Key Takeaways From The Recent CPF Arrears Report

September 22, 2017

Based on the recent article from Channel NewsAsia, it reported that a record of SGD635.1 million in Central Provident Fund (CPF) arrears was recovered in 2016 from employers who had underpaid, did not pay or made late payments of CPF contributions.

The CPF is a compulsory comprehensive savings plan for working Singaporeans and Permanent Residents. This compulsory savings plan is primarily used to fund retirement, healthcare and housing needs. Contributions to this mandatory savings scheme is funded from both employers and employees.

Related reading: What are my CPF contribution obligations as an employer in Singapore?

From the article, the recovered amount was owed to more than 380,000 employees. About SGD19.7 million worth of CPF arrears recovered was due to underpayment or non-payment by 1,608 companies. The remaining SGD615.4 million recovered was due to employers being late in making CPF contributions. Additionally, this late CPF contributions arose from an average of about 5,440 employers each month in 2016.

Underpayment or non-payment of CPF to your employees can incur hefty fines and potentially imprisonment for recurring offenders. Here are some key takeaways from this CPF arrears report.

Who is entitled to CPF contributions

The article mentioned that the CPF board was alerted of a case whereby a restaurant was not paying CPF for their part-time employees. After a field visit, the employer claimed that he was not aware that part-time employers were also eligible for CPF contributions.

Essentially, CPF contributions are payable when there is an employer-employee relationship. Moreover, employers are required to pay both the employer and employee’s share of CPF contributions every month. CPF contributions are payable for Singapore citizens and Singapore permanent residents who are working in Singapore under a contract of services as well as employee under a permanent, part-time or casual basis.

CPF contributions rate

The CPF contribution rates is dependent on the citizenship, age as well as the wages of the employees. A detailed breakdown of the contribution rates can be found on the CPF website here. Do note that there are two different classifications for your employee wages – Ordinary Wages (OW) and Additional Wages (AW). It is crucial to understand the correct classification because there are different ceilings for both OW and AW, which will in turn affect the amount of CPF contribution payable.

The OW are typically wages granted wholly and exclusively in respect of an employee’s employment in that month. One such example is the monthly salary. The OW ceiling limits the amount of OW that is eligible for CPF contributions. Currently, the OW ceiling is capped at SGD6,000. For instance, if your employee’s OW for a calendar month is SGD7,000, his CPF contribution would be computed based on an OW of SGD6,000. CPF contribution is not required for the remaining SGD1,000.

AW are wages which are not granted wholly and exclusively for the month. It could also be wages paid at intervals of more than a month. Examples of AW are annual bonus and leave pay. The AW ceiling is computed based on total wages received by the employee – total OW subjected to CPF for the year.

Late payment or failure to pay CPF

Late payment or non-payment of CPF contributions will result in interest on late payment as well as imposition of a composition amount. Given that interest on late payment is calculated daily at a rate of 1.5% per month, it is imperative to ensure timely and correct CPF contributions to avoid incurring these hefty penalties. For employers who do not comply with the CPF Act or Employment Act, this might result in hefty court fines as well as a minimum of 6 months’ imprisonment.

To find out if your workers are eligible for CPF contributions as well as the CPF contribution rates, do check out the CPF employer guide here.

This is a guest post from RenQun Huang at Gpayroll
Want to read more articles related to payroll, HR & technology? Visit us at Gpayroll

What are my CPF contribution obligations as an employer in Singapore?

In a country that is full of acronyms, another acronym that is frequently used in Singapore is “CPF”. Singapore’s Central Provident Fund (CPF) scheme has undergone many changes since its introduction, with the age at which citizens can withdraw their CPF raised over the years.

As an employer with obligations to contribute to your employee’s CPF account, it is crucial that you stay on top of changes to the CPF scheme. Here, we tell you what you need to know about your employer contribution obligations when it comes to the CPF.

What is the Central Provident Fund (CPF)?

