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

When you set up your company in Singapore, you will have to eventually hire to grow your business. As an employer, you have a responsibility and legal obligation to provide basic employment rights to your employees. One of them is to contribute to the Central Provident Fund (CPF) of staff who are Singapore citizens or Permanent Residents.

Most employees take time to do this right as there are heavy penalties for non-compliance. It can get really overwhelming especially when it is the first time you are going through the process, but get it right the first time and you will set your business up for success. By the way, if you have any questions on bookkeeping and accounting as you set up and grow your business, we’d be glad to help.

What Is the CPF?

The Central Provident Fund in Singapore (CPF) means 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 earn a yearly Net Trade Income (NTI) of more than SGD $6,000, you are only required to contribute to your MediSave account annually.

Your NTI is your gross trade income minus all allowable business expenses, capital allowances and trade losses as determined by The Inland Revenue Authority of Singapore (IRAS).

What is MediSave?

MediSave is a national medical savings scheme that helps individuals set aside part of their income to pay for their personal or approved dependents' hospitalisation, day surgery and some allowed outpatient expenses, as well as their healthcare needs in old age. You can also top up your CPF Ordinary Account or Special Account but on a voluntary basis, it’s not compulsory.

The Singapore government encourages your CPF contribution to MediSave, because of these plus points:

• You can use MediSave savings for:
• Healthcare expenses for yourself and your family;
• Premium payment for MediShield Life or MediSave-approved private integrated plans.
• You can get 4-6% interest per annum on your MediSave savings, so that you will not lose your money from inflation;
• You can get tax relief of up to 37% of your annual Net Trade Income.

What are the rates for MediSave contribution?

The Singapore Employer CPF contribution percentage is the following:

What are the steps and timeline to contribute?

1. First, you will need to declare your actual income and file your Income Tax.
2. Next, IRAS will send you a Notice Of Assessment (NOA).
3. Then, IRAS will send you another letter called the Notice Of Computation (NOC), where your actual MediSave payable will be stated.
4. Your contribution must be made within 30 days of the date stated in the Notice of Computation. This can be done at any CPF service centre or online using your SingPass. Alternatively, you can just do a voluntary top-up to your MediSave account.

How to pay:

1. The most convenient way is to pay online via eNETS Debit Payment. The participating banks are DBS/POSB, UOB, Citibank, OCBC and Standard Chartered Bank.
2. You could also set up monthly GIRO payments online, or pay via NETS at SingPost branches and AXS Machines islandwide.

What About My Staff, How Do I Calculate How Much CPF To Pay Them?

Follow these 4 easy steps to figure out how much CPF contribution you need to pay 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:

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.

Your employees include:

• Company directors;
• Employees holding two or more jobs;
• Family workers;
• NSmen on in-camp training;
• Part-time employees;
• Temporary or casual employees.

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

You could also try using this tool to calculate your own CPF contributions here.

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.

Formula: Total Wages = Ordinary Wages + Additional Wages

It is important for employers to know the correct type of wages because there are different ceilings for OW and AW. This, in turn, will affect the amount of CPF contribution payable.

What are Ordinary Wages?

Ordinary Wages (OW) are:

• Wages due or granted wholly and exclusively in respect of an employee's employment in that month; and
• Wages payable before the due date for payment of CPF contributions for that month.

An example of Ordinary Wage is the monthly salary.

The Ordinary Wage (OW) ceiling limits the amount of OW that an employer needs to make CPF contributions on. The OW Ceiling is capped at $6,000 currently. For example, even if an employee’s ordinary wage for a calendar month is $6,500, his CPF contribution would be limited to an OW of $6,000; CPF contribution is not required on the remaining $500.

What are Additional Wages?

Additional Wages (AW) are:

• Wages which are not granted wholly and exclusively for the month; or
• Wages made at intervals of more than a month.

Examples of AW are annual bonus and leave pay.

The amount of CPF contributions payable on AW is capped at the yearly AW Ceiling of

​ $102,000* – Total OW subject to CPF for the year

*Equivalent to 17 months x $6,000

The AW Ceiling is applied on a per employer per year basis. As an employer, you would need to monitor and limit the contributions on Additional Wages of their employees.

