Long Service Award (LSA) guide for employers in Singapore
Long Service Awards (LSAs) are vital for recognising and rewarding employee loyalty and dedication. This guide provides a concise overview for employers in Singapore, covering key aspects such as the definition of LSAs, eligibility criteria, typical milestones, and best practices for designing an effective LSA programme. We'll also discuss tax implications, employee benefits, and how breaks in service or role changes affect eligibility. By understanding these elements, employers can create a meaningful recognition programme that celebrates long-term commitment and enhances workplace morale.
What is a Long Service Award?
A Long Service Award (LSA) is a recognition programme designed to reward employees for their extended tenure and dedicated service to a company. These awards are typically given to acknowledge milestones in an employee's career with the organisation, celebrating their loyalty, commitment, and contribution over the years.
Who is eligible for the Long Service Award?
Eligibility for the Long Service Award varies by organisation, but it generally includes:
Full-time employees who have completed a minimum number of years of continuous service.
Part-time employees, depending on company policy, may also be considered.
Employees on different contracts (e.g., permanent, contract-based) might be eligible, provided they meet the tenure requirements set by the employer.
What types of the Long Service Award are typically given?
Tip: Considering other forms of bonuses to reward loyal employees? Explore our Bonus Guide for Employers in Singapore to learn how to effectively acknowledge and reward loyalty through tailored bonus schemes.
What are the typical milestones for the Long Service Awards?
Typical milestones for LSAs are:
5 years of service
10 years of service
15 years of service
20 years of service
25 years of service
30 years and above
These intervals can vary depending on the company's policy and the industry standards.
Are there any guidelines or best practices for designing the Long Service Award programme for employees?
When designing a Long Service Award (LSA) programme, consider the following guidelines and best practices to ensure it is effective, meaningful, and fair:
Step #1: Define clear criteria
Establish transparent eligibility requirements: Clearly outline the tenure and performance criteria required for employees to qualify for the LSA. This promotes fairness and ensures all employees understand what is needed to receive the award.
Consistent application: Apply the eligibility criteria uniformly across all departments and roles to prevent any perceptions of bias.
Step #2: Select appropriate awards
Meaningful and valuable awards: Choose awards that genuinely reflect the significance of the employee’s milestone. This could range from monetary bonuses to personalised gifts, extra vacation days, or professional development opportunities.
Customised options: Offer a selection of awards to cater to different employee preferences and needs, ensuring that the recognition is both meaningful and appreciated.
Step #3: Personalise the recognition
Tailored recognition: Personalise the awards with the employee's name, a heartfelt message, or a company-branded item to make the recognition feel special and unique.
Recognition events: Hold individual or small group recognition events where the employee’s contributions are highlighted in a personal and memorable way.
Step #4: Communicate effectively
Clear programme details: Ensure that all employees are aware of the LSA program, including its purpose, the criteria for eligibility, and the types of awards available.
Regular updates: Provide regular updates and reminders about the LSA program through internal communications channels such as newsletters, intranet, or team meetings.
Step #5: Celebrate publicly
Public acknowledgement: Recognise LSA recipients in a public forum, such as company-wide meetings, events, or newsletters. This not only honours the individual but also reinforces the company’s commitment to recognising long-term contributions.
Incorporate stories: Share stories of the recipients’ journeys and achievements to inspire others and highlight the diverse ways employees contribute to the company’s success.
Step #6: Gather feedback
Employee input: Solicit feedback from employees about the LSA programme to understand its impact and areas for improvement. This can be done through surveys, focus groups, or informal conversations.
Continuous improvement: Use the feedback to make necessary adjustments to the program, ensuring it remains relevant, effective, and valued by employees.
Is the Long Service Award subjected to CPF contributions?
CPF contributions are payable on cash awards given to your employee in recognition of his long service.
However, to promote loyalty, CPF contributions are not payable on Long Service Award (LSA) that is given to your employee with at least 5 years of service and subsequent LSA for each 5-year period of service with you, up to the amount of your employee’s Ordinary Wages (OW) for the month in which the LSA is paid. In the event that there are multiple types of LSA given to the same employee, only the first LSA granted to the employee in each 5-year period can qualify for this exemption.
If the LSA exceeds the OW for the month, CPF contributions are payable on the amount in excess of OW. If your employee has no OW payable in that month, CPF contributions are payable on the entire LSA.
Long Service Award (LSA) Scenarios
Are CPF contributions payable?
LSA amount is OW and below
No
LSA amount is more than OW
Yes, on the amount of LSA exceeding OW
OW is $0
Yes, on the entire LSA
Is Long Service Award taxable for employees?
The Inland Revenue Authority of Singapore (IRAS) classifies all gains and profits derived by an employee in respect of his/her employment as taxable, unless specifically exempt from income tax or covered by an existing administrative concession. In the case of Long Service Awards,
Cash awards:
Taxable
Non-cash awards:
Non-cash awards not exceeding $200 are not taxable due to an administrative concession.
If the value of the award exceeds this exemption threshold, the entire value becomes taxable. Employers must declare the cost incurred for taxable awards.
Scenario 1: Long Service Award - Cash
An employee named Alex has been with the company for 20 years. To honour his long service, the company decides to give him a cash award of $1,000.
Tax Implications:
Taxable: Since the award is given in cash, it is considered taxable income regardless of the amount. This $1,000 cash award become his taxable income for the year.
Scenario 2: Long Service Award - Non-Cash
An employee named Sarah has been with the company for 15 years. The company decides to award her a gold watch valued at $150 as a token of appreciation for her long service.
Tax Implications:
Non-Taxable: Since the value of the non-cash award (the gold watch) is $150 and does not exceed the $200 exemption threshold, Sarah will not need to pay taxes on this award.
Alternative Situation: If the company decides to give Sarah a more expensive gift, such as a laptop valued at $300:
Tax Implications:
Taxable: Since the value of the non-cash award exceeds the $200 exemption threshold, the entire value of the award ($300) becomes taxable and will be her taxable income for the year.
How do Long Service Award benefit employees?
Long Service Awards (LSAs) significantly benefit employees in several ways:
Boosting morale: recognising employees for their long-term service enhances their morale and job satisfaction, making them feel valued and appreciated.
Encouraging loyalty: LSAs serve as an incentive for employees to remain with the company longer, fostering loyalty.
Enhancing engagement: regular recognition through LSAs increases employee engagement and motivation, driving higher productivity and commitment.
Promoting a positive culture: celebrating service milestones fosters a positive and appreciative workplace culture, promoting camaraderie and a sense of belonging.
By implementing LSAs, employers can effectively acknowledge and reward dedication, which in turn strengthens the overall organisational culture and employee retention.
Do breaks in service affect the eligibility of the Long Service Award?
Breaks in service can affect eligibility, depending on the company’s policy. Some organisations may reset the tenure count if there is a significant break in service, while others may allow for cumulative service periods. It is essential to define these conditions clearly in the company's LSA policy.
How often is the Long Service Award given out?
LSAs are typically awarded annually during specific events, such as company anniversaries, annual dinners, or special award ceremonies. Some companies may choose to award them based on the actual service milestone date of the employee.
What happens if an employee changes roles or departments within the same company?
If an employee changes roles or departments within the same company, their tenure usually continues to accumulate without interruption. LSA eligibility typically remains unaffected as long as the employee remains within the organisation.
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