Budget 2023 provides robust support to businesses in Singapore to navigate through the challenging economic environment and global economic uncertainty.  With people being our only natural resource, the government continues to provide impetus to employers to continue to upskill workers through topping up the National Productivity Fund to S$4 billion.  Further, Enterprise Innovation Scheme is launched to encourage businesses to press on with innovation so that Singapore remains globally competitive.

It is heartening that the Budget ensures that lower wage workers are not left behind in these difficult times as the government continues to co-fund wage increases of these workers through the Progressive Wage Credit Scheme (PWCS) and will top-up PWCS by S$2.4 billion.

Additionally, welfare of Platform Workers in the areas of housing and retirement are being strengthened through CPF contributions.  These measures would likely uplift the wages of the lower income workers.

The Budget was generous to the Singapore family with help given to first-timer applicants for flats, increments in housing grants, baby bonus cash gift, additional contributions to the child development account amongst other measures.

“It is heartening that the Budget ensures that lower wage workers are not left behind in these difficult times”

In the next section of this commentary, we will discuss the ten announcements in the Budget, that  impact businesses and corporate taxes. In Singapore.

 

BUSINESSES

1. Enterprise Innovation Scheme (EIS)

With effect from the Year of Assessment (YA) 2024 to YA 2028, the new scheme provides businesses 400% tax deductions on qualifying expenditure incurred on:

a) Staff costs and consumables incurred on R&D conducted in Singapore

b) Registration of qualifying Intellectual Property (IP) including patents, trademarks and designs

c) Acquisition and licensing of qualifying IP rights (available to businesses that generate below $$500 million in revenue in relevant YA)

d) Training via courses approved by SkillsFuture Singapore which are aligned to the Skills Framework

e) Innovation projects carried out with polytechnics, the Institute of Technical Education (ITE) and other qualified partners

The expenditure on each activity will be capped at $400,000, except for item 5, which will be capped at S$50,000. Eligible businesses can opt for a non-taxable cash payout in lieu of tax deductions/allowances (capped at 5$20,000), based on a conversion ratio of 20% on up to $$100,000 of total qualifying expenditure across all qualifying activities in (1) to (5) per YA.

In line with the above enhancements, the sunset dates for the following will be extended to YA 2028:

a) Section 14A (deduction for costs of protecting IP)

b) Section 14C (deduction for qualifying expenditure on R&D)

c) Section 14D (enhanced deduction for qualifying expenditure on R&D)

d) Section 14U (enhanced deduction for expenditure on licensing IP rights)

e) Section 19B (Writing-down allowance for capital expenditure on acquiring IP rights)

The Inland Revenue Authority of Singapore (“IRAS”) will provide further details on the scheme by 30 June 2023.

2. Double Tax Deduction for Internationalisation (DTDi) Scheme

The DTDi scheme will be enhanced by the addition of a new qualifying activity – “e-commerce campaign”.

This will cover startup expenses such as business advisory, account creation, content creation and product listing and placement incurred on or after 15 February 2023. Enterprise Singapore will provide further details by 28 February 2023.

Businesses have to seek approval from Enterprise Singapore for DTDi support on this new qualifying activity which will be granted for one year and on a per-country basis.

*Please refer here for a full list of qualifying activities and expenditure available for DTDi.

3. Option to Accelerate the Write-off of the Cost of Plant and Machinery (P&M)

Businesses that incur qualifying expenditure on P&M in the YA 2024 have an option to claim accelerated capital allowances over two years (i.e. 75% in YA 2024 and 25% in YA 2025).

Deferment of capital allowance is not allowed once this option is elected. This option, if exercised, is irrevocable.

4. Option to Accelerate Deduction for Renovation and Refurbishment (R&R)

Businesses that incur qualifying expenditure on R&R in the YA 2024 have an option to claim R&R deduction in one YA. This option, if exercised, is irrevocable.

The cap of S$300,000 for every three relevant consecutive YAs will continue to apply.

