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Payroll for small businesses: options

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cattleherder
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Payroll for small businesses: options

Postby cattleherder » Wed, 22 Nov 2017 9:01 am

I've set up a business a couple of months ago, three guys in total, currently two are on the payroll. First money came in, and so we can pay ourselves finally.

None of us is a PR or a citizen of Singapore, so no CPF contributions. So it should be very simple, paying ourselves. No special allowances, nothing, just the salary, according to the MOM requirements.

I had a conversation with an accounting company we work with, who initially quoted a very sensible S$50 per person + S$100 for the CPF account activation. Upon learning that we don't need the CPF, the lady started asking what else we need, and I am awaiting a quote. "Oh, so you missed the payroll date, so we need to make modifications." While these guys know what they're doing, and they helped us greatly with the employment passes and the initial setup, their modus operandi seems to be similar to that of inkjet printers: entry fees are cheap, then they charge you premium. I'm expecting them to ask for a few hundreds, which, honestly, makes no sense. Additionally, they use their own software so they will not update my Xero account (not a big deal but still a bummer).

I am looking at a past topic about payroll software and I did some reseach about alternatives.

Questions:

1. Does the payroll compliance warrant paying an accountant?
2. What kind of contributions are there?
3. Is it a big issue if we missed the payment date? It's only for one month. Our job offers to ourselves (taken from templates) say that the pay day is "no later than 7 days". We obviously won't sue ourselves but I am wondering if it's an issue.
4. Any feedback on Sage Payroll (price not published), QuickHR (only S$5 a month!), SimplePay Xero plug-in (S$14 per employee per month), Talenox (S$40 per month under 5 employees)?

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Strong Eagle
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Re: Payroll for small businesses: options

Postby Strong Eagle » Wed, 22 Nov 2017 11:58 am

cattleherder wrote:I've set up a business a couple of months ago, three guys in total, currently two are on the payroll. First money came in, and so we can pay ourselves finally.

None of us is a PR or a citizen of Singapore, so no CPF contributions. So it should be very simple, paying ourselves. No special allowances, nothing, just the salary, according to the MOM requirements.

I had a conversation with an accounting company we work with, who initially quoted a very sensible S$50 per person + S$100 for the CPF account activation. Upon learning that we don't need the CPF, the lady started asking what else we need, and I am awaiting a quote. "Oh, so you missed the payroll date, so we need to make modifications." While these guys know what they're doing, and they helped us greatly with the employment passes and the initial setup, their modus operandi seems to be similar to that of inkjet printers: entry fees are cheap, then they charge you premium. I'm expecting them to ask for a few hundreds, which, honestly, makes no sense. Additionally, they use their own software so they will not update my Xero account (not a big deal but still a bummer).

I am looking at a past topic about payroll software and I did some reseach about alternatives.

Questions:

1. Does the payroll compliance warrant paying an accountant?
2. What kind of contributions are there?
3. Is it a big issue if we missed the payment date? It's only for one month. Our job offers to ourselves (taken from templates) say that the pay day is "no later than 7 days". We obviously won't sue ourselves but I am wondering if it's an issue.
4. Any feedback on Sage Payroll (price not published), QuickHR (only S$5 a month!), SimplePay Xero plug-in (S$14 per employee per month), Talenox (S$40 per month under 5 employees)?


My background: I formed a company with another American in 2004. He was PR, for the first two years I was EP, then PR. When we started, we paid only the two of us. In our heyday, we paid about 16 people, some as employees, some as contractors. We never used an accountant and we never used any kind of payroll software. Such software is absolute overkill unless you are offering a smorgasbord of employee deduction opportunities... medical insurance, retirement plans, stock options, etc.

What you do need is a decent chart of accounts and an accounting package. We used Sage... others are probably equal or better.

Unless you are offering deductions for medical insurance, etc, there are no deductions from payroll for an EP. Cut a check, record the expense by employee. End of year, fill out an IR8A with total earnings and send it into IRAS. Next time employee logs in, IRAS has tax due all calculated. It's a no brainer.

There's a couple of wrinkles. If an EP leaves, you have to be bright enough to withhold last check, let IRAS know of termination, have employee pay tax, then send out remaining check amount.

I can see no reason whatsoever to pay money for a payroll program for 3 people. Seriously, you could keep it all in an Excel spreadsheet and be OK, although I am a fan of proper double entry bookkeeping.

As for "compliance"... what is that? Sure, if you are big company and you don't make payroll dates, someone is going to come and sniff around... the gahmen doesn't like to see 50 people not get paid on time... that's red flags everywhere.

But... three people? Which one of you is going to turn the other one in for failure to make payroll on time? Compliance is a non issue. And... unless you have no money, you do need to be disciplined enough to make your self imposed deadlines. One of these days you'll make enough money to pay GST... and they do get bent out of shape if you don't pay on time.

