Employer’s Guide to CPF Contribution and Submission in Singapore

Learning how CPF contribution works may be a hassle, but it isn’t rocket science. As an employer in Singapore, you play a vital part in building your employees’ safety net for their retirement years.

By the end of this article, you’ll have read everything you need to know about the CPF contributions that companies must pay for full-time, part-time, casual, and temporary employees who are:

• Singapore Citizens or Permanent Residents
• Earning more than $50 in a month
• Engaged under a contract of service

1) What is the Central Provident Fund (CPF)?

​The Central Provident Fund (CPF) is an extensive social security savings plan in Singapore. It essentially provides many working Singaporeans financial security for their retirement years; this includes lifelong income, healthcare financing, and home financing.

If you hire employees, you will need to make CPF contributions for staff who are:

• Singapore Citizens;
• 3rd Year and Onwards Singapore Permanent Residents (SPRs); or
• 1st and 2nd Year SPRs who jointly applied with their employer(s) to contribute at full employer-full employee rates.

2) What type of allowances and payments attract CPF contribution?

Besides the monthly salary and annual bonus, you may remunerate your employee with other types of payments for his/her work. If the payment types are any of the following, do factor in your employee’s CPF contribution as well:

1. Basic Wages
2. Overtime Pay for employees with basic monthly salaries not exceeding SGD 4500 and SGD 2600 respectively.
3. Cash Incentives
4. Allowances
5. Bonuses Commission

PRO TIP: Check out the complete list of allowances and payments that attract CPF contributions. It spans across 9 pages in a PDF file, so do take your time to peruse! Alternatively, try a free IRAS-approved payroll software that automatically calculates CPF, taxes and more in your payroll process.

3) What are the different contribution and allocation rates?

Ordinary Wage (OW) CPF Contribution

Ordinary Wages (OW) is the salary an employee receives for his/her employment for the month. This comes with an Ordinary Wage (OW) Ceiling, which currently caps the amount of OW that would attract CPF contributions at SGD 6,000. So, if an employee’s OW for a calendar month is $6,500, his/her CPF contribution is not required for the excess $500 (= $6500 – $6000 OW Ceiling Cap).

According to the most updated CPF contribution rates (dated 1 January 2016), an employee’s age and paycheck size will determine his/her CPF contribution amount for OW.

Monthly Ordinary Wage: $750 or more

For employees with a monthly Ordinary Wage of $750 or more, their contribution (by % of wage) differs by age, as follows:

Monthly Ordinary Wage: Under $750

What about employees whose monthly Ordinary Wage is under $750? As you can see from the table below:

• The employer’s CPF contribution for employees earning less than $750 remains the same.
• In regards to employee’s CPF contributions, those who earn under $500 pay nothing. Those who earn more than $500 to under $750 pay a portion. This is to help low-wage workers enjoy higher take-home pay.

As for employees who earn under $50 a month, there is no employer’s CPF contributions or employee’s CPF contribution necessary.

Do note that your OW Ceiling calculation will have to consider the circumstance in which your employee’s OW either increases or decreases during the year.

For more information on how the calculation should be carried out for those scenarios, feel free to check out this document provided by the CPF Board.

Other Considerations

Over the next 10 years, CPF contributions will gradually rise for older workers beyond age 55 to meet the Total Contribution Rate of 37%. The CPF contribution rates will only drop after age 60.

Older employees will be less costly for employers due to the lower employer’s CPF contributions. As a result, this will make them more competitive in the job market. Lower employee’s CPF contributions also allow older employees to take home more of their salary in cash.

Additional Wage (AW) CPF Contribution

Wages that are not OW (e.g. annual bonuses, leave pay) are Additional Wages (AW) for the month. This comes with a CPF contribution cap known as the Additional Wage (AW) Ceiling, which is the following formula:

Additional Wage Ceiling =​
$102,000* – Ordinary Wages subject to CPF for the year  
*Equivalent to 17 months x $6,000

This calculation is applied on a per employer per year basis.

Let’s say your employee, Jesslyn earns a monthly salary of $7,500. Her OW would cap at $6,000 due to the OW Ceiling. As a result, her AW Ceiling would be as follows:

$30,000 = $102,000 – ($6,000 x 12 months)

If Jesslyn receives an annual bonus of $15,000, the whole amount would be subjected to CPF contribution as it is below her AW Ceiling.

As an employer, you are required to monitor and limit the contributions on Jesslyn’s AW. This is to prevent a refund of excess payment and avoid situations where refunds cannot be made due to insufficient funds in her employees’ CPF accounts.

What if Jesslyn transfers her employment to a related/sister company? In that case, you and her new employer may apply for a single AW Ceiling if:

1. The two companies are related;
2. Jesslyn’s informed consent has been obtained; and
3. The Terms & Conditions of her employment contract remain unchanged.

