Why 72% of Singapore SMEs Overspend on Payroll Compliance

Introduction

I think we are all aware, how big a role SMEs play in Singapore. They are basically the backbone of the economy. They make up about 99% of all businesses and give jobs to almost 3/4 of the workforce.

But there is one surprising part that I came across recently. It is estimated that around 72% of SMS end up overspending on payroll compliance. The sad part is, it is usually for reasons that could have been avoided.

These reasons include things like sticking to manual processes or getting hit with fines or late CPF payments. 

All of these eat into margins, waste leadership time, and slow down growth. The good news? Most of these problems are fixable.

What does Payroll Compliance Really Mean in Singapore?

Payroll compliance means meeting obligations set by the CPF board, IRAS, MOM, and SkillsFuture.

Let’s have a look:

For SMEs, keeping track of these moving parts is complex and costly when mistakes occur.

Why 72% Overspent: The Root Causes

• Manual workflows: A lot of SMEs still use traditional methods and rely on spreadsheets. It sounds harmless, but for a team of just 15 to 25 people, that can take up 180 to 240 hours a year on payroll alone. That is basically a month of work lost.
• Fragmented Tools/Vendors: I have seen companies use one system for leave and another for payroll. Trust me, it gets so messy. They are literally paying for overlapping services and duplicating effort.
• Regulatory Churn: Rules in Singapore change every year; if you miss just one update, you risk underpaying, paying extra interest, or even overcontributing.
• Penalties: Something as simple as a late CPF payment just even by a day, can quickly turn into huge fines and interest.
• Outsourcing Pitfalls: Many payroll vendors sound like an easy fix, but they usually charge more per employee, each month. On top of that, there might be hidden charges for IR8A filings or extra pay runs.
• Duplicated Effort: Sometimes, two departments might end up reconciling the same numbers or managers; double-check what vendors already did. That is just a waste of time and money.
• Opportunity Cost: What I find the worst part is that founders spend more than 10 hours a month just to handle payroll. That time could be used in finding new clients or closing deals.

Where Does the Money Leak?

Also Read: 10 Common Myths About Singapore CPF Contributions

The Fix: Practical Playbook

Platform & Automation

• First things first, you have to get yourself a Singapore-localised HRMS. It should automatically calculate CPF and SDL, and generate the AIS files for IRAS without you having to do anything.
• Also, make sure to turn on automation for payslips, filings, and deadline reminders. This way, you don’t have to struggle at the last minute.
  

Vendor & Process Simplification

• If you’re using three different tools right now, it’s high time it consolidate into one platform, or you need to get a provider that does it all.
• And when you’re reviewing contracts, double-check if there are any hidden fees and also set clear SLAs so you don’t end up paying for surprises.
  

People & Governance

• Make sure your payroll staff are updated with the latest CPF, IRAS, and MOM changes, because the rules change often.
• Also, run quarterly compliance audits using a simple checklist. It’s like preventive maintenance, and it catches small issues before they make things worse.
  

Funding & ROI

• Take advantage of the Productivity Solutions Grant (PSG). It covers up to 70% of payroll software costs, so why pay full price?
• And always track ROI: Look at how many hours you’re saving, if the penalties are down to zero, how much vendor spend you’ve cut, and how much more time leaders now have for growth.
  

30/60/90 Roadmap

I suggest following this roadmap:

• 30 days: Do a quick cost audit, pick your payroll platform, and sign up for GIRO/AIS.
• 60 days: Move your data over, do a parallel run to test it, and train your staff.
• 90 days: Fully switch over, retire duplicate vendors, and launch your KPI dashboard so you can measure the improvements.
  

KPIs that Prove it Worked

• Payroll processing time ↓ 60–80%
  
  Tasks that used to take days now take just a few hours a month.
• Errors/adjustments → near zero
  
  Now there is no need to chase down mistakes or fix numbers after the fact.
• Penalties/interest = 0
  
  Deadlines are handled automatically. This way, late fees and compliance fines disappear.
• Vendor cost/employee ↓ 20–40%
  
  You’re no longer double-paying for overlapping services or hidden fees.
• Leadership hours reallocated to revenue.↑
  
  Instead of dealing with payroll, founders and managers finally spend that time growing the business.
  

Also Read: 8 Key Changes to Singapore CPF Contribution Rates

Conclusion

In the end, I will just say that the fact that 72% of SMEs in Singapore spend more than they should on payroll, compliance really says something. 

The wasted hours and missing out on growth opportunities are a serious concern, and the fix does not have to be complicated. 

All that needs to be done is to get one good payroll platform, automate the filings, cut out the extra vendors, and make sure your team knows the latest rules.

At the end of the day, payroll should be paying your people right and not draining your profits.