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Changes to CPF Contribution By Employee in 2023

From 1 Jan 2023, employee CPF contribution rates will rise by 1% from the current 14% to 15%.

As an employer, it’s your duty to ensure that this new rates must be adhered to, in accordance with the strict MOM laws of Singapore. But then often you may find this confusing as there has been so much news information to digest. 

Yet, there’s no excuse to miss out on compliance with MOM and IRAS. Let us break this down for you easily about the new CPF contribution rates by employees.

CPF Contribution Rate For Employees

It is a compulsory requirement for all employees in Singapore to have CPF contribution regularly. Every month, as the employee receives the monthly paycheck from the employer, part of the pay is set aside for CPF contribution to fund for retirement in the longer term.

Additionally, the employer has to contribute towards their employees’ CPF. The rates are dependent on the employees’ age. For employees up to 55 years of age, CPF contribution is approximately 40% of the monthly salary.

There are changes to the CPF contribution rates from 2023 onwards. Here is the table breakdown of the CPF rates:

As you can see from above, employees in the age group between 55 and 70 years old are seeing increases in their CPF contribution rates. However, this only applies to employees earning monthly wage of $750 and above. CPF contributions for older workers will be gradually increased over the next ten years to meet the full contribution rate of 37% (employee + employer). According to Budget 2022, the CPF contribution rate for people aged 60 to 65 will be raised to 20.5% beginning in January 2023. This is in order to allocate to the Special Accounts of employees to further boost their retirement income.

CPF Contribution Cap For Employees

Do you know that the CPF has contribution caps for employees? They are the wage ceilings.

There are 2 types of CPF wage ceilings – Ordinary Wage (OW) Ceilings and Additional Wage (AW) Ceilings. The OW is capped at $6,000 per month. The AW Cap restricts the amount of Additional Wages that are eligible for CPF contributions. The AW cap is applied per employer and calendar year.

Find out how AW is being calculated.

Employees Who Require CPF Contributions

Besides employees who are Singapore citizens and PRs, the following individuals are also eligible for CPF contributions:

  • Company directors.
  • Part-time or casual employees.
  • Operationally Ready NSmen on in-camp training. You have to pay CPF contributions on an NSman’s wages, including makeup pay from MINDEF. You can recover the employee’s share of the contributions from his wages.
  • Family members of the business owner, if they are receiving wages for work done for the owner.
  • Employees concurrently employed by another employer.

This also includes any Singaporean seaman employed under a service contract or other agreement signed in Singapore.

Minimum Salary To Contribute CPF By Employers

Regardless whether an employee is full time, part time, temporary or casual workers, CPF contribution is mandatory if the employee is earning more than $50 per month. Internships are exempted from CPF contribution. 

Penalties For Failure To Contribute CPF

Under the law of MOM, employers must pay all salaries by the 14th of every month. The liable penalties include:

  • Late payment interest of 18% per annum (1.5% per month) is charged beginning on the first day of the following month after contributions are due. The minimum monthly interest payment is $5.
  • Repeat offenders face a fine of up to $10,000 and no less than $2,000 per offence, as well as up to 12 months in prison, or both.
  • A fine of up to $5,000, but no less than $1,000, per offence, or up to 6 months in prison, or both.
  • If you deduct your employee’s share of CPF contributions but fail to pay the contributions to the CPF Board, you could face a $10,000 fine, up to 7 years in prison, or both.