5. Tax measures relating to Submarine Cable Systems

The existing tax measures relating to submarine cable system which are scheduled to lapse after 31 December 2023 will be extended till 31 December 2028, with the same parameters: –

a) Withholding tax exemption on payments made to non-residents for use of international telecommunications submarine cable capacity under indefeasible right to use (IRU) agreements;

b) Claiming of writing down allowances for the acquisition of an IRU over their useful life; and

c) Claiming of investment allowance for the construction and operation of submarine cable systems in Singapore

6. Tax Deduction for Qualifying Donations to Institutions of a Public Character (IPCs) and Eligible Institutions

250% tax deduction on qualifying donations made to IPCs and eligible institutions will be extended to 31 December 2026.

All other conditions of the scheme will remain the same.

7. Tax Deduction under Corporate Volunteer Scheme (CVS)

250% tax deduction on qualifying expenditure under CVS (previously Business and IPC Partnership Scheme) will be extended to 31 December 2026 with the following enhancements to take effect from 1 January 2024:

a) Qualifying volunteering activities will be expanded to include activities which are conducted virtually (e.g. online mentoring and tuition support for youths/children) or outside of the IPCs’ premises (e.g. refurbishment of rental flats).

b) Cap on qualifying expenditure per IPC will be doubled from S$50,000 to S$100,000 per calendar year.

All other conditions of the scheme will remain the same.

8. Philanthropy Tax Incentive Scheme for Family Offices

A new tax incentive scheme will be introduced for qualifying donors* with Family Offices operating in Singapore, which allows 100% tax deduction for overseas donations made through qualifying local intermediaries, capped at 40% of the donor’s statutory income.

The Monetary Authority of Singapore (“MAS”) will provide more details by 30 June 2023.

*Donors must have a fund under MAS’ Section 13O or Section 13U Schemes and meet eligibility conditions, such as incremental business spending of S$200,000.

9. Investment Allowance Scheme (IA), Pioneer Certificate Incentive (PC), Development and Expansion Incentive (DEI), IP Development Incentive (IDI)

The above schemes/incentives which are scheduled to lapse after 31 December 2023 will be extended till 31 December 2028.

10. Implement Global Anti-Base Erosion and Domestic Top-Up Tax (“DTT”)

Singapore plans to implement GloBE rules and DTT with effect 2025. The DTT will top up the multinational enterprise groups’ effective tax rate in Singapore to 15%.

Singapore will continue to monitor international developments and adjust the implementation timeline for the implementation of GloBE and DTT accordingly.

 

INDIVIDUALS

Increase in the Central Provident Fund (CPF) monthly salary ceiling

CPF monthly salary ceiling will be raised from S$6,000 to S$8,000 by year 2026 for all employees in 4 phases as follows: –

	CPF monthly salary ceiling	CPF annual salary ceiling
	S$	S$
Current	6,000	102,000 (no change)
From 1 September 2023	6,300 (+300)
From 1 January 2024	6,800 (+500)
From 1 January 2025	7,400 (+600)
From 1 January 2026	8,000 (+600)

Working Mother Child Relief (WMCR)

With effect from YA 2025, the WMCR amount for a qualifying child who is a Singapore citizen born or adopted after 1 January 2024 will be changed from a percentage of the mother’s annual earned income to a fixed dollar relief, as follows (subject to personal income tax relief cap of S$80,000):

Child Order	WMCR Amount (S$) For a qualifying Singapore citizen child born or adopted on or after 1 January 2024
1st	8,000
2nd	10,000
3rd and beyond	12,000

The WMCR amount for qualifying children born or adopted before 1 January 2024 will remain unchanged.

Further details can be found at www.go.gov.sg/wmcr.

Grandparent Caregiver Relief (GCR)

With effect from YA 2024, GCR is allowable to working mothers as long as the caregiver does not derive trade, business, profession, vocation or/and employment income exceeding S$4,000 in the year preceding the YA of claim, subject to all other existing conditions being met.

