Can Sole Proprietors in Singapore Hire Employees?

Setting up as a Sole Proprietor is a popular option as it’s pretty straight forward, and allows for flexibility to work as you choose to. But what about when your business expands? Can a sole proprietor hire employees in Singapore - and if not, can a sole proprietor have independent contractors?

This guide gives you a great starting point to learn from - plus we’ll also touch on the card and account services from Wise Business, which can be a simple way to manage your money across currencies as a Singapore sole proprietor, with low fees and the midmarket rate.

What is a Sole Proprietorship?

A Sole Proprietorship is a business owned by one person.

Legally, your personal and business finances are not separate, so you take responsibility for the debts or liabilities of your business personally. You’ll also pay taxes to IRAS at personal income tax levels.

As a Sole Proprietor you still need to register with ACRA and comply with certain rules and requirements - but this is a fairly simple, cheap, and easy business entity type in Singapore.

Can a Sole Proprietor have employees?

The good news is that a sole proprietor in Singapore can have employees. However, it’s important to note that there are many rules and legal steps in place to protect employees in Singapore, and to ensure that any hiring company complies with the law and taxation requirements.

That means that you’ll need to get up to speed with employment law and hiring practices before you start to hire for your team.

It’s also worth noting that the requirements on you if you’re hiring independent contractors rather than employees under contract may be different. Before you get started, consider whether hiring employees or contractors is better for your needs - this guide focuses on hiring employees, so you’ll know what steps you need to take for expanding your team.

Legal requirements for hiring employees as a Sole Proprietor

Hiring staff is bound by many legal requirements, and also means you’ll need to learn more about the taxation policies and processes for employers. It’s crucial that you get individual guidance on the steps you’ll need to take, as these can depend on factors including how many employees you intend to hire, the types of jobs, the salary levels, and where the employees will come from and reside.

Some common steps that most Sole Proprietors hiring in Singapore are likely to need to take include:

• You must register for a CPF submission number before you employ any Singapore citizen or PR - as a sole proprietor you can do this online under your own name¹
• Understand the Employment Actand how it applies to the advertising of roles, writing of employment contracts, leave, benefits and other key employment considerations²
• If you intend to hire any foreigners in Singapore you’ll need to explore the rules, options and eligibility requirements for issuing work passes, based on the type of hire you’re making³
• Once you have employed anyone in Singapore you must report their income annually⁴ with Form IR8A and Appendix 8A, Appendix 8B or Form IR8S to IRAS
• If you have hired any Singapore citizen or PR you must pay CPF contributions, and the Skills Development Levy annually⁵
• Depending on your business type and the work being done you may need to buy employee insurance or comply with other rules - get advice to ensure you’re fully compliant

It’s useful to familiarise yourself with the Employment Act before you start the hiring process as this contains the key employment legislation for Singapore. This legislation includes things like the employment rights of employees, and your obligations as an employer. The act also includes information about the Key Employment Terms which must be included in the contract between you and your employees, and other important information you’ll need to learn about early on in your journey to hire a team in Singapore.

Maximising tax benefits and deductions as a Sole Proprietor

If you start to employ people as a sole proprietor, you’ll need to carefully review the expenses involved with employment which are allowable deductions from your profits when you calculate your own taxable income. This may include things like the salary you pay your employees, their CPF contributions, any medical expenses, insurance policies or bonus paid⁶.

You’ll need to be clear on which employment expenses can be set off against your taxable income, as some things are not allowable business expenses - such as CPF payments above the mandatory requirement, or some Medisave contributions. You may also find some medical expenses exceed the limits for allowable amounts. Bear in mind also that you cannot count your own salary or expenses here to offset against the tax you need to pay.

Taking professional advice here can make the process a lot smoother, and can also help you manage your taxes in the most efficient and streamlined way possible.

This guide is for information only, and can not be taken as advice. If you’re unsure about how to best manage your company legal or tax matters, seek professional support from a tax accountant or lawyer.

Manage your money across currencies more easily with Wise Business

If you’re planning on doing business across countries - now or in the future - check out the account and card services from Wise Business. Wise Business lets you hold and exchange 40+ currencies, and send money to over 140+ countries. That can make paying your employees, contractors, suppliers and vendors a breeze. Plus, if you’re looking for simple ways to connect with overseas customers you can also receive payments from others in 8+ currencies with local and SWIFT account information.

➡️Learn more about Wise Business

Employing family members: Special considerations

As a sole proprietor is by nature a small business to start out, owned by only one person, the easiest way to expand for many people is to employ a family member. This can help you be more flexible in your business dealings by giving you an extra pair of hands when you need it, but it is important to remember that you still need to comply with all applicable laws.

This includes the rules about employing children if you intend to have younger family members involved in your business, and requirements to make CPF payments.

Again, to avoid the risk of accidentally breaking the law, you may want to get professional advice from an employment lawyer or specialist service before you hire.

Transitioning from Sole Proprietorship to Pte Ltd (LLC)

If your company is growing, the obvious option may be to convert your sole proprietorship to a Pte Ltd structure - similar to an LLC in the US, or a PLC in the UK. This will mean closing your sole proprietorship and then registering your new business with ACRA as a Pte Ltd entity type. This process can be completed entirely online through ACRA and Bizfile, or there are formation agents which can walk you through the process step by step for a fee.

Growing your sole proprietor business by bringing on staff can make it easier to manage a larger and more complex entity, and accelerate your company profits. Before you hire anyone, you’ll need to get familiar with the ins and outs of hiring anyone in Singapore - and take legal and tax advice as necessary based on the specific situation you’re in.

While you’re thinking about the next steps to growing your business, why not also consider Wise Business to expand internationally with a smart account to hold and exchange 40+ currencies, with simple, low cost ways to send money to over 140+ countries.

• Obtain account details to receive payments in GBP, EUR, CAD, AUD and more for a one-time fee of S$ 99.
• Simply share your account details with customers or add them to invoices.
• Hold, send, and convert money at the mid-market rate in one account.
• Simplify customer payments with Wise request payment feature.
• Accept payments from customers and payment service providers (PSPs) like Stripe and Amazon.
• Generate payment links to request money in specific currencies.

➡️Get started with Wise Business today

Sources:

1. CPF - apply for a CPF submission number
2. MOM - Employment Act
3. MOM - work passes
4. IRAS - employer income reporting
5. CPF - Skills Development Levy
6. IRAS - self employed tax, allowable deductions

Sources checked on: 29th April 2025