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How to Continue Employing Staff in Singapore After Closing Your Entity

Companies with an overseas branch or subsidiary face some difficult decisions if they need to close down the entity at some point.  Among those is how to continue employing staff for ongoing operations or remote work.  With a local entity, the company was likely running payroll on their own, but that will no longer be possible once the entity winds up.

There are a few ways to handle this depending on how many employees are involved and the previous length of employment.  If you are closing an entity in Singapore this article will discuss your options and the potential consequences of each one.

How to Keep Staff Employed in Singapore Without an Entity

Before your Singapore entity closes you will want to have a plan for keeping staff employed, assuming that you still need their skills and experience.  An apparently easy solution is to hire them as independent contractors, who don’t need to be on payroll and would take care of all their own taxes and contributions. 

The problem with this is because they are former employees, they are used to receiving benefits and entitlements which may be important to them.  Also, they can easily bring a claim based on misclassification as a contractor, if you continue to treat them as employees by controlling their work schedule and methods.

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Another option is to ask a Singapore third-party company (such as a vendor or supplier) to place your employees on their payroll.  Even if the company is willing, this could be confusing for the employee on where they owe their loyalty and if their employment rights would be respected. 

Neither of these choices would be acceptable to long-term, high-value employees, so a more comprehensive solution is needed.

Use an Employer of Record to Employ Your Staff

Your best option for continuing to employ staff is to use an employer of record (EOR).  The EOR has its own entity in Singapore, set up exclusively to administer employment for resident (or expat) employees.  The EOR service goes far beyond just running payroll, and includes drafting a compliant employment contract, calculating taxes and contributions, and engaging with the employee if there are any issues.

A global EOR service will have entities in multiple countries, so if you need to close additional branches you can utilize the same managed service with no interruptions.   If you chose an EOR with an entity only in Singapore, they could not help you in other countries and would not offer the same breadth of experience or client support.

4 Things to Consider When Transferring Employees After Closing an Entity in Singapore

1. Cost and Fees

The cost of closing your entity will be the same regardless of the employment option you choose, but initiating the EOR service does carry both a setup fee and a monthly management fee.  Even so, it is likely far less than the professional or outsourcing fees paid to run payroll yourself through an entity. 

Otherwise, your employer social contributions would be unchanged, and along with the fees, would be included in your monthly remittance of employee compensation to the EOR.

2. Legal Risk

Closing an entity carries some legal risk when transitioning staff, as the termination from the entity must be compliant to avoid triggering any employee claims.  The employees would be effectively ‘terminated’ from any closed entity, and then re-hired by the EOR as their new legal employer. 

An experienced EOR can advise on how to manage a compliant transition, communicate with employees, and then onboard them seamlessly.  This eliminates the risk that an employee misinterprets the transition as ‘cover’ for unjust termination.

3. Employee Benefits

Transitioned employees will expect that their benefits will be similar to the EOR as the new employer.  For example, whether their health insurance will be the same or their pensions will be preserved. The EOR might use a different insurance or pension provider but will make every effort to offer a similar level of service, coverage, and quality. 

Maintaining benefit levels is a key part of a successful employee transition, assuring them the change is strictly administrative.

4. Maintaining Employee Seniority

A related issue is employee seniority and how that is affected when staff is transferred to a new entity and payroll.  HR managers will want to focus on maintaining internally an employee’s years of continual service, and then communicate that to the EOR.  In many countries, benefits such as severance, notice periods, annual leave, and retirement contributions depend on the length of service with a single employer.

This is a key reason that hiring as a contractor or through a third-party company would be unacceptable to many employees, as they would lose all seniority-based entitlements and benefits.

Using Shield GEO’s Employer of Record in Singapore

Shield GEO has a global network of employers of record, including in Singapore. If you are closing an entity, we are well-positioned to transfer your staff and minimize any problems with payroll, contracts, and benefits. 

Here are a few advantages of using Shield GEO’s EOR:

  • Expertise in Singaporean employment and labor laws, ensuring compliance throughout the transfer of staff
  • Experienced in transferring and preserving benefits from the previous entity to the EOR
  • Knowledge of how to offer and maintain entitlement levels based on employee seniority in the entity
  • A dedicated regional account manager to interface with your company and our Singapore partner, and facilitate any issues that arise
  • Adept at communicating with employees how the transfer will work, how it affects them, and what steps will be taken to maintain their current benefits and status
  • A single framework agreement that would cover any other EOR transfers in our global network, for a consistent and familiar client experience

If you are considering closing an entity in Singapore and would like to learn more about the compliant and efficient transfer of staff, we can explain the entire process in detail.  We make international employment simple.

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The information in this article is subject to changes in local legislation.

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