understanding payroll software in singapore

Understanding How Payroll Software Calculates CPF in Singapore

CPF stands for Central Provident Fund and is a mandatory savings plan in Singapore. The main purpose of the fund is to help people finance their retirement, healthcare, housing needs and so on. Contributions from both employers and employees are required. With each payroll cycle, employers must make regular payments into the employee’s CPF account. The total percentage of an employee’s total salary that goes towards CPF is determined by the government.

What is the CPF Contribution Ceiling and Rate? 

The CPF contribution ceiling is the maximum amount of an employee’s wages that need to be contributed towards their CPF account. This amount is determined by the Singapore government. You may want to read about a recent change in CPF contributions by employers.

Employees making less than $6,000 a month have a lower contribution rate which can range from 10.5% – 17%. Payroll software in Singapore will automatically recognize an employee’s wage bracket and calculate the appropriate rates when calculating each employee’s CPF payouts.

In the Budget 2023 announcement, the CPF ceiling will be increased to $8,000 by 2026. Find out how the increase will affect you.

How Does Payroll Software Calculate CPF Contributions?

Payroll software such as Jusixty simplifies the process of calculating CPF contributions for employers in Singapore. They are programmed to calculate both employer and employee CPF contributions accurately without the need for manual tabulation every month.

In the system, salary are classified as ordinary or additional wages. Ordinary wages are given wholly and exclusively in respect of an employee’s employment in any particular month. Additional wages may include items such as transport allowances or other reimbursements.

After salary details have been keyed into the system, we look at potential deductions in salary. Some examples include unpaid leave, or fixed monthly donations.

If the employee had taken unpaid leave during the month, it should also be keyed into the payroll software. The system will then deduct the unpaid leave from the salary accordingly. If there are no other deductions, the system will calculate the CPF contribution based on the rates determined by the government. Most payroll software are designed to be in compliance with latest rules and regulations so as to ensure calculation accuracy.

At the end of the day, the payroll staff will be able to view a consolidated CPF contribution report that can be downloaded via Jusixty dashboard.

Ultimately, getting started on a payroll software gives businesses peace of mind, knowing that their CPF contributions are calculated accurately, and in compliant with Singapore laws.