EOR Glossary: Every Term You Need for Hiring in Southeast Asia (2026)
EOR, PEO, CPF, BPJS, EPF, SDL, misclassification, permanent establishment – the compliance landscape in Southeast Asia has its own vocabulary. This glossary covers every term you’ll encounter when hiring across the region.
In This Guide
- Terms A – D
- Terms E – M
- Terms N – P
- Terms R – S
- Terms T – W
- Frequently Asked Questions
A – D
Annual Wage Supplement (AWS)
A one-month bonus (sometimes called the “13th month payment”) common in Singapore. Not legally mandated but contractually required under many employment agreements. Typically paid in Q4 and must be included in CPF contribution calculations.
Attrition Rate
The percentage of employees who leave an organisation over a given period. SEA’s regional average was 17.5% in 2026 (Aon data), with Singapore and Malaysia posting higher rates of 19.3% and 18.2% respectively. High attrition increases EOR and payroll processing costs per hire.
Base Salary
The fixed monthly cash component of an employee’s compensation, before allowances, bonuses, commissions, or statutory contributions. Used as the primary input for CPF, EPF, BPJS, and SSF contribution calculations. Distinct from gross salary (which includes all cash components) and cost-to-company (which includes employer contributions).
Benefits-in-Kind (BIK)
Non-cash compensation provided to employees — company cars, housing, medical insurance, stock options. Tax treatment varies by country: Singapore taxes most BIK at the employee’s marginal rate; Malaysia has specific exemptions for certain categories.
BPJS Ketenagakerjaan
Indonesia’s mandatory employment social security programme, covering workplace accident insurance (JKK), death insurance (JKM), old-age savings (JHT), and pension (JP). Employer contributions range from 3.7–6.24% of salary depending on risk level; employee contributions are 3%. All employees — including those hired via EOR — must be registered. Failure to enrol or late contribution triggers significant penalties from BPJSTK.
BPJS Kesehatan
Indonesia’s national health insurance scheme, separate from BPJS Ketenagakerjaan. Employer contributes 4%, employee contributes 1% of monthly salary. Mandatory for all formal employees. Employers must register employees within 30 days of hire.
CPF (Central Provident Fund)
Singapore’s mandatory pension and healthcare savings scheme. Employer contributes 17% of Ordinary Wages for employees aged 55 and below; employee contributes 20%. From 2026, the Ordinary Wage ceiling is SGD 8,000/month. CPF covers three accounts: Ordinary (housing), Special (retirement), and MediSave (healthcare). Non-payment or late payment carries penalties including prosecution.
Contractor
An individual engaged under a service contract — not an employment contract. Contractors are responsible for their own taxes in most jurisdictions. However, the label alone does not determine legal status: if the working arrangement resembles employment (control, exclusivity, integration), tax authorities across SEA may reclassify the relationship as employment, triggering back-contributions and penalties.
Cost-to-Company (CTC)
The total employer cost of hiring an employee, including base salary, allowances, bonuses, and all statutory employer contributions (CPF, EPF, BPJS, SSF). In Singapore, CTC is approximately 17–20% higher than the employee’s gross salary due to CPF. In Indonesia, BPJS contributions add 6–10% on top of gross salary.
E – M
Employer of Record (EOR)
A third-party organisation that legally employs workers on behalf of another company in a foreign jurisdiction. The EOR issues the employment contract, handles statutory registrations, runs payroll, and assumes compliance liability. The client company directs the employee’s work and pays the EOR a service fee per employee per month. EOR enables companies to hire internationally without setting up a local legal entity.
Employment Pass (EP)
Singapore’s work authorisation for foreign professionals earning at least SGD 5,000/month (higher for financial services). Issued by MOM. EP holders are not eligible for CPF contributions but may choose to make voluntary contributions. Distinct from S Pass (for mid-skilled workers) and Work Permit (for semi-skilled workers).
EPF (Employees' Provident Fund)
Malaysia’s mandatory retirement savings scheme. Employer contributes 13% (for employees earning ≤MYR 5,000) or 12% (above MYR 5,000); employee contributes 11%. Both contributions are calculated on gross salary. EPF is administered by the Employees Provident Fund Board (KWSP). Non-compliance carries a 10% surcharge on unpaid contributions and possible prosecution under the EPF Act 1991.
Fixed-Term Contract
An employment contract with a defined end date, used for project-based or temporary engagements. In Indonesia (PKWT), fixed-term contracts are strictly regulated: maximum initial duration of 2 years, with a 1-year extension permitted. In Vietnam, a fixed-term contract can be renewed once before automatic conversion to indefinite employment. Misuse of fixed-term contracts to avoid permanent employment obligations is a common enforcement target.
Foreign Worker Levy (FWL)
A monthly fee payable by Singapore employers for each S Pass or Work Permit holder on their payroll. The levy varies by sector and worker tier (e.g., SGD 550–650/month for S Pass holders in services). Employment Pass holders are exempt. FWL is separate from CPF and salary — it is an additional employer cost not related to the employee’s compensation.
