Skills Development Levy: How Much Must Employers Pay on Their Staff?
After you register a new business in Singapore, you have to contribute to statutory funds, regardless if you’re an established subsidiary or a start-up. You have probably heard about contributing to CPF for your staff, but you might not have heard of the Skills Development Levy. That’s a levy for every company on their full or part-time employers. If you’re unsure of what the Skills Development Levy (SDL) is all about but now need to find out more, this article will address your questions.
What is the Skills Development Levy, and what is its purpose?
All employers in Singapore need to pay this levy every month to the SkillsFuture Singapore Agency. The SDL contribution is separate from other mandatory payments made by employers to other statutory boards (i.e. Central Provident Fund or CPF) and is payable regardless of whether you are part of any Skills Development Fund (SDF) training assistance.
The Skills Development Levy (SDL) is managed and controlled by the SkillsFuture Singapore Agency (SSG).
From October 2008, the statutory SDL contribution rate is 0.25% of your employee’s monthly remuneration, capped at a maximum of $11.25 (applicable to those earning above $4,500 a month). There is also a minimum levy of $2 for your employees earning below $800 a month
The levy collected from your company will be pooled to the Skills Development Fund. By paying this levy, you’re contributing to a fund that will help train the Singapore workforce. With this, the government is encouraging you to send your workers for training as well.
What is the Skills Development Fund (SDF)?
Under the SDF system, companies can apply for subsidies for the training of their employees. The Skills Development Fund provides grants to employers who send their employees for training under the National Continuing Education Training system. This is the commonly known employer-based scheme to encourage companies to upgrade the skills of their employees.
Who has to pay for SDL?
All employers are liable to pay SDL for their employees following the Skills Development Levy Act. This mandatory levy is a tax-deductible corporate expense.
If you fail to comply with the SDL procedures, you might run the risk of being penalised or held responsible under the stated rule.
How do I pay the Skills Development Levy on behalf of my staff?
Here are the 4 steps you need to follow:
1. Determine the types of employees who are subjected to SDL
The SDL is payable for all your employees, including:
- Local Citizen and Permanent Residents (PR) who are working full time and part-time
- Employees under Employment Pass, EntrePass, PEP, Training Employment Pass or S-Pass holders
However, there are certain exemptions if your workers belong to the following groups:
- Your employee is a chauffeur, gardener or domestic worker exclusively employed by you and not connected to your business, profession, trade or vocation
- Your employee is not working in Singapore for that month.
For example, Stephanie works for BRACKETS Events Management (fictional company). In the month of September, she was required to undergo training at a tertiary institution and did not render any of her services. As such, BRACKETS events management does not have to pay Stephanie a SDL contribution for the month involved.
2. Find out about the statutory contribution rate & levy for different salary range
From October 2008, the statutory SDL contribution rate is 0.25% of your employee’s monthly remuneration, capped at a maximum of $11.25 (applicable to those earning above $4,500 a month). There is also a minimum levy of $2 for your employees earning below $800 a month.
For example, Elizabeth earns $5,000 a month. You will have to pay her $11.25 levy. On the other hand, Veronica makes $3,450 a month. The SDL made payable to her would be 0.25% of her monthly remuneration, which amounts to $8.63.
If you have only 2 employees in the company, the total SDL payable for that month would be Elizabeth’s SDL and Veronica’s SDL:
$11.25 + $8.63 = $19.88
After rounding to the nearest dollar, the SDL payable is $20.
If you’re still unsure on how to compute this, you can use SDL’s Calculator for clarity.
3. Pay your SDL
As the levy is not a huge amount, you can pay a lump sum an opt for annual payment at beginning of the year or you can pay the SDL monthly along with CPF contributions.
Here are 3 options for you to choose from:
- CPF e-submit@web or CPF e-submit@AXS
You can pay the SDL along with your employees' monthly CPF contributions through
CPF e-submit@web or CPF e-submit@AXS (if you have 10 or fewer employees)
- E-payment service at SDL website
If there are only foreign employees at your company, you can make payment via E-Payment service at the SDL website.
- Cheque + SDL Return form
You can also make payment directly to SkillsFuture Singapore (SSG) either by issuing a crossed cheque payable to ‘Skills Development Fund’ or direct bank transfer. You should also include mandatory details including your company’s name, payment period, contact person, and contact address in the Skills Development Levy Return Form.
4. Adhere to the due dates
According to the SDL Regulations, you are required to pay your employees the SDL within 14 days after the end of each month. Failure to do so will warrant a late payment penalty at 10% per annum of the outstanding fee.
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