Overview of CPF and CPF contribution rates for employees in Singapore

When working in Singapore, in addition to the monthly salary, employees also have an important savings called CPF (Central Provident Fund) - a compulsory social security fund that helps you save for retirement, health care and housing. This is not only a contribution but also a solid financial foundation to help employees in Singapore ensure a stable life in the long term. So how does CPF work? Who needs to contribute? And what purposes can employees use CPF for? Let's find out the details with GLA in this article. 

1. Overview of CPF (Central Provident Fund) in Singapore

2. CPF account structure and interest rates

3 types CPF account, each account serves a specific purpose:

• Ordinary Account (“OA”): Mainly used to save for home purchase, education and investment. Current interest rate: 2,5%/year.
• Special Account (“SA”): For retirement and long-term investment needs. Current interest rate: 4%/year.
• MediSave Account (“MA”): Used to pay for medical expenses, health insurance and long-term care. Current interest rate: 4%/year.

Additionally, when the employee reaches age 55, a Retirement Account (“RA”) will be created by transferring funds from OA and SA. The interest rate of this account is also 4%/year.

Preferential interest rates apply as follows:

• People under 55 years old: Enjoy interest of up to 5%/year on the first SGD 60.000 of total CPF balance.
• People 55 years of age and older: Enjoy interest rates of up to 6%/year on the first SGD30.000 of total CPF balance, and 5%/year on the next SGD30.000.

3. CPF contribution rate for employees in Singapore

CPF is a compulsory contribution between employee and employer.

The CPF contribution rate on salary and allowances, benefits, etc. is entirely dependent on the age and income of the employee/payer. 

For employees with monthly salary exceeding SGD 750:

View details: click here.

Note: For those with a monthly salary above SGD500 to SGD750, the employee contribution will continue to be phased in.

4. Who is entitled to CPF contributions?

In Singapore, CPF is a compulsory contribution for Singapore Citizens (SC) and Singapore Permanent Residents (SPR) who are employed under an employment contract. This means that anyone working in Singapore on a full-time, part-time or short-term contract basis is entitled to receive CPF contributions from their employers.

However, there are some exceptions:

• If the employee is a Singapore citizen or SPR but working overseas, CPF will not be mandatory.
• Employees working under a contract for service instead of a contract of service will not be entitled to CPF.
• Foreign workers working in Singapore under Work Permit or S Pass are not required to pay CPF, but instead, the employer must pay Foreign Worker Levy.

Special groups are also entitled to CPF, including:

• Company directors work and receive salaries from the company.
• Part-time, hourly or short-term contract employees.
• National Reserve Forces (NSmen) during concentrated training.

5. Employer's CPF contribution obligations

Every month, the company is responsible for contributing CPF for employees at the rate prescribed by the Singapore CPF Law. Specifically:

• The total CPF contribution consists of two parts: the employer's portion and the employee's portion.
• Employers have the right to deduct employees' contributions from monthly salaries before paying salaries.
• CPF contribution deadline: Deadline is the last day of the month. If the business is late in submitting, late payment interest will be charged and administrative penalties may be imposed.

If the company fails to perform its obligations, employees have the right to request an explanation and, where necessary, to report to the CPF Board.

6. Consequences of not paying CPF on time

Companies that fail to pay CPF on time may face serious legal consequences, including:

• Late payment interest: 18%/year (equivalent to 1.5%/month), minimum 5 SGD/month.
• Administrative penalty: From SGD 1,000 to SGD 5,000 for each violation, or imprisonment up to 6 months, or both.
• Serious Offence: If an employer has deducted employee's salary but failed to pay CPF, the penalty can be up to SGD 10,000 or 7 years imprisonment.

Therefore, Singapore companies need to prioritize timely CPF payment to avoid legal and financial risks.

7. Frequently Asked Questions about CPF Singapore

Highlights

• Central Provident Fund (CFP)) is a compulsory welfare account (for retirement, healthcare and housing) in Singapore to which all residents must contribute.
• CPF contribution rates vary by age: Employees under 55 years old have higher total contributions than older employees, to ensure better accumulation for retirement
• CPF is divided into three main accounts: Ordinary Account (OA) for home purchases and investments, Special Account (SA) for retirement, and MediSave Account (MA) for medical expenses.
• CPF beneficiaries: CPF applies to Singapore Citizens (SCs) and Singapore Permanent Residents (SPRs) working under an employment contract, but does not apply to foreign workers holding a Work Permit or S Pass.
• Employers in Singapore are required to pay CPF on time, and any delay can result in a fine of up to SGD 10,000, penalty interest or even legal liability.