CPF Contributions in Singapore – A Complete Guide to Employers
To start a business in Singapore, it is important to become familiar with the obligations every business owner has when it comes to hiring employees. One of the most important ones is the monthly compulsory contributions to the Central Provident Fund (CPF), which serves as a solid financial foundation for employees’ retirement years. Our guide will help you understand CPF contributions in more detail, taking into account all the new changes for 2024. The guide gives you important information on how to comply with the CPF contribution requirements when it comes to hiring local staff in Singapore and help you factor them into your future payroll and financial planning!
What is Central Provident Fund?
The Central Provident Fund is a mandatory savings and social security initiative in Singapore set up by the government. It functions as a financial safety net for Singaporeans and Permanent Residents (PR) by requiring both employers and employees to contribute a portion of the employee’s salary to the CPF account. The funds accumulated in the CPF account are designated to address diverse financing requirements such as retirement, housing, healthcare and education. Primarily, this structured system aids individuals in establishing a solid financial foundation for their retirement years – in other words, it works as a pension fund for Singaporeans and PRs.
Mandatory Contributions
Any company in Singapore which hires local workers is obligated to contribute a certain portion of the salary payouts to the CPF. These funds are kept in a personal employee’s account with the CPF until their retirement or other special occasions – like housing financing or medical needs.
The contributions are arranged in a dual manner: one portion is deducted from the employee’s net salary (usually 20%) and the other portion is added from the employer’s side (most often it is 17% payable by the employer on top of the net salary amount).
Example: An Employee has agreed to work with a salary of $2,000. He will be receiving a net $1,600 (less 20% deducted by the Employer), and the Employer will pay $340 (17%) to the CPF on top of the $2,000 salary amount. Thus, the Employer will pay $1,600 to the Employee and $740 to CPF. Despite indicated $2,000 salary, the actual amount which the Employer will spend on the Employee’s compensation is $2,340.
Who is Obligated to CPF Contributions?
CPF contributions are mandatory for all part-time and full-time Singapore citizens and PR workers who are:
- Earning more than $50 a month
- Engaged under a contract of service
Additional regulations to note:
- PR employees follow the same CPF contribution rates as Singaporean citizens.
- During the first two years of obtaining PR status, both employers and employees pay a lower CPF contribution rate.
Salary Cap
The Salary Cap which attracts CPF contribution is currently $6,800 Singapore Dollars. Starting Jan. 1, 2025, the monthly salary ceiling for CPF contributions will be increased again by $600 and will become $7,400.
CPF Rates
Breakdown of Contribution Rates for Singaporean Citizens and PR Holders 3rd Year Onwards
Depending on how much an employee earns, the CPF contributions will vary accordingly. Here is a breakdown of contributions for those who earn $750 and more, and those earning more than $50 to $500 and above $500 to $750:
For employees earning $750 or more a month:
| Employee’s Age | Employer’s Contribution (% Of Wage) | Employee’s Contribution (% Of Wage) | Total Contributions, % |
|---|---|---|---|
| 55 and below | 17 | 20 | 37 |
| Above 55 to 60 | 15 | 16 | 31 |
| Above 60 to 65 | 11.5 | 10.5 | 22 |
| Above 65 to 70 | 9 | 7.5 | 16.5 |
| Above 70 | 7.5 | 5 | 12.5 |
For employees earning less than $750 a month:
| Employee’s Age | Monthly Wages ($) | Employer’s Contribution (% Of Wage) | Employee’s Contribution (% Of Wage) |
|---|---|---|---|
| 55 years and below | >50-500 | 17 | Nil |
| >500-750 | 17 | 0.6 x (Total Wage – $500) | |
| Above 55 to 60 | >50-500 | 15 | Nil |
| >500-750 | 15 | 0.48 x (Total Wage – $500) | |
| Above 60 to 65 | >50-500 | 11.5 | Nil |
| >500-750 | 11.5 | 0.315 x (Total Wage – $500) | |
| Above 65 to 70 | >50-500 | 9 | Nil |
| >500-750 | 9 | 0.225 x (Total Wage – $500) | |
| Above 70 | >50-500 | 7.5 | Nil |
| >500-750 | 7.5 | 0.15 x (Total Wage – $500) |
Despite the employer’s CPF contribution remaining consistent, employee CPF contributions differ. Those earning below $500 make no contributions, and those earning between $500 and $750 contribute a reduced amount. Employees earning under $50 a month are exempt from both employer and employee CPF contributions.
Employers have the flexibility to opt for full CPF contributions for PR employees if they decide to do so. Once the employee completes their third year as a PR, full CPF contributions, similar to a Singaporean citizen employee, must be paid.