Foreign Domestic Worker Levy Relief (FDWLR)

The FDWLR will lapse for all taxpayers with effect from YA 2025.

The Singapore government has also announced tweaks and remedies to existing schemes and new announcements to soften the impact for certain categories of Singaporean employees. These announcements are summarised below:-

MISCELLANEOUS

Progressive Wage Credit Scheme (PWCS)

PWCS will be enhanced by increasing the Government’s co-funding share from 50% to 75% for employees with gross monthly wages of up to S$2,500, and 30% to 45% for employees with gross monthly wages more than S$2,500 and up to S$3,000, for the qualifying year 2023.

Senior Employment Credit (SEC)

SEC will be extended from 2023 to 2025 to support employers in hiring senior workers.

CPF Transition Offset (CTO)

CTO will be provided to employers to alleviate the rise in business cost due to the increase in senior workers’ CPF contribution rates in 2024. The offset provided will be equivalent to half of the 2024 increase in employer CPF contribution rates for senior workers.

Enabling Employment Credit (EEC)

EEC will be enhanced to cover a larger proportion of wages and a longer duration for persons with disabilities (PwDs) who have not been working for at least six months. Further details will be released by the relevant authority in due course.

Tax Changes for vehicles

Additional Registration Fee (ARF) based on the Open Market Value for cars, taxis and goods-cum-passenger vehicles is revised as follows:

Open Market Value (OMV)	Revised ARF rates
First S$20,000	100% of OMV
Next S$20,000	140% of OMV
Next S$20,000	190% of OMV
Next S$20,000	250% of OMV
In excess of S$80,000	320% of OMV

The revised ARF rates will apply to all new and imported used cars and goods-cum-passenger vehicles registered with Certificates of Entitlements (COEs) obtained from the second COE bidding exercise in February 2023 onwards.

For vehicles that do not need to bid for COEs (e.g. taxis and classic cars), the revised ARF rates will apply for those registered on or after 15 February 2023.

Preferential Additional Registration Fee (PARF) Rebate CapPARF rebates will be capped at S$60,000. This is applicable for cars that are registered with COEs obtained from the second bidding exercise in February 2023 onwards and are subsequently deregistered within their PARF eligibility period.For vehicles that do not need to bid for COEs (e.g. taxis), the PARF rebate cap is effective for registration made on or after 15 February 2023 and are subsequently deregistered within their PARF eligibility period.

Buyer’s Stamp Duty (BSD)

Marginal BSD rates will be revised for both higher-value residential and non-residential properties acquired on or after 15 February 2023.

If you wish to understand further how Budget 2023 affects you and your business in Singapore. Reach out and speak to our Tax Advisers team in Ledgen Singapore today.

Malaysia has been a signatory to the United Nations Framework Convention on Climate Change since 1993. It was only in the late 2000s that Malaysia had taken a more serious approach in addressing climate change at the federal level, especially with newly launch National Energy Policy. In 2021, Malaysia announced its Nationally Determined Contributions (NDCs) with the aim to an unconditional reduction in the economy-wide carbon intensity of GDP by 45% by 2030[1].

According to a legal opinion commissioned by The Commonwealth Climate and Law Initiative (CCLI) (“Legal Opinion”), directors of Malaysian companies are duty bound to proactively incorporate climate change considerations into their corporate strategies and decision-making processes [2]. Directors need to apprise themselves of all aspects concerning climate change that can impact their companies and undertake action to manage, plan and implement appropriate strategies to address climate related risks and ensure proper disclosure of such risks. A director who failed to do so may be in breach of his / her legal duties and could be subject to litigation from shareholders or enforcement action from the regulatory authorities [2]. Also, directors cannot deny their obligations to take into account of climate change risks in discharging their fiduciary duties [2]. The directors’ duties under the law of Malaysia comprise of (i) statutory duties which are set out in the Companies Act, 2016 (CA 2016) and (ii) the common law principles as pronounced in cases decided by the Courts of Malaysia.