The Central Provident Fund (CPF) is a mandatory social security savings scheme funded by contributions from both employers and employees. The CPF primarily goes towards meeting the retirement, housing and healthcare needs of Singaporeans.

Working Singaporeans and their employers are required to make monthly contributions to the CPF, which go into 3 accounts:

  1. Ordinary Account: Primarily for retirement and housing needs;
  2. Special Account: Primarily for retirement needs;
  3. Medisave Account: Primarily for healthcare needs.

In what situations am I required to pay CPF contributions for my employees?

If your employee earns more than SGD 50 per month, you are required to pay CPF contributions as an employer. If your employee earns more than SGD 500 per month, you are entitled to recover the employee’s share from the employee’s wages.

Several requirements must be met before an employer is liable to pay CPF contributions for his employee. The employee must be:

  • a Singapore Citizen (SC) or Singapore Permanent Resident (SPR);
  • working in Singapore under a contract of service; and
  • employed under a permanent, part-time or casual basis.  

CPF contributions for a SC or SPR working overseas is not mandatory.

A contract of service in this case essentially refers to an Employment Contract that defines the employer-employee relationship, including the terms and conditions of employment.

Learn more about the CPF contribution for employees.

Am I only required to pay CPF contributions for my employees’ base monthly salary?

CPF contributions are calculated based on an employee’s total wages. The total wages for a given calendar month is the sum of an employee’s Ordinary Wages (OW) for the month and the Additional Wages (AW) paid to him in that month.

There are different ceilings for OW and AW, which refers to the amount of OW or AW that would attract CPF contributions. It is important to classify the wages correctly as this will in turn affect the amount of CPF contribution payable.

Ordinary Wages (OW)

Ordinary Wages (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 is capped at $6,000 currently. For example, if an employee’s OW for a calendar month is $6,700, his CPF contribution would be computed based on an OW of $6,000; CPF contribution is not required on the remaining $700.

Additional Wages (AW)

​Additional Wages (AW) are:

  • wages which are not granted wholly and exclusively for the month; or
  • wages made at intervals of more than a month.

Apart from the monthly salary, there are other types of payments which you may make to your employees which may also attract CPF contributions, including:

  • Overtime pay (only applicable to workmen and employees with basic monthly salaries not exceeding $4,500 and $2,500 respectively);
  • Cash incentives (e.g. Good Service Awards);
  • Allowances (e.g. meal, transport, laundry);
  • Bonuses;
  • Commissions.

Source: CPF Board
The amount of CPF contributions payable on AW from 2016 onwards is capped at the yearly AW Ceiling of $102,000 with the total OW subject to CPF for the year deducted.

AW Ceiling = $102,000* – Total OW subject to CPF for the year


The AW Ceiling is applied on a per employer per year basis. Employers are required to monitor and limit the contributions on Additional Wages of their employees. This is to prevent refund of excess payment and avoid situations where refunds cannot be made due to insufficient funds in their employees’ CPF accounts.

To calculate the Additional Wage Ceiling for private sector employees, use the online calculator provided by the CPF Board.

What are my CPF contribution rates as an employer?

There are two key terms that you need to be familiar with as an employer:

  • Contribution rate: This refers to the total rate that employers and employees have to contribute to the employee’s CPF.
  • Allocation rate: This refers to the various rates that are allocated into the different CPF accounts (namely the Ordinary Account, Special Account, and Medisave Account).

As an employer, you are required to make CPF contributions at the monthly rates stated in the CPF Act. The CPF contribution and allocation rates vary depending on your employee’s citizenship, age group and total wages for the calendar month.

The CPF contribution rates that are applicable would depend on the category that employees fall into:

  1. Singapore Citizens & Singapore Permanent Residents (3rd Year Onwards)
  2. Singapore Permanent Residents (first 2 years of obtaining SPR status)

Category #1: Singapore Citizens & Singapore Permanent Residents (3rd Year Onwards)

These contribution rates apply to private sector and public sector non-pensionable employees who fall into one of the following categories:

  • Singapore Citizen;
  • SPR from the third year of obtaining SPR status; or
  • SPR during the first two years of obtaining SPR status but who has jointly applied with employer to contribute at full employer-full employee rates.

