You can’t talk about employment in Singapore without mentioning the Central Provident Fund (CPF). CPF is a mandatory social security savings scheme that is funded by employers and employees to meet Singapore’s healthcare, housing, and retirement needs. CPF savings can be used for many things, such as for paying your medical bills and purchasing your Housing & Development Board (HDB) flat. Working Singaporeans and their employers will make monthly contributions to the employee’s CPF accounts:
- Ordinary Account – Savings can be used to purchase a home, investment, education, and to pay for CPF insurance.
- Special Account – Savings can be used for old age and retirement-related investments.
- Medisave Account – Savings can be used for hospitalisation expenses and approved medical insurance.
- Retirement Account – This account will be automatically created upon your 55th birthday.
Employer’s CPF contributions
As an employer, you are required to make monthly CPF contributions following the monthly rates stated in the CPF Act. If your employee earns more than $50 per month, you are required to contribute to their CPF, and if your employee earns more than $500 per month, you can recover the employee’s share by deducting the CPF amount from their wages.
Who do you need to contribute CPF to?
Employers must contribute to their employees who are Singapore Citizens (SC) or Singapore permanent residents (PR) working in Singapore. This includes part-time employees, National Servicemen, casual employees, company directors, and more. For SCs or PRs who are working overseas, CPF contributions are not mandatory.
When do you need to pay for CPF?
CPF contributions are due at the end of the month. As an employer, you must ensure that CPF contributions are paid on time and communicate payment dates with your employees. If you fail to pay your employees’ CPF on time, you must inform your employees beforehand on why the payment is late and when they can expect it, and prioritise CPF contributions among your company’s outstanding payments.
This is because failure to pay CPF contributions by the 14th of the following month may lead to:
- Late payment interest charged at 1.5% per month, beginning from the first day of the following month after the contributions are due. The minimum interest payable is $5 per month.
- A fine of up to %5,000 and no less than $1,000 per offence, up to 6 months jail, or both.
- For repeat offenders, a fine of up to $10,000 and no less than $2,000 per offence, up to 12 months jail, or both.
- If you deduct your employee’s share of CPF contributions but didn’t pay the contributions to the CPF board, a fine of up to $10,000, up to 7 years jail, or both.
Do you have to pay CPF contributions for foreign workers?
Foreigners only need to contribute to their CPF after having assumed PR status. The CPF rates during the first two years as a PR are reduced. Therefore, if you employ foreign workers, you do not need to pay CPF contributions for them. However, you are required to pay them the Skills Development Levy (SDL).
What types of payments attract CPF contributions?
Other than the regular monthly salary, there are other types of payments that attract CPF contributions. This applies to workmen and employees with a basic monthly salary not exceeding $4,500 and $2,600 respectively.
- Basic wages
- Overtime pay
- Cash incentives
- Allowances
- Bonuses
- Commission
Who is exempted from receiving CPF contributions?
While employees should receive CPF contributions from their employers, this does not apply to all employees. These are the people who are exempted from receiving CPF contributions:
- Students who fulfil exemption criteria.
- Foreigners (Foreign workers who are not SCs or PRs).
- Domestic workers with employment not exceeding 14 hours a week such as maids, gardeners, and cooks.
- Employees under the United Nations (UN) Organisation, or any agency or institution of the UN Organisation stationed in Singapore.
- Seamen who are SCs and are employed.
CPF contributions are imperative to meet Singapore’s healthcare, retirement, and housing needs. Therefore, as an employer, you must understand your responsibilities to provide CPF contributions for your employees. For more information about CPF contributions as an employer, get in touch with us now for our team at Transform Borders also offers assistance with payroll.