How to Correctly Calculate CPF Contributions

The Central Provident Fund (CPF) in Singapore serves as a comprehensive social security savings scheme, designed to support its citizens and permanent residents across various life stages. This mandatory savings program ensures financial provision for retirement, healthcare, housing, and other essential needs. Both employees and employers contribute to the CPF system each month, fostering a collective approach to financial well-being.

Core Components of CPF Contributions

Understanding the calculation of CPF contributions requires familiarity with specific wage classifications and their associated ceilings. Wages are broadly categorized into Ordinary Wages (OW) and Additional Wages (AW), each with distinct rules for CPF purposes.

Ordinary Wages (OW) represent payments for an employee’s employment during a specific month. These wages must be payable by the 14th day of the following month to be classified as OW. Common examples include monthly basic salary, fixed allowances such as transport or meal allowances, and overtime pay if disbursed within this timeframe.

Additional Wages (AW) encompass payments not attributed exclusively to the month of payment, or those paid at intervals exceeding one month. This category typically includes annual bonuses, incentive payments, leave pay, and overtime wages paid beyond the 14th day of the subsequent month.

The Ordinary Wage Ceiling (OWC) limits the amount of monthly OW subject to CPF contributions. For instance, the OWC is S$6,800 for 2024, increasing to S$7,400 in 2025, and S$8,000 from 2026 onwards.

Beyond the monthly cap, the Annual Wage Ceiling (AWC) places an overall limit on the total CPF contributions for the entire year. This ceiling, currently set at S$102,000, covers both Ordinary and Additional Wages.

Determining Applicable Contribution Rates

The percentage of wages contributed to CPF varies based on an employee’s age and residency status. For Singapore Citizens and Permanent Residents (PRs) who have attained their third year of PR status and earn more than S$750 per month, the following rates apply.

For employees aged 55 and below, the total CPF contribution rate is 37% of their wages, with the employer contributing 17% and the employee contributing 20%.

For employees aged above 55 to 60, the total contribution rate is 31% in 2024, comprising a 15% employer share and a 16% employee share. This rate will increase from January 1, 2025, to a total of 32.5%, with the employer contributing 15.5% and the employee 17%.

For those aged above 60 to 65, the total contribution rate stands at 22% in 2024, with employers contributing 11.5% and employees 10.5%. This rate is also scheduled to increase from January 1, 2025, to 23.5%, with a 12% employer contribution and an 11.5% employee contribution.

Employees aged above 65 to 70 have a total contribution rate of 16.5% in 2024, split as 9% from the employer and 7.5% from the employee. For individuals above 70 years old, the total contribution rate is 12.5%, with a 7.5% employer contribution and a 5% employee contribution.

The rates for these two oldest age groups are not changing in 2025. New Permanent Residents are subject to graduated contribution rates during their first two years of residency, which are lower than the full rates applicable to established residents.

Step-by-Step CPF Contribution Calculation

Calculating CPF contributions involves a methodical application of the defined wage types and ceilings. Employers must first identify an employee’s Ordinary Wages (OW) and Additional Wages (AW) for the relevant period.

Once categorized, the Ordinary Wages are subjected to the Ordinary Wage Ceiling (OWC). If an employee’s OW for the month exceeds the OWC, CPF contributions are calculated only on the ceiling amount, not the full OW. For instance, in 2024, if an employee earns S$7,000 in OW, CPF contributions are computed on S$6,800, which is the OWC for that year. The remaining S$200 of OW is not subject to CPF contributions.

Next, Additional Wages are considered for CPF contributions. CPF contributions are applied to the full amount of AW, unless the annual total wages exceed the Annual Wage Ceiling (AWC).

After calculating the CPF contributions for both OW and AW, these amounts are summed to arrive at the total monthly CPF contribution. This total is then divided between the employee’s and employer’s shares based on the applicable age-based contribution rates. For example, for an employee aged 35 and below, the employer contributes 17% and the employee 20%.

The Annual Wage Ceiling (AWC) acts as an overarching cap on total CPF contributions for the entire calendar year, set at S$102,000. This ceiling applies to the sum of all Ordinary Wages and Additional Wages that attract CPF contributions over a year. If the total wages for the year, after accounting for the monthly OWC, would result in CPF contributions exceeding this S$102,000 annual limit, the contributions on Additional Wages are adjusted downwards. For example, if an employee’s total Ordinary Wages subject to CPF for the year amount to S$81,600 (S$6,800 OWC x 12 months), the remaining AWC available for Additional Wages would be S$20,400 (S$102,000 – S$81,600). Any AW paid during the year that pushes the total CPF-contributory wages beyond S$102,000 will only have CPF contributions calculated up to that S$102,000 limit. This ensures that the combined contributions on OW and AW do not exceed the annual maximum.

Special Calculation Considerations

Specific scenarios can affect the standard CPF contribution calculation, requiring careful attention to ensure accuracy. The Ordinary Wage Ceiling (OWC) may be pro-rated for employees who do not work a full calendar month. This adjustment applies when an employee joins or leaves employment part-way through a month, or during periods of approved no-pay leave. The pro-ration ensures that the monthly cap on CPF contributions is proportionate to the actual period of employment within that month.

The categorization of various payment types as either Ordinary Wages (OW) or Additional Wages (AW) is crucial for correct calculation. Payments like basic salary and fixed allowances (e.g., transport, meal, housing) are typically considered OW. Overtime pay is classified as OW if it is earned and paid by the 14th day of the following month, otherwise it becomes AW. Conversely, large, infrequent payments such as annual performance bonuses, annual wage supplements, and variable commissions are generally classified as AW.

CPF contributions are also applicable to part-time employees. The same principles of Ordinary Wages, Additional Wages, and the respective ceilings apply to their earnings. While part-time employees may not frequently hit the Ordinary Wage or Annual Wage Ceilings due to their lower total earnings, employers must still apply the standard contribution rates and rules to their wages.