FX Markup
The spread between the interbank exchange rate and the rate a provider actually applies when converting currencies. An 8% FX markup on a USD 3,000/month salary payment costs USD 240/month — USD 2,880/year — that never appears as a line item on an invoice. When comparing EOR or payroll providers, always ask for the exact exchange rate applied, not the mid-market rate.
Gross Salary
Total employee earnings before tax deductions, but after any pre-tax deductions. Includes base salary, fixed allowances, overtime, and commissions. Gross salary is the basis for calculating CPF (Singapore), EPF (Malaysia), SSF (Thailand), BPJS (Indonesia), and PIT (Vietnam) contributions. Distinct from net salary (after-tax take-home) and CTC (gross salary plus employer statutory contributions).
IR8A
Singapore’s mandatory annual return of employee income, filed with IRAS by 1 March for the preceding calendar year. Covers all employees who received income from a Singapore employer. Includes salary, bonuses, benefits-in-kind, and equity compensation. Late filing penalty: up to SGD 10,000 per offence. A reputable payroll outsourcing provider handles IR8A submission as a standard inclusion.
Misclassification
Incorrectly classifying an employee as a contractor (or vice versa), resulting in non-payment of statutory contributions and employment protections. Tax authorities across SEA apply substance-over-form tests: the nature of the working relationship — not the contract label — determines classification. Misclassification penalties include back-contributions for the full engagement period, fines, and in Indonesia and Vietnam, potential criminal liability for company directors.
N – P
Net Salary
The take-home pay received by an employee after all deductions — income tax, employee statutory contributions (CPF, EPF, BPJS, SSF), and any other authorised deductions. Net salary is always lower than gross salary. The difference between gross and net varies significantly by country: a Singapore employee on SGD 5,000 gross takes home approximately SGD 4,000 net after CPF; an Indonesia employee on equivalent IDR has similar percentage deductions via BPJS and PPh 21.
Notice Period
The period of advance notice required before either party terminates an employment contract. Statutory minimums vary: Singapore requires at least 1 day per year of service for employees below 2 years’ service (minimum 1 day, maximum 4 weeks under the Employment Act for shorter-tenure employees); Malaysia requires 4–8 weeks depending on tenure; Vietnam requires 3–45 days depending on contract type. Many employment contracts specify longer notice periods than the statutory minimum.
Offshore Hiring
Employing workers in a country where your business has no registered legal entity. Without an EOR, offshore hiring creates permanent establishment risk, unregistered employment, and non-compliance with local statutory schemes. EOR is the standard mechanism for compliant offshore hiring in Southeast Asia.
Payroll Outsourcing
Contracting an external provider to handle payroll calculation, statutory contributions, and filing on behalf of a company — while the company remains the legal employer. Distinct from EOR: payroll outsourcing assumes you already have a local entity. The provider handles mechanics; you handle employment. For companies without a local entity, EOR is the appropriate service.
PEO (Professional Employer Organisation)
Similar to an EOR but typically involves a co-employment structure, where both the PEO and the client company share employer responsibilities. PEOs are common in the US. In Southeast Asia, the EOR model (sole legal employer) is more prevalent and better aligned with local labour law frameworks. When a SEA provider uses the term “PEO,” confirm the exact legal structure before proceeding.
Permanent Establishment (PE) Risk
The risk that a company’s activities in a foreign country create a taxable presence — a “permanent establishment” — subjecting the company to corporate income tax in that jurisdiction. Employing staff in a country without a local entity can trigger PE risk in some circumstances. Using an EOR significantly reduces (though does not entirely eliminate) PE risk, as the EOR — not the client company — is the legal employer and taxpayer.
Personal Income Tax (PIT)
Income tax payable by individual employees on their earnings. Rates and calculation methods vary across SEA: Singapore applies a progressive scale from 0–24% (resident) with significant relief schemes; Malaysia’s resident scale runs 0–30%; Thailand’s scale is 0–35%; Indonesia (PPh 21) ranges from 5–35%; Vietnam applies a 7-bracket scale from 5–35%. PIT is the employee’s liability, but employers are typically responsible for withholding and remitting it.
Probation Period
An initial employment period — typically 3–6 months — during which either party may terminate with shorter notice. Probation is permitted in all five SEA markets. In Vietnam, probation is capped at 60 days for professional roles and 30 days for others. In Indonesia, probation cannot exceed 3 months and must be included in the PKWT. Statutory protections (annual leave, EPF/CPF) accrue from the first day of employment, not from the end of probation.
Ready to hire compliantly across SEA?
Gotpaid handles all of the above — from CPF remittances to BPJS registration to IR8A filings — across Malaysia, Singapore, Thailand, Indonesia, and Vietnam.
R – S
SDL (Skills Development Levy)
A mandatory levy of 0.25% of each employee’s gross wages, capped at SGD 11.25/month. Paid monthly by employers to SkillsFuture Singapore (SSG). Applies to all employees in Singapore, including foreign workers. Not related to CPF. Non-payment carries fines under the SDL Act.
