Central Provident Fund (CPF) relates to employer and employee contributions and Singapore incorporated businesses are required to make CPF contributions in line with the prescribed rates.
Singapore employers are required by law to pay CPF for employees who are Singapore Citizen and SPR.
An employee can also include the company directors, employees, family workers, national servicemen (NS men) on in-camp training, part-time and temporary employees.
CPF contributions is payable for basic salary, bonuses, allowances, commissions, overtime pay and NS men make-up pay.
CPF contributions is not payable for reimbursement of business expenses and termination benefits (ie retrenchment pay, retirement gratuity, salary in lieu of notice, etc.)
CPF contributions are calculated based on the employee’s total wages: Ordinary Wages (OW) plus Additional Wages (AW) paid in that month.
1. Ordinary wages (OW)
The ordinary wages relate to wages (example monthly salary) that are earned by an employee in a particular calendar month.
CPF contributions for OW is capped at SGD 6,000, and CPF contribution is not required on the excess of SGD 6,000.
There are different CPF contribution rate for your employees, and the rate depends on his citizenship (Singapore Citizen or SPR in his 1st, 2nd year or from the 3rd year of obtaining SPR status), total wages and age group for the particular calendar month.
2. Additional wages (AW)
The additional wages relate to additional payments such as leave pay or annual bonuses which are paid at intervals more than a month or are not paid exclusively for that particular month.
CPF contributions for AW is capped at an annual AW ceiling of SGD 102,000 minus total OW subject to CPF for that particular year.
It is the responsibility of the employer to make the CPF contributions within the grace period of 14 days after the CPF payment due date.
3. Skill development levy (SDL) for all employees
Skills Development Levy is a compulsory levy contribution payable to CPF Board for all employees (temporary, casual, part-time, full-time and foreign employees on work permits and employment passes) working in Singapore.
This is on top of CPF contribution and foreign working levy.
Please note that this levy is not deducted from the employee’s monthly wage.
The fund collected for Skills Development Fund (SDF) is used to provide training grants when companies send their employees for training courses.
The employers are required to contribute SDL up to the first SGD 4,500 at a rate of 0.25% (or a minimum of SGD 2), whichever is higher.
For the gross monthly salary exceeding SGD 4,500, the levy is capped at SGD 11.25.
Gross monthly salary includes basic salary, allowances, overtime pay, leave pay, bonus, commission and payments in cash.
4. Foreign workers levy (FWL) for Work Permit & S Pass Holders
FWL is used to regulate the number of foreign workers.
An employer that hires foreign workers is liable to pay the foreign workers levy.
The extra fee is intended to cover the cost of administrating foreign workers and organising work permits.
The levy amount payable varies with the employment sector and foreign worker’s qualifications.
For S Pass, the monthly salary must be at least SGD 2,200, it is valid for two years, and the employer must provide medical insurance.
For work permit, there are no minimum salary, valid up to 2 years (subject to certain conditions) and the employer must provide medical insurance.
There is also an S Pass and Work Permit quota for every company.
5. Self-Help Group (SHG) and SHARE Donation to Community Chest
The SHG funds are the Chinese Development Assistance Council (CDAC), Eurasian Community Fund (ECF), Mosque Building and Mendaki Fund (MBMF) and Singapore Indian Development Association (SIDA).
Monthly contributions are deducted from the employee’s salary, and the money goes directly to the appropriate ethnic group welfare.
Should you need assistance or would like to find out more about the cloud payroll processing services in Singapore, please send an email to Contact@AccountingSolutionsSingapore.com, and our business advisor will contact you.