Under Section 213 of the CA 2016, the duties that directors owe to their companies are in two broad categories i.e., fiduciary duty to act for a proper purpose and in good faith in the best interest of the company and a duty of care skill and diligence [2].

 

Fiduciary Duty

Section 213(1) of the CA 2016 provides for the first category of directors’ duties, whereby a director is under a fiduciary duty to, at all times (i) exercise his powers for a proper purpose and (ii) such powers must be exercised in good faith in the best interest of the company. The statutory duties and fiduciary duties of directors under the CA 2016 can be explained by references to the following case laws [2]:

(1) Case law: Dato’ Abul Hasan bin Mohamed Rashid v Multi-Code Electronics Industries & Anor [2012] 5 MLJ 176 (Court of Appeal of Malaysia) A director of a company is precluded from bringing his personal interest into conflict with that of the company. In the case of Dato’ Abul Hasan bin Mohamed Rashid v Multi-Code Electronics Industries & Anor [2012] 5 MLJ 176 (Court of Appeal of Malaysia), it was held that directors could be regarded as trustees and were subject to strict fiduciary principles that ensured certain minimum standards of behaviour with potentially severe penalties in the event of breach.

(2) Case law: The Board of Trustees of the Sabah Foundation & Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469 The company is entitled to the single-minded loyalty of its directors. In The Board of Trustees of the Sabah Foundation & Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469, the court defined the characteristic of a fiduciary as that the director must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal.

(3) Dato’ Abul Hasan bin Mohamed Rashid v Multi-Code Electronics Industries & Anor [2012] 5 MLJ 176 A director must act bona fide in the interests of the company and not exercises his or her powers for any collateral purpose. In Dato’ Abul Hasan bin Mohamed Rashid v Multi-Code Electronics Industries & Anor [2012] 5 MLJ 176 (Court of Appeal of Malaysia), the court held that a director who, by using the position, makes a profitable gain and must account for that profit. Where a director finds himself or herself in a position where the duty to the company and the director’s personal interest conflict, any contract entered is voidable at the instance of the company.

(4) Zaharen bin Hj Zakaria v Redmax Sdn Bhd and other appeals [2016] 5 MLJ 91 A director must never act in any manner that would put the company in harm’s way. This principle was affirmed in Zaharen bin Hj Zakaria v Redmax Sdn Bhd and other appeals [2016] 5 MLJ 91 (Court of Appeal of Malaysia).

 

Duty of Care

Section 213(2) of the CA 2016 requires a director to exercise reasonable care, skill and diligence. A director’s exercise of this duty of care will be assessed based on [2]: (a)    Firstly, the knowledge, skill and experience which may be reasonably expected of a director having the same responsibilities. This is assessed using an objective test; and (b)    Secondly, the additional knowledge, skill and experience which the director in fact has. Therefore, where a director professes to have qualifications or experience in a specialised area of knowledge, he shall be expected to use such specialised knowledge where it is pertinent to the company’s activities. In such circumstances, while the second limb under Section 213(2) CA 2016 is described as a subjective test, the director is adjudged against the standard of skill commensurate with the director’s professed level of qualification or experience in the area of knowledge [2].

Case law: Singapore landmark case of Abdul Ghani bin Tahir v Public Prosecutor [2017] SGHC 125 In a Singapore landmark case of Abdul Ghani bin Tahir v Public Prosecutor [2017] SGHC 125, the company director was imprisoned for failure to exercise reasonable diligence under section 157(1) of the Singapore Companies Act [2]. In this case, The Singapore High Court found the director to have neglected his duty of care and diligence which contributed to the company committing money laundering offences because of the skills and experience that the director possessed, which was, as a chartered accountant providing corporate secretarial services and his experience as a Singaporean resident director.

