CPF and Employee Matters

CPF and Employee Matters

Central Provident Funds
CPF contributions are payable when there is an employer–employee relationship, that is, there is a contract of service in place between the Company and the individual.

 

Who do you need to pay CPF contributions for?
  • Company directors if they are engaged under a contract of service and paid a salary on top of any fee received
  • Full Time employees
  • Part-time/casual employees
  • Foreigners from the day they attain Singapore Permanent Resident (SPR) status in Singapore
  • School-leavers or students working on a part-time or temporary basis

 

CPF is NOT payable for the following:
  • Directors’ fees voted to company directors at General Meetings
  • Singapore citizens or Singapore Permanent Residents working overseas
  • Foreigners holding Employment Pass, S Pass, Miscellaneous Work Pass or Work Permits
  • Partners, sole-proprietors, or self-employed persons (however they will need to contribute to their own Medisave Accounts)
  • ‘N’, ‘O’ and ‘A’ level Government School students working during their gazetted school holidays
  • Tertiary students on full-time industrial attachment, or employed under a training programme, during vacation or term approved by the selected institutions
  • Students working during vacation or term, under a training programme approved by their overseas tertiary education institution, and the training period does not exceed 6 months

 

How to Create a CPF Account?

You are strongly encouraged to apply to e-submit your CPF contribution details using CPF e-Submit@web as soon as you intend to hire your first employee, or pay yourself your first salary. You will need your SingPass and company’s Unique Entity Number (UEN) to apply.

Upon approval, you will receive your Company CPF Submission Number (CSN), Payment Advice (CPF91) and GIRO application form from the CPF Board. Normally, the first CPF Contribution will be made using the Payment Advice form as the GIRO application will take some time before approval.

 

When to Pay CPF Contributions?
CPF contributions are due at the end of each month. However, employers have a grace period of 14 days to pay CPF contributions after the end of the month.
You are required to pay the employer’s and employee’s share of CPF contributions monthly for all employees.

 

Basis of CPF Contribution

The CPF contribution rates applicable for an employee who is a Singapore Citizen is dependent on his or her wages and age group. For SPRs, the rate will be dependent on his or her Year of SPR status, wages and age group.

Total Wages used to compute the CPF contribution for any given month is computed based on the sum of Ordinary Wages and Additional Wages for the month.

Ordinary Wages are wages due or granted wholly and exclusively in respect of an employee’s employment in that month which will also include allowances like food allowance or overtime payment.

Additional Wages are wages which are not granted wholly and exclusively for the month such as bonus, leave pay, incentive and other payments made at intervals of more than a month.

You may check on the amount of CPF payable for each employee HERE.

 

Contribution Ceiling

The Ordinary Wage (OW) Ceiling is currently fixed at $6,000 per month.

The Additional Wage (AW) Ceiling is dependent on the following formula:

$102,000* – Total Ordinary Wages subject to CPF for the year

 

CPF Contribution Rates at a Glance
Year 2017 Rates
AGE GROUP EMPLOYER CONTRIBUTION EMPLOYEE CONTRIBUTION TOTAL CPF CONTRIBUTION
UP TO 55 17 20 37
55 – 60 13 13 26
60 – 65 9 7.5 16.5
ABOVE 65 7.5 5 12.5

 

Late Payment of CPF Contribution
Late payment interest, with a minimum interest amount of $5, calculated daily at 1.5% per month, starting from the first day of the following month after the CPF contributions are due, will be levied for late payment.

 

Non Payment of CPF Contribution
Please try not to be in this category, for the penalty may be a court conviction that comes with a fine up to $10,000, imprisonment, or both.

 

Reporting Employee Earnings to IRAS
Under S68(2) of the Income Tax Act, an employer must prepare Form IR8A and Appendix 8A, Appendix 8B or Form IR8S (where applicable) for ALL your employees who are employed in Singapore by 1st March each year.

 

Auto-Inclusion Scheme for Employment Income
If you have 9 or more employees, you will need to submit your employees’ income details to IRAS by 1st March every year. If you participate in this AIS Scheme, you will not be required to provide your employees with IR8A, although it is still a common practice to continue to furnish them with the IR8A, or a statement of earnings for their own record.

 

Implication of the Earnings Reporting requirement
As a general guide, when preparing accounts for your company, it is advisable to keep proper records of each individual employee’s payroll record to facilitate the reporting process. If your staff count is relatively high, it is advisable that you consider the use of a payroll system, or a dedicated payroll record in excel, to monitor and record all your payroll transactions by employee name or ID.

 

Use of Employment Contracts
An employment contract is an agreement between the employer and an employee to state the terms for the contract of service of the employee. Typically, an employment contract covers clauses such as
  • Commencement Date
  • Place of Work
  • Job Description/ Job Title
  • Remuneration
  • Working Days / Work hours / Overtime hours
  • Public Holidays
  • Annual Leave
  • Sick Leave
  • Maternity/Paternity Leave
  • Childcare Leave
  • Deductions
  • Termination of Employment
  • Notice Period for Resignation
  • Company Information Confidentiality
  • Workmen’s Insurance (if required)

It is highly recommended for companies to draft a proper employment contract, compliant with applicable employment laws, to provide clarity on the terms of employment for both the employer and the employee.

 

The Employment Act
The Employment Act covers every employee (regardless of nationality) who is under a contract of service with an employer, except for persons employed in a managerial or executive position, seaman; domestic workers; and persons employed by a Statutory Board or the Government.

 

Part IV of the Act, which provides for rest days, hours of work and other conditions of service, applies only to:
  • Workmen earning not more than $4,500 basic monthly salaries; and
  • Employees (other than workmen) covered under Employment Act earning not more than $2,500 basic monthly salaries Basic salary will excludes overtime, bonus, Annual Wage Supplement, productivity incentive payment, reimbursement for special expenses and any allowances.

With effect from 1 April 2014, persons employed in managerial and executive positions earning a basic monthly salary not exceeding $4,500 will be covered under the Employment Act, except for the provisions in Part IV.

You may read more about the Singapore Employment Act HERE.