The current CPF contribution rates applicable to private sector and public sector non-pensionable employees are laid out in the following table:

Employee’s age (years)

Contribution Rates from 1 Jan 2016 (for monthly wages SGD 750)  

By Employer (% of wage) By Employee (% of wage)

Total (% of wage)

55 and below 17 20 37
Above 55 to 60 13 13 26
Above 60 to 65 9 7.5 16.5
Above 65 7.5 5 12.5

 

For the current CPF contribution rates applicable to public sector pensionable employees and a more detailed breakdown of the CPF contribution rates for this category of employees, refer to the CPF Contribution Rates Table available on the CPF Board website.

Category #2: Singapore Permanent Residents (first 2 years of obtaining SPR status)

Employers in Singapore are not required to pay CPF for their foreign employees. However, once your foreign employee successfully obtains SPR status, you will have to pay CPF contributions. CPF contributions are payable at lower rates (known as graduated employer-graduated employee contribution rates) during the first two years of obtaining SPR status. From the third year onwards, both you and your SPR employee will contribute to CPF at regular rates (i.e. those set out in Category #1 above).

For private sector and public sector non-pensionable employees who are in their first two years of obtaining SPR status, refer to the CPF Contribution Rates Table available on the CPF Board website.

This all seems very complicated. How do I calculate the CPF contributions payable for my employees?

In order to determine the CPF contribution rates applicable to you as an employer, log on to CPF e-Submit@web, the free web-based application developed by CPF Board that auto-computes the CPF contributions.

What are the consequences if I fail to pay CPF?

Frequent mistakes made by employers when determining CPF contributions include the following:

  • Non-payment of CPF contributions for employees under part-time/temporary and/or casual employment’  
  • Non-payment of CPF contributions for full time employees who have requested not to have CPF contributions so that they can have higher take-home pay;
  • Underpayment of CPF contributions when wages are not paid monthly.

Employers who do not comply with the CPF Act may be liable to:

  • Late payment interest charged at 18% per annum (1.5% per month), starting from the first day of the following month after the contributions are due. The minimum interest payable is $5 per month.
  • A fine of up to $5,000 and no less than $1,000 per offence and/or up to 6 months jail.
  • A fine of up to $10,000 and no less than $2,000 per offence and/or 12 months jail for repeat offenders.
  • Fine of up to $10,000, imprisonment of up to 7 years or both if you deduct your employee’s share of CPF contributions but fail to pay the contributions to CPF Board.

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Fintech solutions for startups & small businesses in New Zealand

According to a study by Accenture, fintech investment in Asia-Pacific skyrocketed in 2015, from about USD 880 million in all of 2014 to nearly USD 3.5 billion in just the first nine months of 2015. In New Zealand, experts observe that fintech has grown despite the lack of a clear strategy from the government, with initiatives such as the Kiwibank Fintech Accelerator programme launched in late 2016. FinTechNZ, a financial innovation and technology association in New Zealand, was launched earlier this year.

Source: Accenture
As the financial services industry began to embrace the potential of fintech, it is important to remember that the benefits of fintech are not just limited to just that few industries or sectors. Given that fintech redefines the way that we borrow, lend, save, store and transfer money, business owners and startup founders also stand to gain.

Related reading: Navigating The Regulatory Challenges Of #FinTech

Here, we give you the lowdown on key fintech startups in New Zealand that will make the lives of small businesses and startups easier.

For fundraising: Equitise

Founded in 2014 by a team with backgrounds in law, investment banking, financial services and equity capital markets, Equitise is a online equity crowdfunding platform that brings together investors and startups, enabling New Zealand startups to raise capital from the crowd. According to co-founder Chris Gilbert, raising capital through a platform like Equitise often leads to greater after-market support for the stocks, due to the broader base of shareholders.