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.

Here’s a breakdown of the age and percentage contribution:

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

The due date for CPF contributions from employer 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!

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

Who is not eligible for CPF contributions?

CPF contributions are not allowed for foreigners holding Employment Pass, S Pass, Miscellaneous Work Pass or Work Permit.

When do foreigners need to contribute CPF?

CPF contribution for foreigners is obligatory if they have been a permanent resident in Singapore for two years. During this period, CPF contribution rates are reduced.

I’m a New Boss. What Are the Exact Steps To Pay My Staff’s CPF?

After incorporating your company in Singapore, you might decide to hire employees. As a new employer, you would first need to register with the Singapore Central Provident Fund Board.

These are the steps that you should take to credit your staff’s CPF contributions:

1. Apply to e-submit your CPF contribution details using CPF e-Submit@web as soon as you intend to hire your first employee. You will need your SingPass/CorpPass and your company's Unique Entity Number (UEN).
2. Once your application is approved, you will be notified via email. You will also receive a hardcopy letter which contains your CPF Submission Number (CSN) and a Direct Debit Authorisation form, both of which are needed to pay your and your staff’s CPF contributions.
3. After your payment has been processed, you will receive an email notification to view the electronic Record of Payment (eROP).
4. Please check your eROP and inform the Board immediately of any discrepancy. The eROP should be kept for future reference.

What is the CPF Submission Number (CSN)?

The CPF Submission Number (CSN) that you received via mail mentioned above, would then be used to transact with the CPF Board.

The CSN comprises your UEN and CPF Payment Code, except in these cases:​

• For employers who are individuals hiring local employees such as a personal driver, gardener and local domestic worker, the CSN is the 'NRIC/Foreign Identification Number (FIN) + CPF Payment Code'; and
• For individuals hiring foreign domestic workers or individuals who are self-employed, the CSN is the individual's NRIC/FIN.

What is the CPF e-Submit@web?

CPF e-Submit@web is the CPF Board’s online platform where CPF contribution details are submitted electronically. It helps you calculate CPF contributions rates automatically, giving the breakdown of employer’s and employee’s rates. It also auto-updates when an employee moves to a different age group, or changes his Singapore Permanent Residency status.

It is secure, as login is authenticated via SingPass/CorpPass and restricted only to company’s authorised staff. Yours and your staff’s CPF contribution payments made by you can be deducted electronically via Direct Debit, PayNow, and eNETS, when you use the CPF e-submit@web.

What payment methods can I use to pay my employees’ CPF contributions?

There are 3 ways to do this - direct debit, eNETS, or AXS machines:

1. Direct Debit

Direct Debit is the way to go, and the most convenient too, to pay for your CPF contribution payments to the CPF Board.

You would need to complete and send the Direct Debit Authorisation (DDA) form to the CPF Board. Next, it will forward it to your bank for processing. The bank takes about 21 working days to process this.

The Board will directly notify you of the Direct Debit arrangement after approval from your bank.

While your DDA application is being processed, you would need to use any of the next few following payment services to pay CPF contributions.

2. eNETS (for CPF e-Submit@web users)

Employers who have personal bank accounts with the following participating banks may initiate the payment online, and deduction will be done from their bank accounts immediately.

Currently, only personal accounts from DBS, POSB, UOB, OCBC, Citibank (Maxisave/Ready Credit) and Standard Chartered Bank are accepted.

3. AXS machines (CPF e-Submit@AXS)

Employers who pay via AXS machines to submit their CPF contribution details may choose between the Diners Club Card or NETS. Maximum transaction amount for Diners Club Card is subject to the card's credit limit, while NETS payment is subject to the daily transaction limit set by your bank.

4. PayNow

PayNow QR and OCBC Pay Anyone payment options are available for all payment services via the myCPF mobile app.

What Do I Do if I Have More Questions? Is There a Hotline?

CPF does not list a direct CPF email address, however you could write in your CPF related enquiry here in an online form.

Got a Burning Question?

Alternatively, you could always chat with us here at East river. We will clarify questions that a new boss has when they have just set up their company and are expanding their business, including questions on how to set up a good system of accounting.