 

In today’s scenario where wide and global discussions on issues regarding climate-related provisions, regulations and guidelines are now easily available to directors of Malaysian companies, it will be difficult for any director to claim they were not aware of the material risks arising from the climate crisis. Therefore, directors may risk acting in breach of their duties, if they do not keep themselves informed of the climate risks and must undertake the appropriate action to incorporate a broader sustainability agenda in their companies’ operating and decision-making processes and address these issues. Board can and rely on the support of external ESG experts and advisors but it is important for directors having regard to their knowledge of the company’s activities, structure and operations, to make an independent assessment of the sustainability and climate-related advice, opinions, reports and statements and should refrain from taking a simplistic approach of just placing wholesale reliance on the opinions of ESG experts.  

Companies are pressured to take responsibility for the impact of its business on the environment, the economy and the community as stakeholders have become increasingly aware of the impact of climate change.

In March 2022, the directors of Shell were sued for failing to properly prepare the multinational oil and gas company for net zero. The lawsuit brought by activist shareholders was thought to be a first-of-its-kind action at holding a company’s board of directors personally liable “for failing to properly prepare for the net zero transition.”[3] The activist shareholders argued that the board’s failure to implement a climate strategy that truly aligns with the landmark Paris Agreement was a breach of their duties under English law. It claimed that the Shell board’s mismanagement of climate risk had put its directors in breach of their duties under the U.K. Companies Act. This law stipulates directors are legally required to promote the firm’s success and to exercise reasonable care, skill and diligence.

It is not the first time that Shell has been brought to court over climate-related issues. In May 2021, a Dutch court ordered Shell to reduce its global carbon emissions by 45% by the end of 2030, when compared with 2019 levels. The court also held that Shell was responsible for its own carbon emissions and those of its suppliers, known as Scope 3 emissions [3].

It is rather clear and evident from the above legal actions that companies today must ensure that strategic plans are in place to incorporate sustainability considerations into business strategies and operations as failure to do so will have a greater impact on the company’s risk profile, reputation, potential liabilities and its overall value.  As climate crisis and issues becoming more prevalent, directors’ duty and standard of care have now evolved to an even higher benchmark i.e., to consider climate related risks in their decision-making process.

Directors today must own up to their roles and responsibilities in addressing climate change and step up in discharging their duties.

 

If you have any questions or require any additional information, please contact us.

 

The above have been extracted from [1] The Star : On climate change, Malaysia has three stories to tell, [2] the Legal Opinion commissioned and published by The Commonwealth Climate and Law Initiative (CCLI) and [3] The Guardian : Shell directors sued for ‘failing to prepare company for net zero’ and is for general information only. It is not a substitute for professional advice.

As an international financial hub that powers Asia, Singapore deals with cross border transactions in volumes every day. Managing the tax services relating to cross border issues can be complex, especially withholding tax. It is therefore crucial for taxpayers to understand the mechanism of this tax, more so for accountants, comptrollers, and tax leaders of an organisation.      

This article will cover tax residency of a company and the types of payments to non-residents that would be subject to withholding tax. 

Managing the tax services relating to cross border issues can be complex, especially withholding tax. For individuals, our Singapore income tax for foreigners guide explains how tax obligations differ for non-residents and expatriates.

What is Withholding Tax (WHT)?

Withholding tax is a tax collection mechanism to facilitate and ensure the collection of tax due from non-resident persons on specified categories of Singapore-sourced or deemed Singapore-sourced income. 

A payer who makes certain types of payments to a non-resident is obliged to withhold tax on the gross payments and remit the tax withheld to the Inland Revenue Authority of Singapore (IRAS) within a stipulated time frame. 

Tax Residency of a Company

Under Singapore tax law, tax residency of a company is determined by the place in which the business is controlled and managed. A company is considered a Singapore tax resident if the control and management of its business are exercised in Singapore. 

One key factor in determining ‘control and management’ is the location of the Board of Directors meetings (i.e. the location where strategic decisions of the company are made).

On the other hand, a Singapore branch office of a foreign company is regarded as a non-resident of Singapore as it is generally controlled and managed by its overseas parent company. 

