On 3 March 2026, MOM confirmed at the Committee of Supply that Employment Pass qualifying salaries will rise from S$5,600 to S$6,000 for most sectors, part of a broader set of foreign workforce policy updates that changes how employers should budget payroll services in Singapore for 2026 and beyond. The headline salary figures are only part of the picture, since local and foreign staff generate entirely different cost structures once CPF, levies, and statutory contributions are factored in.
A local employee's true cost includes CPF contributions on top of wages. A foreign employee on an Employment Pass generates no CPF and no levy at all, despite requiring the highest qualifying salary of any pass type. A foreign employee on an S Pass or Work Permit generates a separate monthly levy instead of CPF. Three genuinely different cost profiles, often collapsed into a single "foreign vs local" comparison that misses the mechanics driving the actual number.
Getting this comparison wrong has a direct budgeting consequence. An employer who models a foreign hire purely on the advertised qualifying salary, without accounting for whether that hire falls under EP, S Pass, or Work Permit rules, can find the actual monthly cost diverging meaningfully from the forecast once the first payroll cycle runs.
This guide breaks down what each staff category costs an employer, what a payroll service provider actually handles month to month, and why outsourcing this function is often the more economical choice, particularly for a foreign founder without an existing local HR team.
Key Takeaways
Employer payroll costs in Singapore follow three distinct structures depending on staff type. Local staff (Singapore Citizens and Permanent Residents) generate CPF contributions on top of wages. Employment Pass holders generate neither CPF nor a levy, making their total cost closer to salary alone despite the highest qualifying salary threshold. S Pass and Work Permit holders generate no CPF but carry a fixed monthly Foreign Worker Levy instead.
Skills Development Levy is the one cost that applies uniformly across all four categories, calculated at 0.25% of monthly wages regardless of nationality or pass type. Understanding which of the other three structures applies to a given hire is the starting point for any accurate payroll budget, since the qualifying salary alone tells only part of the cost story.
A local employee's employer cost is their gross wage plus CPF contributions, which vary by age band and can add up to 17% to the wage bill for employees aged 55 and below.
CPF applies to Ordinary Wages up to the monthly ceiling of S$8,000, and Skills Development Levy of 0.25% applies on top, subject to a S$2 minimum and S$11.25 maximum per employee per month. For a local employee earning S$5,000 a month at the 55-and-below band, the employer's true monthly cost is approximately S$5,850, wages plus S$850 in CPF, before accounting for any bonuses or benefits.
An Employment Pass holder's employer cost is their salary alone, plus the flat Skills Development Levy, since EP holders generate neither CPF contributions nor a Foreign Worker Levy of any kind.
This produces a counterintuitive result worth budgeting around: an EP holder earning the qualifying minimum of S$5,600 costs the employer S$5,600 plus a small SDL amount, while a local employee earning the same S$5,600 costs the employer an additional S$952 in CPF at the 17% rate, bringing the local employee's true cost above the EP holder's despite the EP salary floor being higher on paper. The absence of both CPF and levy is what makes the Employment Pass structurally the cleanest cost profile of the four categories, even though it demands the highest entry salary.
An S Pass holder's employer cost is their qualifying salary plus a fixed monthly Foreign Worker Levy of S$650, harmonised across all quota tiers from 1 September 2025, replacing the previous tiered structure that charged less at lower quota utilisation.
The levy is paid monthly via GIRO and cannot legally be deducted from the employee's salary under any circumstance. S Pass hiring is also capped by the Dependency Ratio Ceiling, which limits the proportion of S Pass and Work Permit holders relative to the local workforce, calculated from the CPF records of local employees over the preceding three months. An employer planning to scale S Pass headcount should confirm quota headroom before extending an offer, since exceeding the ceiling blocks the application regardless of budget.
The Local Qualifying Salary used in this quota calculation was raised to S$1,800 a month from 1 July 2026, meaning a local employee must earn at least this amount to count as a full headcount unit toward the employer's foreign worker quota. Local employees earning between S$900 and below S$1,800 count as half a headcount unit, which directly affects how much S Pass or Work Permit hiring a given local workforce can support.
Work Permit holders have no minimum qualifying salary, but the Foreign Worker Levy varies considerably by sector and skill tier, and MOM publishes the current rate schedule directly. Like the S Pass levy, this is a fixed monthly cost on top of wages, paid by the employer and never recoverable from the worker. Work Permit hiring is also subject to sector-specific dependency ratio ceilings and, for most nationalities, a security bond requirement, both of which add administrative overhead beyond the levy itself.
Practitioner's Note: Employers converting an S Pass holder to a Work Permit to manage rising S Pass salary thresholds should confirm the worker's sector and source country still qualify under Work Permit rules, since eligibility criteria differ meaningfully between the two pass types and a straightforward conversion is not always available.