Now that the Australian government has passed the first wave of crowdfunding legislation to enable companies to raise capital from mum and dad investors under certain conditions, as well as sophisticated investors, the future of Equitise looks bright as it will be launching in Australia.  

Equity crowdfunding is well suited to B2C companies, as such companies can leverage their customer database by inviting them to invest in the offer. This would allow the company to simultaneously use the fundraising process as a marketing campaign.

For insurance: Insurely

Occupying a sub-category of fintech known as insurtech, Insurely is an online platform that helps small to medium businesses to research, choose, and apply for insurance policies. As one of the first batch in the Kiwibank Accelerator programme, Insurely received NZD 20,000 in seed funding in exchange for 6% equity. The platform uses artificial intelligence (AI) to give users advice and bring clarity and management to small to medium business’ insurance policy management.

For sales: Vend

Source: Vend

Founded in 2009, Vend now has 200 staff in the US, UK, Canada, Australia and New Zealand. This cloud-based point-of-sale (POS) and retail platform enables retailers to accept payments, sell in-store and online, manage their inventor, reward customer loyalty, and report on their business in real-time. This allows business owners to coordinate their sales across multiple retail platforms, analyse their sales data and make better data-supported sales decisions.

Vend has integrations with other digital platforms, such as e-commerce platform Shopify and cloud-based accounting software Xero.

For accounting: Xero

Source: Xero

Having been around for more than ten years, cloud-based accounting software Xero can hardly be considered a startup. Founded in 2006 in New Zealand, Xero now leads the New Zealand, Australian and United Kingdom cloud accounting markets. Xero’s software provides business owners with real-time visibility of their financial position.

Xero has racked up an impressive array of accolades, including the Best Overall Fintech award at the Fintech Breakthrough Award 2017. More impressively, Xero has integrations with more than 500 apps acros a range of industries and business functions, including inventory, time tracking, and debtor tracking.

Learn how to manage your legal & accounting needs with Dragon Law’s Xero Integration

Does your company in New Zealand use a fintech solution?

Share with us in the comments below!

3 takeaways from Day 1 of SWITCH Singapore 2017

September 19, 2017

Source: SWITCH

With the slew of startup and tech events happening in the next couple of days, it’s an exciting week for the startup and innovation community in Singapore. Organised by SGInnovate and funded by the National Research Foundation (NRF) in Singapore, the Singapore Week of Innovation & TeCHnology (SWITCH) is a platform where complementing tech and innovation events come together to showcase Singapore’s vibrant entrepreneurial and technology innovation ecosystem.

Related reading: How to start a business in Singapore

Now in its second year, SWITCH is bringing together events such as Slush, a global movement originally founded in Helsinki to change attitudes towards entrepreneurship, and the Women In Tech Conference (Asia) 2017.

Day 1 of SWITCH Singapore kickstarted with an opening address by Minister for Finance Heng Swee Keat. This was followed by a panel discussion on “Imagining a New World with Technology” featuring a star-studded line-up including moderator Steve Leonard, Founding CEO of SGInnovate and panelists Mike Descheneaux, President, Silicon Valley Bank; William Bao Bean, General Partner, SOSV; Taizo Son, CEO, Mistletoe; and Ben Goertzel, Chief Scientist, Hanson Robotics. 

Here, we outline three key takeaways from Day 1 of SWITCH.

1. Nurturing both tech & entrepreneurial talent is crucial for ensuring that ideas get commercialised

When Leonard asked the panelists what they would be looking at in terms of technology developments in the next couple of years, Son shared that one thing to keep our eye on is updating the education system for children. As Minister Heng rightly stated, innovation is driven by people.

It is therefore promising that the Singapore government has introduced initiatives to nurture tech and entrepreneurial talent. Since it was established last year, SGInnovate has been hard at work bringing together entrepreneurs, industry mentors, venture capitalists and research talent through programmes such as globally established Entrepreneur First (EF). The first cohort of EF has built 12 companies and applied for 9 patents, as well as attracted interest from more than 60 investors.