Understanding tax residency is essential not just for withholding tax but also for effective corporate tax planning, ensuring that companies remain compliant while optimising their overall tax position.

What Type of Payments are Subject to Withholding Tax?

Pursuant to Section 45 of the Singapore Income Tax Act 1947, the following payments made to non-resident persons are subject to withholding tax: 

• Interest, commissions or fees in connection with any loan or indebtedness
• Royalties or other payments for the use of or the right to use any movable property
• Payments for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information
• Non-resident Director’s remuneration 
• Certain distributions by unit trusts
• Gains from trading in real properties 
• Withdrawals from Supplementary Retirement Scheme (SRS) accounts by non-citizen SRS members
• Income from any profession or vocation carried on by non-resident individuals
• Distributions from a real estate investment trust (REIT)
• Income derived from public entertainers 
• Commission or other payment of licensed international market agent 

The withholding tax rate depends on the type of payment to the non-resident person. It ranges between 10% to 17% (Refer here on the IRAS website). Lower withholding tax rates may apply if the non-resident person is a tax resident of a country which has a Double Tax Agreement (DTA) with Singapore. 

When to File Withholding Tax?

A payer has to file the online withholding tax form (IR37) and pay the withholding tax to the IRAS by the 15th of the second month from the date of payment to the non-resident (“due date”).

If the withholding tax is not paid by the due date, a 5% late payment penalty will be imposed. If the withholding tax remains unpaid 30 days after the due date, an additional 1% penalty of the unpaid tax will be levied for each completed month, subject to a maximum of 15%. Thus, the maximum late payment penalty is 20%. 

How to File Section 45 Withholding Tax?

A payer should log into the IRAS’ MyTaxPortal using a Corppass account to file the online withholding tax form (IR37). Thereafter, the payer can choose its preferred payment methods such as, bank transfer, interbank GIRO or telegraphic transfer to settle the tax liability. 

To ensure accuracy and compliance, organisations may also engage professional tax advisory services Singapore to assist with the filing and payment process.

Conclusion

We know that tax obligation is important for every organisation to stay compliant. A good tax record reflects well on the company’s reputation. Hence, taxes such as withholding tax must be adhered to in its due time. 

Whether it is withholding tax, corporate tax, or personal tax, the certified tax professionals at Ledgen Group are able to help clients comply with regulations and work to the best interest of the client organisation. We have provided solutions relating to withholding tax that has resulted in great client satisfaction and compliance with the local authority.  

Contact Ledgen, a corporate service provider in Singapore for a better management of withholding tax today. 

At certain junctures of your business, there will be a time where you need to scale some operations like payroll. As one of the most vital parts of a company, payroll has to function reliably and accurately. For it to scale effectively, you have a few options to ensure that this part of the business can keep functioning without a hitch.

Hiring an extra hand would be an apparent thing to do, but there might be issues with budget, lack of training, or simply not the best solution for the company. Hence, there are two options to consider. You can either subscribe to a payroll software online or outsource payroll to a corporate service provider.

Read more: Hidden Risks of In-House Payroll

In this article, we will help you understand what each option entails and what factors to consider before deciding. Let’s start by looking at each one in more detail:

What is Payroll Software?

A payroll software is a computer program or application that organises, maintains, and automates payroll processes such as salary payments, pension fund, tax and other statutory deductions. It can be done in-house using proprietary technology developed by the company itself. For most companies though, off-the-shelf or readily available cloud-based payroll software are more commonly used.

Cloud-based software or software-as-a-service (SaaS) is popular especially among small to medium businesses to do payroll since it eliminates the need for maintaining physical servers, its respective networking hardware and firewalls. 

Advantages of Payroll Software:

• Control

You have control over all the details and raw data of running payroll, taxes, activity logs and reports. A payroll software can gather and store payroll data very reliably these days. 

• Cost

It generally costs much less to subscribe to a basic payroll package online than to develop in-house or outsource.  

