Hire Contractors in Singapore

Singapore, an economic powerhouse in maritime Southeast Asia, attracts numerous global companies. These companies are increasingly looking to hire contractors from within Singapore to tap into the local talent pool. 

Despite a work permit quota system for foreign employees, hiring local independent contractors provides flexibility and access to specialized skills.

Over 50% of local businesses intend to increase their contractor workforce in Singapore by 20-30%. This trend highlights the growing acceptance and reliance on local talent to drive business growth.

If you are planning to tap into the contractor’s market in Singapore, we are here to help. This guide will explore the intricacies of hiring contractors in Singapore, from understanding the legal framework to managing contractor relationships effectively.

How to Hire Contractors in Singapore

You can hire contractors in Singapore to scale operations or fill specific skill gaps. Here's a general overview of the process when hiring contractors directly:

1. Establish a business entity to employ contractors in Singapore under your payroll: 

Choose from any one of the following legal structures: 

• Private Limited Company
• Public Limited Company
• Sole Proprietorship
• Limited Partnership
• Limited Liability Partnership
• Branch Office
• Representative Office
• Subsidiary

2. Clearly outline the project scope, required skills, and deliverables before hunting for suitable contractors on job boards, freelance platforms, and social media.
3. Draft a compelling contract for service by clearly defining the scope of work, payment terms, intellectual property rights, confidentiality, and dispute resolution mechanisms.
4. Understand tax obligations for both the contractor and your business and ensure timely payments as per the contract terms. 

While direct hiring offers control and potential cost savings, it also involves administrative overhead and risks. Consider using contractor management software or Agent of Record services for added support.

Hiring contractors through Skuad AOR

Contractor management services by Skuad AOR can streamline the contractor hiring process by:

• Handling administrative tasks like payroll, benefits, and compliance.
• Offering contract management tools and dispute resolution support.
• Support with intellectual property rights protection during the contractor engagement term. 
• Manage contractor records for easy conversion to employees in the future. 

How to pay independent contractors in Singapore

The table summarizes the best ways to pay contractors in Singapore.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here is a comparison table summarizing the impact of directly hiring and hiring contractors in Singapore via Skuad. You can also go through this comprehensive checklist to avoid misclassification of independent contractors as employees in Singapore.

Cost of Hiring Contractors in Singapore

In the absence of minimum wage legislation for full-time employees, there is no benchmark for the cost of hiring contractors in Singapore. 

Therefore, the cost of hiring contractors in Singapore can vary based on industry, experience level, project scope, and contract type. The following table provides a general overview of potential costs.

Challenges of Hiring Contractors in Singapore

While the current landscape offers advantages for businesses, there are still challenges to consider when hiring independent contractors in Singapore:

1) Increased competition for hiring contractors  

• The work permit quota system encourages companies to hire local talent while limiting the number of foreign employees a company can employ. 
• Companies turn to a global talent pool to hire contractors in Singapore for specialized work requirements. 
• At the same time, the competition for securing top talent can make it challenging for companies to find contractors with the necessary skills, experience, and budget.

2) Contract of service vs. contract for service

• You must proactively distinguish between a contract of service and a contract for service to hire contractors in Singapore.
• Singapore independent contractor law enforces a contract for service between a client and a self-employed person or vendor on a project basis.
• While there is no restriction on hiring independent contractors in Singapore, you constantly risk misclassifying them as full-time employees. 

3) Misclassifying workers 

• The Ministry of Manpower takes strict action against companies that falsely categorize workers as independent contractors to cut expenses.
• Moreover, there is no definitive test to determine whether a worker is an employee or an independent contractor in Singapore.
• Businesses must consider a range of factors to make this determination, including the level of control, obligation to provide work, obligation to accept work, and use of company equipment.

Fortunately, specialized contractor management solutions like Skuad AOR (agent of record) can help businesses avoid misclassification risks by compliant onboarding, paying, and managing contractors.

How to Convert a Contractor into an Employee in Singapore

US employers will be familiar with switching contractors from 1099 to W2 tax status. Similarly, you can convert a contractor into a full-time employee working in Singapore by choosing any one of the following ways:

The first method involves setting up a legal entity in Singapore to draft a contract of service or employment contract. You must register the newly converted employees with the tax authorities for payroll compliance and benefits administration, including tax deductions for social security schemes and more.  

Employers usually bear the cost of payroll & taxation at nearly 19% on an annual salary of USD 60,000 when converting contractors into full-time employees. 

The second method utilizes a contractor management platform like Skuad to oversee all legal and administrative processes in converting a contractor to a full-time employee in Singapore. 

The table summarizes the factors differentiating employees from independent contractors in Singapore:

Hire Contractors in Singapore with Skuad

Skuad empowers global businesses to seamlessly hire, pay, and manage independent contractors in Singapore and beyond. 

Through its Agent of Record (AOR) solution, Skuad simplifies the complex process of contractor management and ensures compliance with local labor laws and regulations. Moreover, with a global presence spanning over 160 countries, Skuad enables businesses to hire contractors or convert them into full-time employees without setting up local entities. 

‍Book a demo today to scale up your global hiring efforts efficiently and compliantly.

FAQs

1) What is an independent contractor in Singapore?

An independent contractor in Singapore can be a self-employed individual, a sole proprietor of a business, or a vendor offering specific services to a company on a contractual basis. Unlike employees, independent contractors can invoice clients, pay applicable taxes from the business income, and maintain control over their work schedule. 

2) Can I hire an independent contractor in Singapore?

Yes, you can hire an independent contractor in Singapore directly on a project basis. However, a better alternative to hiring contractors in Singapore is through a contractor management platform like Skuad, which also does so without establishing a legal entity and remains compliance-free.

3) What is the difference between an employee and a contractor in Singapore?

In Singapore, the difference between an employee and a contractor is determined based on the level of control, obligation to provide work, obligation to accept work, and use of company equipment. Unlike independent contractors, employees receive regular salaries and benefits like paid leave and CPF contributions. 

4) How does Skuad help hire and pay international contractors in Singapore?

Skuad provides a one-stop shop contractor management platform to onboard, pay, and manage international contractors in Singapore, all without setting up a local entity. Skuad’s Agent of Record (AOR) solution handles the complexities of local labor laws, payroll, benefits, and tax compliance when hiring contractors. 

5) How do I pay a contractor in Singapore?

Singapore is a global economy, and you can typically pay a contractor in Singapore through widely accepted payment platforms like direct bank transfer, cheque, or online payment wallets. However, paying your contractors in Singapore through global payroll systems like Skuad allows you to track invoices, comply with applicable tax deductions, handle currency fluctuations, and have automatic disbursements under the contract for the service agreement.