The pace of change today is the slowest it will ever be. – Mike Descheneaux, President, Silicon Valley Bank

More initiatives are set to come. Minister Heng announced two programmes in particular that are targeted at tertiary level institutions. The first is Lean LaunchPad (LLP), a national entrepreneurship training programmes spearheaded by several universities in Singapore. By pushing researchers to talk to potential users and customers and better understand user needs, Lean LaunchPad aims to increase the number of technologies that go to market. Each of the universities – the National University of Singapore (NUS), Nanyang Technological University (NTU), Singapore Management University (SMU) and the Singapore University of Technology and Design (SUTD) – will run thematic tracks focused on different areas of tech, such as robotics and infocomm technology (ICT). 22 teams have been selected for the programme’s first run.

The other initiative that launched yesterday is Pollinate, an incubator that is targeted at students and alumni from Singapore’s polytechnics. Driven by Ngee Ann Polytechnic, Singapore Polytechnic and Temasek Polytechnic, Pollinate will give participants opportunities to collaborate with SMEs to address problems in the SME sector.

2. It’s important to think about the social implications of tech advancements as well

As technology and automation become more advanced and replace human jobs, will we create a class of useless people?

Will social structures change in the future from being governed in a centralised manner to something more self-organising?

These were some of the questions that arose during the panel discussion. Indeed, the social implications of tech developments are something that we should start thinking about. On the question of governance, Son was of the view that society will become more decentralised, with smaller communities.

The panelists acknowledged that the disruption brought about by tech advancements, and AI in particular, will make work redundant. There inevitably will be a class of people that will be left jobless.

Goertzel pointed out, however, that human beings can still carry out intellectual, spiritual and artistic pursuits.

There are a lot of things to do besides carrying out tasks to accumulate resources for your survival. Ben Goertzel, Chief Scientist, Hanson Robotics

Yet, Singapore is a country where the social security system greatly favours vulnerable individuals who are at the very least engaged in some form of employment. For instance, one source of top-ups to the social security scheme – known as the Central Provident Fund (CPF) – is contributions from one’s employer. It is not clear how the elimination of an entire layer of jobs will be dealt with. Perhaps it’s time for us to start paying attention to the debate on universal basic income as a potential solution to the upcoming vulnerable class of jobless individuals.

3. Collaboration between incumbents and innovators is how magic is made

In response to a question by a member of the audience on how innovative and traditional companies can best work together to push boundaries, Bao Bean shared about the challenges that MNCs and startups face when working together. For starters, the goals of a MNC and a startup are very far apart and they tend to speak a different language. There therefore tends to be a difference in expectations when working together. In his experience working with startups and MNCs, the best approach seems to be to match a startup to an MNC where the startup works with the corporate on something specific and roll that out. Thus far, large corporates that he has worked with include Johnson & Johnson, Nestle and Visa.

Companies are good at executing. Startups are good at experimenting. It’s hard to bring those things together. – Steve Leonard, Founding CEO of SGInnovate

Yet, magic happens precisely at the intersection of experimentation and execution.

Come say hi to he Dragons at SWITCH Singapore 2017!

 

Here at Dragon Law, we recognise that striving to best serve our clients means working together with other organisations and companies when necessary. This is why we collaborate with law firms, corporate advisory firms and HR consultancies via our Dragon Law Certified Advisors programme. On top of access to all the features in the Dragon Law app, clients who opt for our Premium Plan will also get a dedicated law firm that they can turn to should they require specialised advice or document drafting.

Claim your free trial. Start drafting legal documents with Dragon Law today.

Attending SWITCH 2017?

Share your experience with us in the comments below! 

Are You Aware Of These Employment Laws In Singapore?

Hiring employees in Singapore is definitely not infringing on any laws. However, before do you so, are you aware that as an employer, you have to fulfill certain obligations under the Employment Act?