• Speed 

Payroll software can calculate and generate reports in an instance. 

Limitations of Payroll Software:

• Learning Curve

Some payroll software have steep learning curves and it takes a while to navigate around with confidence. The user must also have ample payroll knowledge to make sure payroll data is input correctly to avoid wrongful calculations.  

• Prone to Error

To a certain degree, payroll software cannot verify whether the input data is correct or otherwise. There is no logical check capability to verify the payroll reports before submitting the net pay, tax, or pension reports to respective stakeholders. Cases of simple and extreme errors have led to unnecessary harsh penalties and blacklisting respectively.   

• Prone to Downtime

Servers and systems are susceptible to IT downtimes that can last from a few hours to days. When it happens, you will have no control over it and your whole payroll process management will be derailed, causing demoralising late salary crediting into the staff’s bank accounts.  

• Upfront Investment

Some software and SaaS providers charge a high fee that needs up to one year upfront payment. Besides that, their service packages might not be customisable to fit into your unique business needs and this premise is especially true for all cloud based systems.

What is Payroll Outsourcing?

Payroll outsourcing is when your company enlist the services of a third party provider to manage and support your payroll. These outsourcing providers can usually help with administrative and compliance functions as well. Depending on what you need done, outsourced payroll specialists are able to either take over your entire payroll department or just do part of the job.  

Advantages of outsourcing:

• Saves Time

No more manual work or data entry. By outsourcing, you free up your team’s time and resources to refocus on other necessary tasks. 

• Compliance Guaranteed

Unlike payroll software, outsourcing ensures that your payroll data is accurate and compliant to local regulations. Outsourced specialists may also help you answer queries and requests from the authorities with the right information.  

• Secured Data

Payroll outsourcing service providers would know the best practices to ensure data security of your company and employee information. In the event of a downtime, they are able to support and troubleshoot so your company’s payroll can still be done in-time via their well established contingency SOPs.

• Access to Add-on Services

A lot of payroll services also provide other services such as human resource, tax and accounting. This can be helpful when you need more hands on deck later on. Rather than researching and using multitudes of software, you can outsource to just one vendor for different projects or service support.    

Limitations of outsourcing:

• Cost

Depending on the services and the degree of customisation offered, some outsourcing services incur costs that can be higher than an average payroll software. 

• Less control 

With a hands-off approach via outsourcing, it makes sense that less control is exercised. Unlike payroll software where reports can be accessed quickly, it might take a while for the same report to be handed over to you by the outsourced provider. On the plus side, all the reports given by the outsourced payroll service would usually be accurate and subsequently verified by the client’s HR point of contact which forms an excellent check and balance internal control procedure. 

Which One is Right for You?

Whether it is done via outsourcing or software, it is undeniable that payroll is part and parcel of your business. A lot of stakeholders depend on payroll to be done right and timely. Therefore, you need to work with a reliable solution and opt for a provider that can meet your needs. 

Payroll software could be the best solution for small and medium businesses that might need help with one or two payroll tasks to be automated, such as salary payments and claims verifications. 

On the other hand, businesses can opt for payroll outsourcing when there are a lot of tasks that need coordination and proper handling. These outsourced tasks range in complexity from salary payments, claims reimbursements, to income tax submissions, employee provident fund, and pension schemes. 

Payroll outsource also makes sense if the company operates cross-border and has no payroll department in every office branch. Through outsourcing, there will be one dedicated centralised payroll partner that the whole organisation can rely on for accurate and timely transactions.    

Read more: What You Should Know about Payroll Outsourcing & How to Get Started 

Conclusion

Both payroll software and payroll outsourcing seeks to help you lighten the load of your payroll duties. But by outsourcing, a lot more tasks can be handled and managed with better efficiency and reliability. Talk to our payroll and HR experts at Ledgen Group to see how outsourcing can benefit your organisation. 

With presence in multiple Asian regions, Ledgen has a great track record of solving client’s payroll and HR issues and providing value-added services.  

