Hiring your first employee in Singapore feels straightforward until you hit payroll setup. Most first-time employers miss three things that cost money later: the non-negotiable four-month probation structure, Central Provident Fund (CPF) contributions that employers often miscalculate, and bonus taxation that looks simple but isn't. This guide walks you through the legal requirements and the operational setup that keeps you compliant. Singapore's four-month probation: what's actually mandatory Singapore's Employment Act sets a maximum probation period of four months for most employees. This is not a recommendation—it's the legal ceiling. You cannot extend probation beyond four months unless the employment contract explicitly states a longer period (up to six months in limited cases like executive roles), and even then, only with clear written agreement before hire. What matters operationally: Probation must be stated in the employment contract before the employee starts. Verbal probation is not enforceable. During probation, employees are entitled to the same statutory benefits as permanent staff—CPF contributions, paid leave (prorated), and notice periods still apply. You cannot terminate during probation without any reason, but the bar for dismissal is lower than after confirmation. "Poor fit" or failure to meet performance standards is typically sufficient. Probation ends automatically on the fourth month unless you confirm employment in writing before that date. The mistake most businesses make: treating probation as "trial without obligations." Singapore law doesn't work that way. Your obligations begin on day one, including CPF contributions and leave accrual, even if the employee doesn't pass probation. Central Provident Fund: calculation, employer match, and compliance The CPF is Singapore's mandatory retirement savings system. Both employer and employee contribute a percentage of the employee's ordinary wages (OW). For 2024, the rates are: Employee contribution: 10–11% of OW (depends on age and income ceiling) Employer contribution: 10.5% of OW for most employees (varies slightly by age and structure) "Ordinary wages" is the key phrase. It includes basic salary, allowances, and performance bonuses—but excludes overtime, housing benefits paid by the employer, and bonuses paid once a year or less frequently. Most payroll mistakes happen here: including non-ordinary items in the CPF-able wage, or forgetting to adjust contributions when an employee hits the Monthly Ceiling (currently $6,800). Practical steps: Classify each component of salary as ordinary or non-ordinary in your payroll system. Check your employment contract to confirm which allowances are ordinary. Calculate CPF on ordinary wages up to the Monthly Ceiling only. If an employee earns $8,000, you calculate CPF on $6,800. Pay employer CPF by the 4th of the following month. Late payment triggers interest (5% per annum) and penalties (up to $5,000 for first-time late payment). Submit monthly CPF returns to the Central Provident Fund Board (CPFB) via their online portal. Misreporting is a compliance violation. Age matters. Employees aged 55 and above have different contribution rates and ceilings. Hire a 58-year-old and your employer contribution drops to 5.5% (from 10.5%). This is legal—not a discount—and must be reflected in payroll setup from hire date. CPF contributions are mandatory and deducted from your payroll expense on day one. Budget for 10.5% employer contribution on top of salary for staff under 55. Bonus taxation and structure: the hidden layer Bonuses in Singapore are taxed as employment income, not separate. The tax rate depends on the employee's total annual income (salary + bonus), and bonuses are assessed in the year they are paid. This means a $5,000 mid-year performance bonus lands in the same tax year as salary and pushes the employee into a higher tax bracket. Employers are not required to withhold income tax on bonuses—the employee reports and pays via their annual tax return. However, many employers voluntarily withhold to simplify compliance. If you do withhold, document the amount clearly in payroll records and on the employee's payslip. What complicates bonus structure: CPF applicability. If a bonus is classified as ordinary wages (paid regularly, contractually promised), it's CPF-able. Annual bonuses or discretionary bonuses typically are not. Check your contract language. Year-end timing. A December bonus paid in January is taxed in the year it's paid, not earned. This can split the tax impact across two years if you're not deliberate about timing. Foreign employee withholding. If you employ work permit holders (non-citizens), different tax rules apply and withholding may be mandatory. Verify with IRAS (Inland Revenue Authority of Singapore). Operationally, define bonus structure in the employment contract—is it discretionary or contractual? If contractual, what triggers it? This clarity prevents disputes and sim