On top of detailing the minimum terms and conditions of employment, the Employment Act also spells out the rights and responsibilities of both employers and employees under a contract of service. Moreover, if your employee is a Singapore Citizen or Singapore Permanent Resident, you as an employer is required to pay Central Provident Fund (CPF) contributions for them.

Here is an overview of the Employment Act that you, as an employer, need to be aware of.

Which employees are covered under the Employment Act?

The Employment Act covers every employee (regardless of nationality) who is under a contract of service with the employer. However, the following employees are not covered under the Employment Act:

  • Managers and executives who earn basic monthly salaries of more than S$4,500
  • Seafarers
  • Domestic workers
  • Statutory board and government employees

Payment of Salary

You should pay your employees salary and overtime pay at least once a month. Salary has to be disbursed to employees within 7 days after the end of the salary period. Overtime pay has to be paid to employees within 14 days after the end of the salary period.

Working Hours

Under the Employment Act, your employees should not work more than 44 hours a week (excluding break time and overtime). All work done in excess of the contractual hours is considered as overtime work. Additionally, do note that overtime payment is at 1.5 times the hourly basic rate if you require your employees to work overtime.

Including overtime, the total working hours should not exceed 12 hours a day and total overtime must not exceed 72 hours a month.

Rest Days

You should grant your employees at least one rest day every week without pay. If you require your employee to work on a rest day, you should pay them based on the terms specified under the Employment Act.

Public Holidays, Sick Leave and Annual Leave

All your employees are entitled to 11 paid public holidays per year. Should you require your employee to work on a public holiday, they should be given either an extra day’s salary or a replacement day off.

Under the Employment Act, your employees are entitled to paid outpatient sick leave and hospitalisation leave annually if they have:

  • Worked with the organisation for at least 3 months
  • Obtained a medical certificate from the company doctor, company approved doctor or a government doctor
  • Informed you of the sick leave within 48 hours

Do keep in mind that for new employees, the number of days of paid sick leave entitlement is prorated according to their service period.

Your employees are entitled to paid annual leave if they have worked at least 3 months for you. For new employees with less than a year length of service, they are entitled to prorated annual leave based on the months of service.

If you happen to hire part-time employees (those who work less than 35 hours a week under a contract of service), do remember that they are entitled to employment benefits such as paid public holidays, sick leave, annual leave and childcare leave. However, their entitlement should be prorated according to the number of hours worked by a similar full-time employee.

CPF Contributions

As an employer, you are required to pay CPF contributions to all employees who are Singapore Citizens/Singapore Permanent Residents (SPRs) earning more than S$50 per month.

This is also applicable even if your employees are hired on a part-time/ad-hoc/contract basis or during their probation period.

Related reading: What are my CPF contribution obligations as an employer in Singapore?

Key Employment Terms (KETs)

Effective 1 April 2016, as an employer, you are required to issue key employment terms (KETs) in writing to all employees covered under the Employment Act.

Essentially, these KETs can be issued in soft or hard copy and should be given to all employees within 14 days from the start of employment.

Items to include in the KETs can be found on the MOM website.

Itemised Payslips

Likewise, you are required to issue all your employees itemised payslips to employees covered under the Employment Act.

Details on what items to include can be found on the MOM website.

Non-compliance

It is imperative to be familiar with the Employment Act to avoid incurring any unnecessary costs or non-compliance with these statutory laws.

Non-compliance of the Employment Act can result in a fine of between S$3,000 and S$15,000 and/or maximum of 6 months’ jail term.

Additionally, subsequent offenders are subjected to a fine of between S$6,000 and S$30,000 and/or maximum 12 months’ jail term.

If you have yet to familiarise yourself with the employment laws in Singapore, perhaps it is high time that you do so!

Claim your free trial. Start drafting legal documents with Dragon Law today.

This is a guest post from RenQun Huang at Gpayroll
Want to read more articles related to payroll, HR & technology? Visit us at Gpayroll

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