The signs of a recession are already here. Central banks around the world are increasing interest rates as an attempt to combat rising inflation. Cost of living and the cost of goods are climbing. Even the most established and notable e-commerce and tech companies are scaling back despite their well-known success during the COVID-19 pandemic. No one will be exempted from the impact of the incoming recession.

The World Bank predicts that a global recession will happen in full force in one to two years time. Hence, companies need to start minding the most important part of their whole business; managing cash flow. In a recession, businesses must conserve cash to brave through the challenges of an economic downturn. 

History has taught us valuable lessons for managing cash flow during a recession. Here, we share five actionable ideas to protect your cash flows. 

1.Understand Your Company’s Financial Performance

As a business owner or part of the C-level executive, it is imperative to understand the company’s financial statements. This includes the Profit & Loss Statement, Balance Sheet and most importantly, the Cash Flow Statement. By doing so, it would allow for an in-depth understanding of the company’s debts, cash in bank, assets, the cost structure and more. 

A detailed understanding would allow for better planning in terms of expenses and to factor in the risk relating to a recession. It would also ensure the company has enough liquidity to continue operating and do business as usual. Having a properly planned budget would allow a company to have an idea of the outflow of money and help identify the best course of action for the year. 

2. Diversify Your Products & Services 

In a recession, some industries are impacted greater than others. Industries such as technology, healthcare, and consumer staples are regarded as “recession-proof” since they are deemed essential in any point of the economic life cycle. As such, companies can explore whether it will be a good idea to adapt and diversify to new products and services according to current demands. For example, companies could start digitalising their offers by selling through online channels or introducing new online services.

3. Seek Alternative Funding

In general, companies have two broad categories for fundraising; debt and equity. Debt financing or debt raising is when a company borrows money and agrees to pay it back later with interest. Equity financing is when a company raises capital by selling shares of the company with a promise of dividends when profitable. In a recession, share prices of companies tend to drop and interest rates tend to hike. 

Companies would be wise to stock up on cash by raising funds in the external market, i.e. in the capital market. This can be done when the share offer price is at a sufficiently high level. This would ensure financial sustainability of the company should the recession impact the sales.

4. Restructure & Optimise Costs

In a recession, most companies will be keeping a close eye on their cost structure. The company’s yearly budget has to be reviewed and adjusted accordingly so as to identify any shortfalls in spending. This will make it easier to reduce operating costs. 

You should also take current market conditions into account when adjusting and restructuring the budget. It would be prudent to delay or eliminate any unnecessary spending or investments until the recession runs its course. Thus, take this time to perform in-depth cost analyses to determine the categories of cost that can be reduced, delayed or eliminated. 

In short, an accurate cost structure would allow companies to optimise and pivot their cost levels accordingly.

5. Create a Recession-Proof Business Plan

A recession-proof business plan is defined as a business plan that is specifically tailored to weather the storm of a recession. The value of cash flow is ever more important in a recession and in some ways, more crucial at the profit & loss position of a company. One way to keep cash coming in is to keep in touch with loyal customers to ensure they have your support and likewise. 

A recession-proof business plan also means finding new revenue streams, restructuring costs, and all the points aforementioned. All of these efforts will hopefully fortify the foundation of your business as it brave the recession. 

Read more: Helpful Ways to be Timely & Accurate with Your Accounting 

Conclusion

A recession is only natural as part of the economic cycle. When it happens though, companies of any size will need to rethink and adapt their cash flow management to focus only on the essentials. Normally in an economic slowdown, companies take the time to re-strategise for growth in the next cycle. When things are finally starting to look up, these prudent businesses would just need to execute their plan to win back the market or even take advantage of acquiring distressed companies of good value with their strong cash reserves.

One way to restructure cost and build a recession-adapted business plan is by outsourcing selected tasks like accounting or payroll. Talk to our specialists at Ledgen to explore the best outsourcing solution that can best help your business in these times.   

Contact Ledgen today to get started in navigating through a recession.