Updates to CPF Contribution for Employers 2021

Over the years, Singapore’s Central Provident Fund (CPF) has been evolving in response to the needs of each generation of citizens. The CPF system promotes three core values:

  • Personal responsibility: Stay employed and save more for your retirement
  • Ownership: Accumulated savings are your own
  • Lifelong income: Savings will pay you a stream of retirement income for life

 

Compliance to regulation standards in Singapore are crucial and this is especially so for pharmaceuticals and manufacturing facilities where it should be deemed a priority. This blog will support you in understanding the employment requirements in Singapore, to ensure your company is compliant with CPF board Singapore.

 

How does mandated CPF contribution by employers help employees in their retirement

According to the Singapore Government,

  1. Employees can use their CPF to safeguard their retirement, housing and healthcare

Unlike pension schemes in other countries, the CPF goes beyond providing members with an income in retirement. The CPF board also helps us to save for housing and healthcare.

 

  1. Employees can enjoy risk-free CPF interest rates

CPF members earn government-guaranteed CPF interest rates of up to 6% per annum on their savings. More information on CPF interest rates can also be found at CPF gov.sg website.

In comparison, other defined-contribution pensions schemes require members to take on some investment risks to grow their savings.

 

  1. 20% of employees’ ordinary wage will go towards their CPF for those aged 55 and below

CPF contribution and allocation depends on both salary and age group. For those aged 55 and below, 20% of employees’ ordinary wage (capped at ordinary wage ceiling of S$6,000) will be deducted from employees to go towards their CPF while 17% of their ordinary wage will be paid out from employers into employees’ CPF. You may refer to CPF Contribution Rates Table to find out the full breakdown by age and income.

 

  1. Employees can rely on other saving methods for retirement

The savings required to meet retirement needs differ from person to person and there is no CPF minimum sum. To help provide for basic retirement expenses, CPF members can set aside the Basic Retirement Sum (BRS), which takes reference from the actual spending of retiree households.

To get higher CPF pay-outs, your employees can choose to:

  1. Top up their CPF; or
  2. Defer their start date of retirement pay-outs.

Unlike our CPF board Singapore where it’s funded by both employers and employees, many other pension schemes are funded by taxpayers. Given rapidly ageing populations and the challenges with reducing pension benefits or deferring pension pay-out, these systems run the risk of default or insolvency.

 

  1. Employees can pass on unused CPF monies to their nominees and/or loved ones

Most tax-funded pension schemes stop payments upon members’ death, so not all of a member’s contributions will be paid out to them or their loved ones. This is not the case in Singapore.

 

2021 updates in CPF Contribution for your Employees

If you hire employees in Singapore, you will need to make CPF contributions for them. This will mainly help your employees meet their retirement, housing and healthcare needs.

Singapore will increase the CPF contribution rates for employees aged 55 to 70 years from January 1, 2022.

The increase was due in January 2021 but was deferred to 2022 to enable employers to manage overhead costs amidst the pandemic. Additionally, the government plans to gradually increase CPF contributions for those aged 55 to 70 years over the coming decade to strengthen their retirement adequacy and strengthen Singapore’s businesses’ foundations for older work employment. From January 2022, CPF contributions would have increased between 1.5 and two percent of total wages.

 

Knowing your responsibilities for CPF Contribution as an Employer

To start contributing CPF as a new employer, you should apply for CPF Submission Number as soon as you intend to hire your first employee. To apply, you will need your Singpass and entity’s Unique Entity Number (UEN).

You will be notified via email once your application is approved. You will also receive a hardcopy welcome letter which contains your CPF Submission Number (CSN) and a Direct Debit Authorisation form.

 

When is CPF not payable for contract jobs in Singapore?

It is dependent on the type of contract job. CPF contributions are not payable if a person is providing his services under a "contract for service".

A contract for service is an agreement in which a person or an entity is engaged as an independent contractor, such as a self-employed person or a vendor engaged for a fee to carry out an assignment or a project for a company on a freelance basis. For such contract jobs, there is no employer-employee relationship, and the person will not be covered under the Employment Act. They will therefore not be entitled to the statutory benefits under the Act.

As statutory benefits do not apply, the terms of engagement will be according to the contract agreed upon by both parties. The contractor, however, is required to pay compulsory MediSave contribution as a self-employed person.

For more information, please visit the Ministry of Manpower website. Nonetheless, if require support and guidance, our team is here to help. Do leave your enquiry in the form below with your hiring needs and our dedicated team members will be in touch. For other employment related articles, please visit our blog section.

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