Understanding CPF &SDL as An Employer in Singapore

août 30, 2024 elitestage No Comment
SINGAPORE
Singapore is one of the business centers in Asia due to its geographical location, politics and culture. However, as an employer, there are a few local labour laws and regulations that you need to pay special attention to. Apart from paying monthly salaries to talents, Singaporean employers are also required to contribute to the Central Provident Fund (CPF) and Skill Development Levy (SDL) for their employees in accordance with the local labour laws and regulations.
While local Singaporean employees are no strangers to automatic monthly deductions from their salaries, it is a different story for offshore employers. In this article, Elite Stage will introduce employers to the Singapore Provident Fund (CPF) and the Skills Development Levy (SDL) in preparation for your entry into the Singapore market!
Central Provident Fund，CPF
CPF was set up on 11 July 1955 to provide a portion of monthly income to help people save for their retirement. Today, CPF is a mandatory social security savings scheme in Singapore with contributions from both employers and employees. It is an important pillar of Singapore’s overall social system, catering for the needs of housing, healthcare, children’s school fees, etc. after retirement.Employers are required to make CPF contributions for Singapore citizens or Permanent Resident Permit (PR) holders whose gross salary exceeds S$50 per month. An employee’s CPF account consists of four accounts

Ordinary Account: for retirement, insurance, housing and investments.

MediSave Account: For hospitalization expenses and approved medical insurance.

Special Account: for retirement and retirement-related financial products.

Retirement Account: for monthly retirement benefits for persons 55 years of age and older.

As an employer, the deadline for you to contribute is the last day of the month, but you must contribute by the 14th of the following month.

Employer contribution rates for 2025

The monthly CPF Ordinary Salary Limit has been increased twice since the implementation of the increase: from S$6,000 to S$6,300 on 1 September 2023, to S$6,800 on 1 January 2024, and to S$6,800on 1 January 2025, when the monthly CPF Ordinary Salary Limit will be increased to S$6,300 per month.

On 1 January 2025, the monthly CPF Ordinary Salary Limit will increase to S$7,400 per month. In other words, the annual CPF salary limit will remain at S$102,000, including Ordinary Salary and Premium Salary. The current maximum additional salary and annual CPF limit will also remain unchanged at S$102,000 and S$37,740 respectively. To simplify the new changes, here is a list of CPF contribution rates for 2025:

Skill Development Levy (SDL)
Employers are required to pay a monthly Skills Development Levy (SDL) for all employees working in Singapore. The SDL is a mandatory tax imposed by the Singapore Government on employers under the Skills Development Levy Act 1979.SDL is administered by the Singapore Skills Development Board (SSG) and all levies are paid into the Skills Development Fund (SDF). The SDF is used to support workforce upgrading programs and also provides training grants for employers to send their employees to training courses under Singapore’s Continuing Education and Training (CET) system.

Under the Skills Development Levy Act, you are required to pay SDL for all your employees*, capped at the first S$4,500 of each employee’s monthly gross salary at a levy rate of 0.25 per cent or a minimum of S$2 (for gross salaries of S$800 or less), whichever is higher.Note*: Employees include full-time, temporary, part-time, foreign employees who are wholly or partly performing services in Singapore.

Gross monthly wages include any salary, commission, bonus, holiday pay, overtime, allowances and other cash payments.

After you have calculated the SDL for each employee, you need to add up the total amount of SDL payable and round it up to the nearest dollar. The following table is an example of how to calculate SDL:

The above are the things that employers need to be aware of and bear in mind when hiring employees in Singapore. As social security and labour laws in Singapore are more stringent and complex than in other countries, the costs can vary greatly depending on the salary interval of different employees.In addition, extra bonuses and benefits can also add to the employer’s tax costs. If not handled correctly, employer’s contributions and employees’ salaries can easily go wrong.

Doing business in Singapore, employers must remember to pay CPF and SDL to their employees in time. If you want to know more about Singapore labour law and dealing with salary payment in Singapore, welcome to consult us by private letter or message, we will work out the appropriate solution for you.

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