets were met, he would get X dollars, otherwise nothing. Just consider that bonuses and one time payments may attract a larget CPF payment (percentage wise) than a monthly stipend. You'll need to look at CPF website for details.

Also, be aware that if he is already paying CPF from other employment, he can petition the CPF board to ensure that the total of the two jobs does not exceed maximum CPF contributions.

2.hire him as director of marketing but he does not hold any company stakeholder shares where he is just under an employee term.

3. can he hold director of marketing where he does not has shares in the company, if cannot, what post is your suggestion

A director does not need to be a shareholder. Any person can be a director, so no issue there.

fyi, our company already has 2 directors with stakeholder shares of 50/50.

we want to hire him because he has good experience and good network in marketing field

please kindly advise

Every situation is different... and... since he is a director of marketing and has a good network, paying something in salary is appropriate. However, since this is a business development type of position, it is also perfectly reasonable to set compensation as either a commission percentage or a bonus when targets are met.

You can also pay directors fees to reduce the total CPF payments due, and again, this is not unreasonable. Consider: he may spend 50 percent of his time in an advisory capacity, developing a marketing strategy, analyzing the performance of marketing plans, etc. In this capacity, he really is acting as an advisor and you would have a defensible position for the payment of fees.

For the times he is actively seeking out new business by using his network, you could well consider this "employment" in the sense that he is applying the marketing strategy by calling his network.

The issue is "reasonableness" in my view. And it sounds to me that you have something reasonable in mind... some salary compensation for active participation in the business, and fee compensation for advice and guidance.

[lkh66]

hi strong eagle

really thanks for your great and generous advises

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