A payroll service provider's scope typically extends well beyond calculating monthly pay, covering CPF and levy administration, annual IRAS filings, work pass application and renewal support, and centralised access to compliance documentation through a dedicated platform.
The core recurring functions include accurate monthly payroll computation covering CPF contributions where applicable, Skills Development Levy, and any Foreign Worker Levy due; preparation and submission of IR8A and Auto-Inclusion Scheme filings to IRAS each year; and processing of government-paid leave claims, which ATHR handles at S$50 per application per employee as a standard add-on. Providers offering integrated work pass support also handle Employment Pass applications, including MOM fee processing, and subsequent renewals, keeping the hiring and payroll functions connected rather than managed through separate systems.
Access to a client dashboard tracking compliance deadlines and active tasks, delivered in ATHR's case through its Aptvise platform, is what separates a modern payroll service from manual spreadsheet-based processing. This gives an employer visibility into upcoming deadlines without relying entirely on the provider to flag them proactively.
A provider handling both payroll and work pass administration together also reduces a specific coordination risk: an EP renewal that lapses because it wasn't tracked against the same calendar as payroll processing can interrupt an employee's legal ability to work, a materially more serious consequence than a late CPF payment. Providers offering both functions under one system are structured specifically to prevent this kind of cross-function gap.
Running payroll correctly in-house requires tracking several moving regulatory pieces simultaneously: CPF contribution rates that change periodically, the SDL calculation, Foreign Worker Levy administration for any S Pass or Work Permit holders, work pass renewal deadlines, and the annual IR8A and AIS filing cycle with IRAS. A founder managing this alongside running the actual business is exposed to the same compliance risk as a large company, without any of the internal systems built to manage it reliably.
This burden falls hardest on foreign founders specifically, who frequently lack an existing Singapore-based HR function to absorb the work and are simultaneously managing their own Employment Pass or work pass status alongside the company's broader payroll obligations. For a broader look at when outsourcing HR functions makes sense for a lean or remote setup, ATHR's guide to outsourcing HR services in Singapore covers the decision point in more detail.
No. CPF contributions apply only to Singapore Citizens and Permanent Residents. Employment Pass, S Pass, and Work Permit holders are entirely outside the CPF system, regardless of salary level, which is part of why the EP cost structure differs so significantly from a local hire at a comparable salary.
No. MOM prohibits recovering the levy from a worker's salary in any form, whether as a direct deduction, an administrative fee, or a condition of employment. The levy is treated as an employer cost in full, paid monthly by GIRO regardless of how the employer chooses to structure the role internally.
Yes, including Employment Pass, S Pass, and Work Permit holders, alongside local staff. SDL is calculated at 0.25% of monthly wages, subject to a S$2 minimum for lower-wage employees and an S$11.25 maximum for higher earners, and it is the one payroll cost with no exceptions by nationality or pass type.
The increase applies to new EP applications from 1 January 2027 and renewals of passes expiring from 1 January 2028, so an EP holder already employed under the current threshold is not immediately affected. Employers planning to hire new EP staff, or whose existing EP holders have renewals falling due after that date, should budget for the higher qualifying salary now rather than at the point the change takes effect.
Not necessarily. An S Pass holder at S$3,300 carries a S$650 monthly levy on top, bringing the effective cost close to S$3,950 before SDL, while a local employee at the same S$3,300 wage carries CPF of roughly S$561 at the 17% rate, a lower total employer cost despite the headline salary being identical. The comparison depends entirely on the specific salary level and age band involved rather than a fixed rule favouring one category.
Comparing payroll costs across local and foreign staff requires looking past the qualifying salary figure to the structure sitting underneath it, CPF for locals, nothing extra for EP holders, and a fixed levy for S Pass and Work Permit holders. Getting this comparison wrong produces a payroll budget that looks reasonable on paper and turns out to be materially off once the first CPF or levy payment is actually due.
The administrative complexity behind these calculations, layered with periodic rate changes and annual filing obligations, is precisely what makes payroll one of the more commonly outsourced functions for growing companies in Singapore, particularly those without an established local HR team already tracking these moving pieces.
Budgeting accurately for a mixed local and foreign workforce, and keeping CPF, levy, and filing obligations correctly administered as headcount grows, requires payroll infrastructure most small teams have not yet had reason to build internally.
ATHR provides payroll management services covering local and foreign staff processing from S$20 to S$30 per headcount per payrun, alongside Employment Pass application support and company incorporation services for founders setting up their Singapore payroll function from the ground up.
👉 Ready to see what payroll services in Singapore would actually cost for your team? Book a free consultation with ATHR today →
The ATHR Content Team is a group of professional writers from Singapore and the Philippines, committed to delivering informative, practical, and engaging content for business owners across Southeast Asia.
