Whether the economy worsens or improves, employees need to be given annual salary hikes. Salary raises are a way to retain employees as well as reward the staff who has been loyal and hard-working. You may decide to keep the hike small – 1% to 5% – or give a large hike – 15% to 50% – but to provide these hikes in a depressed market condition puts heavy pressure on your operational costs.
In order to ensure that companies are able to increase the salaries of their employees and that Singaporeans do not have to suffer in difficult times, the government announced that it would contribute to the annual wage hikes by providing businesses with adequate funds. This co-funding scheme is known as the Wage Credit Scheme (WCS). This scheme is run by the Inland Revenue Authority of Singapore (IRAS).
History Of WCS:
WCS was introduced in Budget 2013, as a part of the Transition Support Package worth S$3.6 billion. The package was aimed at helping businesses ride through a tight labour market. At that time, it was decided that the government would, for a period of 3 years, co-fund 40% of the salary hikes given to Singapore citizens whose gross monthly wages is not higher than S$4,000.
In Budget 2015, the government promised to extend the scheme by 2 years – until 2017 – but with a reduced funding rate of 20%. This reduction is to help the companies adjust to the phasing out of the scheme. The companies are expected to work on improving their productivity and annual turnover in these 5 years to prepare themselves to the labour demands and reduced to negligible government bailout.
Eligibility Criteria For WCS:
An employer can get the benefits of WCS only for the Singapore citizens it employs. Other criteria are:
- The monthly salary of the employee should be S$4,000 or less.
- The employer should have paid CPF contributions for at least 3 months in the previous calendar year.
- The employee should be on payroll for at least 3 months in the ongoing year.
- The monthly wage hike should be a minimum of S$50. The co-funding will be given even if the hike is given in a qualifying year (between 2013 and 2017) and sustained in the next few years.
- The funding will be given only for employees and not for partners, sole owners, directors, etc.
- The company should be registered in Singapore.
If an employer fulfils any of the following conditions, they will not be able to participate in the Wage Credit Scheme:
- The company has insufficient trade or business activities;
- The company gives false or misleading information about employees or salary hikes to the IRAS in order to get the scheme’s benefits or get a higher funding;
- If the employee/s in question have not done substantial work in the company;
- If the employee is exercising any power on the management of the company;
- If the total wages paid by a company for a period is disproportionate to the volume or amount of work achieved by them, then the IRAS can reduce the amount of funding as it deems accurate.
- If the total wages paid by a company to a particular employee for a period does not match the volume or nature of work carried out by them, then the IRAS can reduce the amount of funding for that particular employee as it deems right.
- If an employer fails to provide any information requested by the IRAS on time, the department can cancel the funding for specific employees or the business.
The following employers cannot claim the WCS benefits:
- Local Government Agencies such as Organs of State, Ministries and Departments, Statutory Boards
- Government and Government-Aided Schools
- PA Services and Grassroot Units
- High Commissions, Embassies, Trade Offices and Consulate
- Unregistered Foreign Entities
- Foreign Military Units
- Representative offices of Foreign companies, Foreign Government Agencies, Foreign Trade Associations/Foreign Chambers/Foreign Non-profit Organisations/Foreign Law Practices
- Bank Representative Offices/Insurance Representative Officers/Other Financial Representative Offices (registered with MAS); News Bureaus (which are representative offices);
- International Organisations
- Entities that pay CPF but are not registered in Singapore
How Is Wage Credit Paid?
To get the benefits of the Wage Credit Scheme, you don’t need to apply to the IRAS. The IRAS determines which companies and how many employees are eligible, and will notify the beneficiary by March 31 of a given year. The salary hikes are calculated by subtracting the gross monthly wage of an employee in the previous year from the gross monthly wage of an employee in the qualifying year. The payouts are also given annually by March 31 of each year from 2014-2018. The co-funding will be provided for the qualifying year in the next year – that is, you will get the money for 2015 by March 2016, etc. This money will be transferred to the company’s bank account through GIRO arrangement or in the form of cheque.
Employers need to pay tax on the money provided through WCS because it is considered as revenue. The tax should be paid in the year that you receive the amount and not the year for which the payout is actually meant. While individuals, sole proprietors and partnerships do not have to declare the amount received under WCS in their Income Tax Returns Form B/B1 or Form P, companies have to declare the amount in their Income Tax Return Form C/Form C-S for the relevant year of assessment. IRAS automatically determines the tax payable for the former category.
How To Request For Wage Credit Breakdown:
Businesses can write to the IRAS requesting an analysis of the total Wage Credit given for each employee in the year of payment. This application needs to be made through myTax Portal, between last week of March and October 31 of the year of payout. If you are requesting information for more than 100 employees, you need to pay processing charges as given below:
- S$100 for records of between 100 to 200 employees
- S$150 for records of more than 200 employees
This payment has to be made via cheque (no other option allowed currently) to “Commissioner of Inland Revenue” at the time of collecting the records. The breakdown will be delivered to the employer within 7 working days in the case of records for less than 100 employees, and in 10 working days if data of more than 100 employees is sought. Records of 100-plus employees will be delivered in a CD (compact disc).
The records will contain the breakdown of Wage Credit for existing employees, and names of the new employees. No records are provided for new employees to avoid the data from their previous job from being leaked. If the company wants to see the Wage Credits of new employees, they should sign a Consent Form, after which the business must complete and submit a Declaration Form to [email protected]
How To Appeal For Wage Credit Adjustment:
Wage Credit adjustments, if needed, have to be sought during the year of the payment. The appeals can be submitted up to June 30 of the payout year. An appeal can be made under the following circumstances:
- Company mergers
- Conversion or change in UEN of a business entity
- Singaporean employees living abroad whose salaries were paid but CPF contributions were not made
To make an appeal, you need to visit the IRAS website, download and complete an Appeal Form and submit it along with supporting documents. The documents required in this case are:
- Completed Annex A of Appeal Form (list of employees under appeal)
- Wage records such as payslips or employment contract, for all months in the qualifying year and/or the preceding year for which wages were paid
- Print out of completed WCS calculator (which can be obtained from the IRAS WCS website)
- Legal documentation of amalgamation/conversion of business entity/change in UEN
- Directors Resolution and ACRA bizfile
- Any other supporting documents that will help your case
How To Contact IRAS:
The easiest ways to reach out to IRAS are:
- Send an email to [email protected]
- Call the authority on the toll-free number 1800-3524727, between 8am and 5pm from Monday to Friday.
- Office address: Inland Revenue Authority of Singapore
55 Newton Road,
Singapore – 307987
The Wage Credit Scheme is employer-focused, and aspires to not only support companies monetarily but also to boost productivity, profits and upgrading of functionality. It is best to contact the authority directly in case of any doubts or clarifications. Other employer-friendly plans by the island’s government include Special Employment Credit and Temporary Employment Credit.