Do note that your AW Ceiling calculation will have to factor in any of the following circumstances in the event that Jesslyn has carried out any of the following during the year:

• Left employment
• Moved up an age group
• Changed age group and left employment
• Changed age group and OW
• Left and rejoined the company

For more information on how the calculation should be carried out for these scenarios, feel free to check out this document provided by the CPF Board.

Permanent Residents’ (PR) CPF Contribution

Permanent Resident employees’ CPF contributions do not differ from that of Singaporeans, except for the first two years of when an employee obtains his/her PR status. In the first two years, both employers and employees pay a lower contribution.

For 1^st year PRs with a monthly salary of $750 or more, their contribution (by % of Wage) differs by age, as follows:

For 2nd year PRs with a monthly salary of $750 or more, their contribution (by % of Wage) differs by age, as follows:

Similar to Singaporeans, PRs who earn under $50 do not receive any CPF contributions. Also, those who earn above $50 to under $750 will receive the same employer’s CPF contributions, but lower employee’s CPF contributions.

Employers have the option to make full CPF contributions for the PR employees if they choose to do so.

Once the PR employee becomes a 3^rd year PR, full CPF contributions – similar to a Singapore Citizen employee – must be paid.

CPF Contribution for Employees on National Service (NS)

As an employer in Singapore, you may have male employees who will be called up to National Service. In that case, you will need to continue paying their full salary, including the employer’s CPF contributions and the employee’s CPF contributions.

You can claim the make-up pay from MINDEF/SPF/SCDF for the employee’s salary only (including employee CPF contributions). In regards to other types of payment, you will have to continue paying the full employer’s share.

4) How do I submit my employees’ contributions?

As the employer, you can make CPF contributions via the CPF e-Submit@web portal, using your SingPass/CorpPass. You can make payment via Direct Debit, Standing Instructions, eNETS, cheques, or Diners Club card / NETS at any AXS Stations.

You will need a CPF PAL file for this process, which you should be able. to export from your payroll software. A CPF PAL file is a .txt file that starts with the CPF Submission Number (CSN), followed by the contribution month and a string of code. E.g. 201417072CPTE01AUG201459.txt.

Here is a step-by-step guide using a PAL file exported from an IRAS-approved payroll software like Talenox.

5) Can I help my employees adjust their CPF contribution?

Refund

If you happen to overpay CPF contributions and want a refund, you will have to seek the CPF Board’s help to adjust the excess CPF contributions paid through an application. Your application must be made within one year of the payment or it cannot be adjusted; this is because the CPF Board is unable to help you deduct the excess off your employee’s salary

Voluntary contribution

You can choose to make Voluntary Contributions (VC) to your employees’ three CPF Accounts or to their MediSave Account only. Depending on the type of VC you are making, the following maximum amount of VC and tax deductions will apply:

Your mandatory contributions (MC) will take precedence over VC when determining any excess made above the CPF Annual Limit. The CPF Board will refund any excess VC made above the CPF Annual Limit without interest.

You can make a VC of any amount (up to the applicable limits) at any time, and the CPF Board will consider it the current month’s contribution. However, you cannot backdate VC to an earlier date.

To apply for VC for your employees, you will need to apply for a separate CPF Submission Number (CSN). Once your application is approved and depending on the type of VC you are making, you will receive the following CSNs:

6) What is the deadline for CPF contribution?

The due date for CPF contributions is on the last day of the calendar month. However, you have until the 14^th of the following month (or the next working day if the 14^th falls on a Saturday, Sunday or Public Holiday) to make payment. Failure to do so may lead to enforcement actions, including a late payment interest charged at 1.5% per month from the due date. 

At any company, it is normal to experience payment delays due to administrative reasons; e.g. when a new hire joins after the payroll cut-off date. In this instance, always use the payable date to determine the classification of wages.

7) What happens if I fail to submit my employees’ CPF?

Upon detection of late payment or non-payment of CPF contributions, CPF will send you a notice by registered post informing them that legal action will be taken. You will then need to pay all outstanding CPF contributions.

The CPF Board will impose interest on late payment (subject to a minimum of $5) and a composition amount.

Hence, if you still do not make payment for the outstanding CPF contributions, you will be taken to court. The court will then order you to pay the CPF contributions, interest as well as a court fine and/or be sentenced to imprisonment.

If you still do not make the payment from there, a warrant will be issued to seize and sell your assets. The Singapore government may institute bankruptcy or wind up your proceedings as a last resort, and the penalty will be as follows:

• Up to $5,000 court fine and no less than $1,000 per offence and/or up to 6 months imprisonment for 1^st conviction
• Up to $10,000 court fine and no less than $2,000 per offence and/or up to 12 months imprisonment for subsequent convictions

Should you recover your employee’s share of CPF contributions but fail to pay the contributions to the CPF Board, you may be fined up to $10,000 and/or up to 7 years’ imprisonment.