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A Guide to Central Provident Fund (CPF) for New Employers


When you start a company in Singapore, you will eventually need to recruit people to help you expand. As an employer, it is your duty and legal obligation to provide your workers with basic employment rights. One of them is for Singapore citizens and Permanent Residents to contribute to the Central Provident Fund (CPF).


Since there are severe penalties for non-compliance, most workers take their time to do it right. It can be overwhelming, especially if you are going through the process for the first time, but if you get it right the first time, you can set your company up for success. By the way, if you have any bookkeeping or accounting questions as you start and expand your company, we'd be happy to assist you.


What is the CPF?

The Central Provident Fund (CPF) is a compulsory, employment-based savings scheme for Singapore Citizens and Permanent Residents (SPRs). Under the CPF scheme, all Singaporeans and SPRs are required to make regular monthly contributions to the Fund deducted by their employers from their monthly salaries, which invests the proceeds on their behalf for their healthcare, home ownership, and family insurance.


As a business owner, do I need to contribute to my own CPF too?

If you own a Sole Proprietorship or Private Limited Company and receive more than SGD $6,000 in annual Net Trade Income (NTI), you only have to apply to your MediSave account once a year.

The Inland Revenue Authority of Singapore decides your NTI, which is your gross trade profits minus all permissible business expenses, capital allowances, and trade losses (IRAS).


What about my staff, how do I calculate how much CPF to pay them?

Follow these 4 easy steps to figure out how much to pay CPF for your employees:

1. Identify if you need to pay CPF for those employees.

2. Find out which wage payments you will need to pay CPF contributions on.

3. Classify wages as ordinary wages and additional wages.

4. Apply the CPF contribution rates​.


Step 1: Identify if you need to pay CPF for your employees.

Once you start to hire employees, you’ll need to make CPF contributions for your staff. All CPF contributions must be paid solely by you.

Take a look at which types of staff you would need to pay CPF for, and which types of staff you don’t have to:


Need to contribute to CPF

  1. Singapore Citizens or Permanent Residents earning more than $500 per month. (full-time, part-time, ad-hoc, or contract basis, and even during their probation period)

  2. School-leavers or students working on a part-time or temporary basis under a contract of service on their vacation.

  3. Company directors engaged under a contract of service and paid a salary on top of any fee received

Don’t have to contribute to CPF

  1. Singapore Citizens or Permanent Residents earning more than $500 per month. (full-time, part-time, ad-hoc, or contract basis, and even during their probation period)

  2. Students who work during their term time or school holidays (i.e. not final year holidays, for post-secondary institutions)

  3. Tertiary students employed under training programmes approved by local government higher education institutions

  4. Singapore Citizens or Singapore Permanent Residents working overseas

  5. Foreigners holding Employment Pass, S Pass, Miscellaneous Work Pass or Work Permit

  6. Directors’ fees voted to company directors at General Meetings


What is an employer?

An employer can be: Any person, company, association, or organization, whether or not incorporated, who employs a worker; Any agent or person responsible for paying an employee’s salary, on behalf of an employer.


What is an employee?

An employee is: Any Singapore Citizen or Singapore Permanent Resident who is employed in Singapore under a contract of service by an employer; Any Singapore Citizen or PR who is employed under a contract of service or an agreement, in Singapore, as a master, a seaman or an apprentice in any ship where the owners are not exempted from the CPF Act.


Step 2: Find out which wage payments you will need to pay CPF contributions on.

These are 6 payments for your employees that you will need to include when you calculate for CPF contribution:

1. Basic wages

2. Overtime pay (for workmen and employees with basic monthly salaries not exceeding $4,500 and $2,600 respectively)

3. Cash incentives (e.g. Good service awards)

4. Allowances (e.g. meal, transport, laundry)

5. Bonuses

6. Commissions


Step 3: Classify Wages as Ordinary or Additional Wages

As the CPF contributions you would have to pay for your staff are calculated based on an employee's total wages, the total wages for any calendar month is the sum of an employee's Ordinary Wages (OW) for the month and the Additional Wages (AW) paid to him in that month.


Step 4: Apply the CPF contribution rates

You may now be asking yourself: How much is the employer’s CPF contribution rates? Or, How to calculate CPF contribution rates?


All companies in Singapore are required to deduct a portion of their employee’s salary (usually 20%) and contribute an additional 17% for their employee. The employer pays their employee’s share of Central Provident Fund (CPF) contributions monthly if the employee is paid more than S$500 per month.


When is the due date for CPF contributions, and what happens if I miss the deadline?

The due date for CPF contributions is on the last day of the calendar month. There is a grace period for employers until the 14th of the following month (or the next working day if the 14th falls on a Saturday, Sunday or Public Holiday).


After that, late payment interest would be charged at 1.5% per month commencing from the first day after the due date. Enforcement action may be taken against employers who fail 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). Save money by paying on time and being compliant!

XYZ Pte Ltd made a CPF contribution of $3,000 for the month of October on 20 November 2014. This payment is late by 19 days.

Therefore, the amount of late payment interest will be:

= $3,000 x 1.5% x 19/30 (stop at the 4th decimal)*

= $28.50

*Number of days the payment is late/number of days in the month.



For your CPF and payroll services needs, you may contact us for consultation and avail our services.





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