Payroll Concepts > Statutory Deductions and Contributions > CPF

The Central Provident Fund (CPF) is a comprehensive social security system that enables working Singapore Citizens and Singapore Permanent Residents (SPRs) to set aside funds for retirement. It also addresses healthcare, home ownership, family protection and asset enhancement.

Employers are required to make contributions for qualifying employees and may recover the employee’s share as a deduction from their wages. An explanation of when and for whom CPF contributions must be made is available on the CPF website.

Determining CPF Contribution

CPF is calculated as a percentage of employees’ wages that attract CPF. The contribution percentages by the employer and the employee are determined by a combination of factors:

  • Amount of monthly wages – which should be classified as discussed below
  • Legal status – divided into three groups:
    • Citizens and SPRs from the third year of obtaining SPR status onwards
    • Second year SPRs
    • First year SPRs
  • Age – divided into a number of different age brackets

Since these three factors are very important in determining the CPF contribution, please ensure that employees’ information is entered correctly. For more information about entering / editing employee information, please go to:

Classification of Wages

Once you have determined which wage payments attract CPF contributions, you have to classify wages as ordinary wages and additional wages.

Ordinary Wages (OW)

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 OW is the monthly salary.

The OW Ceiling limits the amount of OW that would attract CPF contributions. The OW Ceiling is capped at $6,000 currently. For example, if an employee’s OW for a calendar month is $6,500, his CPF contribution would be computed based on an OW of $6,000; CPF contribution is not required on the remaining $500.

Additional Wages (AW)

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 AW Ceiling sets the maximum amount of AW that CPF contributions are payable on. An employee’s AW Ceiling is computed on a per employer per year basis. More information about the AW Ceiling is available here.

The AW ceiling is calculated as:

$102 000 – Total ordinary wages subject to CPF.

The total ordinary wages for the year is only known at the end of the year. In order to apply the ceiling throughout the year, an estimate of the total ordinary wages to use in the calculation of the ceiling is needed.

To select the method used to calculate the total ordinary wages in the AW ceiling:

  • Go to Settings > Payroll Calculations > CPF
  • In the field Year One (for employees who are in their first year of employment with the company), you can select:
  1. “Project using current OW” (default) – this calculates the total OW based on the year-to-date OW on prior payslips (subject to CPF) plus a projected OW for the remainder of the year based on the current month’s OW
  2. “Project using basic salary” – this calculates the total OW based on the year-to-date OW on prior payslips (subject to CPF) plus a projected OW for the remainder of the year based on the current month’s basic salary
  3. “Do not project” – this calculates the total OW based on year-to-date basic salary (subject to CPF) on prior payslips  only (i.e. no projection for the remainder of the year).
  • In the field Subsequent Years (for employees who have been employed with the company for more than a year), you can select:
  1. “Use previous year’s OW” (default) – this projects the total OW subject to CPF for this year based on the total OW for the previous year*.
  2. “Project using current OW” (default) – this calculates the total OW based on the year-to-date OW on prior payslips (subject to CPF) plus a projected OW for the remainder of the year based on the current month’s OW
  3. “Project using basic salary” – this calculates the total OW based on the year-to-date OW on prior payslips (subject to CPF) plus a projected OW for the remainder of the year based on the current month’s basic salary
  • Click Save

Cautionary note: At the end of the year or upon termination when all actual figures for the year are known, the total CPF liability for the year can be accurately calculated. An employee’s contributions for a given period can therefore be affected by a recalculation of the AW ceiling. For that reason, it is of utmost importance to select the method that will most accurately determine CPF. This will prevent unusually large CPF payments due at the end of the year or upon termination caused by under payments made in prior months. The CPF Board also has an online calculator for this, as well as examples.

*If this method is used and you are new to SimplePay, take-on balances will need to include the previous year’s OW. More information about take-on balances is available on the following help page:

Payroll Setup > Employee Setup > Take-on Balances

Where an employee’s SPR date is during the month, the ordinary wages should be pro-rated based on their SPR date and CPF should only be calculated on this pro-rated portion.

As a general rule, income, allowances and benefits are subject to CPF and reimbursements are not. A comprehensive list of what is and isn’t subject to CPF is available here.

The CPF Board has an online calculator for checking CPF contributions.

CPF and Unpaid Leave

CPF is calculated on the employee’s wages earned for the month. Therefore, if the employee took unpaid leave, this will be deducted from the employee’s basic salary before the CPF contributions are calculated.

If the employee takes unpaid leave for the entire month, no CPF is payable (as per the CPF board’s FAQ here).

CPF and Overutilised Leave

If an employee takes more annual leave than they have available, the company may opt to either deduct the overutilised leave from the employee’s salary (as unpaid leave) or allow the employee to go into a negative annual leave balance.

If the company deduct’s the leave from the employee’s salary in the month that the leave was taken, then the CPF contribution will be calculated based on the employee’s earnings after the unpaid leave deduction.

If the company allows the employee to go into a negative leave balance and the employee subsequently resigns with a negative leave balance, then the CPF must be calculated based on the employee’s earnings before the deduction for leave. See the CPF board’s FAQ here for more information.

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