SOCSO (Social Security Organisation)
Malaysia’s social insurance programme covering employment injury and invalidity. Employer contributes 1.75% of monthly wages; employee contributes 0.5%. Applicable to all employees earning below MYR 5,000/month and others who opt in. Administered by PERKESO. Closely related to the Employment Insurance System (EIS), a separate 0.2% contribution (employer) and 0.2% (employee) for retrenchment benefits.
SSF (Social Security Fund)
Thailand’s mandatory employee welfare fund covering medical care, disability, maternity, unemployment, and old age. Both employer and employee contribute 5% of monthly wages (capped at THB 750/month each). Administered by the Social Security Office (SSO). All employees working in Thailand must be registered within 30 days of hire. Foreign employees are also required to contribute.
Statutory Minimum Wage
The government-mandated minimum monthly or daily wage floor. In 2026: Malaysia MYR 1,700/month (revised from MYR 1,500); Indonesia’s regional minimum wages vary by province (Jakarta ~IDR 5.6 million/month); Thailand THB 400/day in most provinces; Vietnam varies by region (Region I ~VND 5.0 million/month); Singapore does not have a universal statutory minimum wage but applies the Progressive Wage Model (PWM) for specific sectors.
T – W
Total Compensation
The complete value of what an employee receives — base salary, variable pay (bonus, commission), benefits (medical, insurance, leave), equity (if applicable), and all statutory contributions credited to the employee (CPF, EPF, etc.). When benchmarking salaries across SEA markets, comparing total compensation — not just base salary — gives a more accurate picture of employer cost and employee value.
VSS (Vietnam Social Security)
Vietnam’s mandatory social insurance system, covering health insurance, social insurance (pension and sick leave), and unemployment insurance. Employer total contribution is approximately 21.5% of gross salary; employee contributes 10.5%. Both are capped at 20× the base regional minimum wage. VSS registration is required for all employees within 30 days of hire.
Withholding Tax (WHT)
Tax deducted at source by the payer on behalf of the tax authority, before remitting the net amount to the recipient. In the context of contractor payments across SEA: Malaysia 10% (non-resident services), Singapore 15% (non-resident professional fees), Thailand 3% (all service fees), Indonesia 20% PPh 26 (non-resident), Vietnam FCT ~5%. The payer is liable for remitting withholding tax even if they fail to deduct it from the payment.
Work Permit vs Employment Pass
Singapore issues different work authorisations depending on skill level and salary. Employment Pass (EP): professionals earning SGD 5,000+/month; no CPF but may volunteer. S Pass: mid-skilled workers earning SGD 3,150+/month; subject to levy and CPF. Work Permit: semi-skilled workers in specific sectors; subject to levy and sectoral restrictions. EOR providers must determine the correct pass type before onboarding foreign employees in Singapore.
Frequently Asked Questions
What's the difference between an EOR and a PEO?
An EOR (Employer of Record) is the sole legal employer — the employment contract is between the EOR and the employee. A PEO (Professional Employer Organisation) typically operates under a co-employment model where the PEO and client company share employer obligations. EOR is more common in Southeast Asia and better suited to markets where co-employment arrangements are legally ambiguous. Most SEA HR service providers use the EOR model.
What does CPF stand for and who pays it?
CPF stands for Central Provident Fund — Singapore’s mandatory pension and healthcare scheme. Both employer and employee pay contributions: employer pays 17% of Ordinary Wages for employees aged 55 and below; employee pays 20%. From 2026, the Ordinary Wage ceiling is SGD 8,000/month. CPF contributions are non-negotiable — failure to pay is a criminal offence in Singapore.
Is an Employment Pass the same as a work permit in Singapore?
No. An Employment Pass (EP) is for foreign professionals earning SGD 5,000+/month and is issued by MOM at a company’s request. A Work Permit is for semi-skilled workers in specific sectors (construction, marine, domestic) and carries different conditions including sector quotas and foreign worker levy obligations. S Pass sits between the two, for mid-skilled workers earning SGD 3,150+/month.
What is permanent establishment risk and how does an EOR reduce it?
Permanent establishment (PE) risk arises when a company’s activities in a foreign country create a taxable corporate presence — meaning that country’s tax authority can levy corporate income tax on profits attributed to that presence. Employing staff abroad can trigger PE in certain circumstances. An EOR reduces PE risk because the EOR (not your company) is the legal employer — your company has no formal employment relationship in that country, which is one of the key PE triggers.
How is gross salary different from cost-to-company (CTC)?
Gross salary is what the employee earns before personal tax deductions. CTC is the total cost to the employer — gross salary plus all employer-side statutory contributions. In Singapore, CPF adds 17% employer contribution, so a SGD 5,000 gross salary costs the employer SGD 5,850 in CTC. In Indonesia, BPJS Ketenagakerjaan and BPJS Kesehatan together add roughly 10–12% on top of gross salary. Always budget based on CTC, not gross salary.
From glossary to hiring — Gotpaid handles the rest
Now that you know the terms, Gotpaid handles the compliance. EOR, payroll outsourcing, and contractor payments across Malaysia, Singapore, Thailand, Indonesia, and Vietnam.