Breakdown of Contribution Rates for PR Holders During 1st Year
Unlike Singapore citizens, there are no higher contribution rates for PR employees who are aged 65 and above. Here is the full breakdown of CPF contributions for PRs during their first year:
For employees earning $750 or more a month:
| Employee’s Age | Employer’s Contribution (% Of Wage) | Employee’s Contribution (% Of Wage) | Total Contributions |
|---|---|---|---|
| 55 and below | 4 | 5 | 9 |
| Above 55 to 60 | 4 | 5 | 9 |
| Above 60 to 65 | 3.5 | 5 | 8.5 |
| Above 65 to 70 | 3.5 | 5 | 8.5 |
For employees earning less than $750 a month:
| Employee’s Age | Monthly Wages ($) | Employer’s Contribution (% Of Wage) | Employee’s Contribution (% Of Wage) |
|---|---|---|---|
| 55 years and below | >50-500 | 4 | Nil |
| >500-750 | 4 | 0.15 x (Total Wage – $500) | |
| Above 55 to 60 | >50-500 | 4 | Nil |
| >500-750 | 4 | 0.15 x (Total Wage – $500) | |
| Above 60 to 65 | >50-500 | 3.5 | Nil |
| >500-750 | 3.5 | 0.15 x (Total Wage – $500) | |
| Above 65 to 70 | >50-500 | 3.5 | Nil |
| >500-750 | 3.5 | 0.15 x (Total Wage – $500) |
CPF contributions differ based on income level. Individuals earning less than $50 do not qualify for CPF contributions. Whereas, those earning between $50 and $750 receive the same employer’s CPF contributions but with reduced employee CPF contributions.
Breakdown of Contribution Rates for PR Holders During 2nd Year
The CPF rates slightly change during PR’s second year of their status:
For employees earning $750 or more a month:
| Employee’s Age | Employer’s Contribution (% Of Wage) | Employee’s Contribution (% Of Wage) | Total Contributions |
|---|---|---|---|
| 55 and below | 9 | 15 | 24 |
| Above 55 to 60 | 6 | 12.5 | 18.5 |
| Above 60 to 65 | 3.5 | 7.5 | 11 |
| Above 65 to 70 | 3.5 | 5 | 8.5 |
For employees earning less than $750 a month:
| Employee’s Age | Monthly Wages ($) | Employer’s Contribution (% Of Wage) | Employee’s Contribution (% Of Wage) |
|---|---|---|---|
| 55 years and below | >50-500 | 9 | Nil |
| >500-750 | 9 | 0.45 x (Total Wage – $500) | |
| Above 55 to 60 | >50-500 | 6 | Nil |
| >500-750 | 6 | 0.375 x (Total Wage – $500) | |
| Above 60 to 65 | >50-500 | 3.5 | Nil |
| >500-750 | 3.5 | 0.225 x (Total Wage – $500) | |
| Above 65 to 70 | >50-500 | 3.5 | Nil |
| >500-750 | 3.5 | 0.15 x (Total Wage – $500) |
It is important to consider the long-term implications of CPF contributions before planning to start a business. These rates change over time so remember to keep an eye out for an update each year!
Overseas Employees
Paying CPF to Employees who work Overseas
CPF contributions are not payable on wages given to your employee who is employed to work overseas. Those working overseas are usually entitled to other retirement fund system contributions, preventing dual contributions by employers. However, there is one exception for when contributions are mandatory. The contributions are payable during overseas training if your employee is employed in Singapore but is required to go overseas for the training period.
CPF contributions are applicable for Singapore employees who are required to go on short-term overseas assignments, including business trips, client meetings, seminars, conferences and training.
If an employee is posted to Singapore but accomplishes work or earns bonuses overseas, CPF contributions continue. On the contrary, if an employee is posted overseas but works or earns bonuses in Singapore, CPF contributions are not mandatory.
Due Dates and Payments
When Is the Due Date to Submit CPF Contributions?
CPF contributions are payable by the Employers on a monthly basis; for every completed month of employment for each employee.
The payment must be done before the 14th day of the month next to the month of employment.
What Happens If You Overpaid Contributions?
In cases where employers discover they have overpaid CPF contributions, they can apply for a refund to the CPF Board for adjustments to the excess payments. If the submission of applications for adjustments exceeds the one-year window from the day of overpayment, corrections will not be processed. It is not possible for employers to simply deduct the overpaid amount from an employee’s salary in the subsequent month.
What Are the Consequences of Non-Payment of CPF Contributions?
As with any government-controlled obligations, there are consequences if you fail to fulfill CPF payment responsibilities. Late payment interest will be charged at 1.5% per month from the first day after the due date in case an employer fails to pay by the 14th of the following month (or the next working day if the 14th falls on a Saturday, Sunday, or Public Holiday).
If the employer continues with the late- or non-payments, legal actions will be initiated. In case an employer doesn’t pay by the 14th of the following month, they may be facing:
- An interest with a minimum monthly payable of $5, starting from the first day of the following month after the contributions are due.
- A fine of up to $5,000 and no less than $1,000 per offense and/or up to 6 months in jail.
- A fine of up to $10,000 and no less than $2,000 per offense and/or up to 12 months in jail in case of repeated offense.
- A fine of up to $10,000 and/or up to 7 years in jail if an employer deducts their employee’s share of CPF contributions but fails to pay the contributions to the CPF Board.
These legal measures underscore the importance of timely and accurate CPF contributions to avoid severe consequences.
Conclusion
A comprehensive understanding of the Employers’ obligations related to hiring local manpower is essential when starting a business in Singapore. The guide helps learn the significance of adhering to CPF contributions for employers, emphasizing the need for accurate compliance and financial planning. It is advisable to check the CPF overview page or reach out to us if you need more clarification on CPF regulations!