One of the biggest pains in the ass is employee expenses, especially if your employees travel. These expenses are reimbursable, tax free, to the employee and must be included in the payroll check, but not in IR8A reporting.

My wife handled all of our transactions and put the entries into Sage. Our accountant would quarterly reconcile. When my wife went on to other things, our account took over posting of a couple hundred transactions a month for $100 to $150.

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Re: Payroll for small businesses: options

Postby cattleherder » Wed, 22 Nov 2017 4:40 pm

Thanks, Strong Eagle!

A crystal-clear response.

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Re: Payroll for small businesses: options

Postby cattleherder » Wed, 22 Nov 2017 5:04 pm

Got a quote, and questioned it.

The accounting company claims that every company is now obliged to pay so-called Skill Development Levy. I googled it and apparently it's very easy to calculate: https://www.cpf.gov.sg/employers/employ ... vy-(sdl%29.

She also claims that every month, the wages are to be reported to the MOM or something like that. Is she bullshitting me?

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Re: Payroll for small businesses: options

Postby Strong Eagle » Wed, 22 Nov 2017 11:49 pm

cattleherder wrote:Got a quote, and questioned it.

The accounting company claims that every company is now obliged to pay so-called Skill Development Levy. I googled it and apparently it's very easy to calculate: https://www.cpf.gov.sg/employers/employ ... vy-(sdl%29.

She also claims that every month, the wages are to be reported to the MOM or something like that. Is she bullshitting me?


I forgot about the SDL... but it's calculated pretty much the same as CPF with a minimum, a percentage, and a cap. Since we had two PR's, we paid everything (as I recall) through CPF. Even if not, we setup electronic pay accounts for government payments (we also paid GST), and once payroll was determined, a per employee calculation was made for CPF and SDL... I think that Sage could be programmed to compute deductions like that.

As for reporting, I am unaware of any monthly reporting requirements to MoM, even if you have employees covered under the employment act. Perhaps SMS can chime in here. In any event, I can tell you we never reported anything monthly to MoM and it sounds like crap to me. We reported and paid quarterly GST and monthly CPF/SDL, neither of which goes to MoM.

For employees covered under the employment act you are required to provide detailed time and pay slips, and to keep records... thanks to the underhanded employers who screw their employees but it's not applicable to exempt employees. It's only common sense, though... bi-weekly, semi-monthly, or monthly pay slips emailed to employees detailing gross pay, any deductions (the SDL is not deducted from employee pay, BTW), expense reimbursements, etc. Keeps employees in the know, provides a detailed audit trail, should your books ever be audited.

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Re: Payroll for small businesses: options

Postby sundaymorningstaple » Thu, 23 Nov 2017 3:25 pm

Nothing is reported directly from the employer to MOM except during application or renewal of employment passes.

SDL (Skills Development Levy) is generally paid via the CPF Board, but can also be paid direct as well, which if you have no local/PR employees sound like you should use that route. However, it would be better to set up an Employer CPF account as you are going to need it in another year in all probability as you are running a company without any local staff and the government looks down severely at that as you are not helping Singapore, but only taking from Singapore. You could find yourself unable to get an employment pass on renewal, but that is a different issue.

A payroll system: Like Strong Eagle, I also use Sage although I am probably using a larger package than he was. (I'm using Sage-EasyPay with 300 seats and a server installation with two client PCs) It's is automatically updated by Sage whenever there is a change in the laws or rates and with 11 years of experience of using it, I like the system and the company hasn't let me down yet. I currently have around 120 staff but previously before downsizing we had 225 staff with 40% being foreigners, mostly on WPs, S passes and/or LoCs. So I have a full make up when it comes to the various tax issues. Sage EasyPay is not cheap, but it is modular so you only need the packages you need. I'm not sure of the current costs, however. You can add modules to it later as you expand, like a Leave Module (it has a built in leave package in the basic Core & Payroll modules but it is very basic, the Leave Module is much more comprehensive. They used to sell EasyPay as a stand-alone single PC package, but not sure it they still do. Actually, EasyPay is way to much for a small company. What I would suggest is Sage Payroll which is designed for small to medium companies. However I have no idea of current costs, but here is a link to find out and download the brochure for more information.

http://www.sage.com/en-my/solutions/hr- ... ge-payroll

Having said all that, I don't think I'd spend the money for Sage when just starting out. There are several subscription vendors and other standalone offerings out there. That are surely cheaper but you have to watch out to insure they are regularly updated or they send you self extracting filed which will update your systems timely whenever MOM changes their rates, etc.

You can do it in excel easy enough and but you would need to do figure out the formulas for SDL and for the Self-Help groups if you have any Muslim employees - they attract the Self Help deductions regardless of where they are from - the other races do not unless they are SGC/PR.

What ever you decide to do make sure it is localized and not an off the shelf program with just basic functions.

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Re: Payroll for small businesses: options

Postby cattleherder » Thu, 23 Nov 2017 9:55 pm

Excellent advice, thanks, guys.


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