Understanding how CPF contributions are calculated
CPF contribution rates are not one-size-fits-all. The amount you contribute for each employee depends on several factors, including their age, salary, and residency status. This guide explains how rates work so you can better understand what goes into each payslip.
What Determines CPF Rates
Three main factors affect how much CPF is contributed:
- Age plays the biggest role. Younger employees have higher contribution rates, which gradually decrease as they get older. This helps workers build savings early while reducing the burden closer to retirement.
- Residency Status matters because Singapore Citizens and Permanent Residents have different rates. Permanent Residents also go through a graduated contribution schedule in their first few years.
- Salary determines the base amount. CPF is calculated as a percentage of wages, but there are caps on how much salary is subject to contributions.
Employer and Employee Contributions
Both employers and employees contribute to CPF, but the amounts differ:
- Employer contribution is paid on top of the employee's salary. This is an additional cost to the business.
- Employee contribution is deducted from the employee's salary before they receive their pay.
Together, these contributions are submitted to the CPF Board as a single payment by the employer.
Age-Based Contribution Rates
CPF rates are structured by age groups. In general:
- Employees 55 years and below have the highest total contribution rate.
- Employees above 55 to 60 have slightly lower rates.
- Employees above 60 to 65 have further reduced rates.
- Employees above 65 to 70 and above 70 have the lowest rates.
As employees age, a larger portion of contributions goes to their Retirement Account and MediSave Account to support healthcare and retirement needs.
Salary Ceilings
CPF contributions are capped based on salary limits set by the government:
- Ordinary Wage (OW) Ceiling is the maximum monthly salary on which CPF is calculated. Wages above this ceiling are not subject to CPF.
- Additional Wage (AW) Ceiling applies to bonuses, commissions, and other non-monthly payments. This ensures there is a yearly limit on total CPF contributions.
These ceilings are adjusted periodically. When processing payroll, Officaid automatically checks whether an employee's wages exceed the ceiling and calculates contributions accordingly.
Permanent Resident Graduated Rates
Permanent Residents do not start with full CPF rates immediately. They go through a graduated contribution schedule:
- Year 1 as a PR has lower contribution rates for both employer and employee.
- Year 2 has slightly higher rates.
- Year 3 onwards follows the full rates, same as Singapore Citizens.
Employers can choose to contribute at full rates from the start, but the default is the graduated schedule.
Low Wage Employees
For employees earning lower wages, the contribution structure is slightly different:
- Employees earning $50 or less per month are not required to contribute to CPF.
- Employees earning $50 to $500 have employer-only contributions with no employee deduction.
- Employees earning $500 to $750 have graduated employee contributions.
- Employees earning above $750 follow the standard contribution rates.
This ensures lower-income workers are not overly burdened while still building some retirement savings.
How Officaid Handles CPF Rates
Calculating CPF manually can be complex, especially with different age groups, salary ceilings, and residency statuses. Officaid removes this burden entirely.
When you add an employee to the Directory and enter their date of birth, nationality, and salary details, Officaid automatically determines the correct CPF rates. Every time you generate a payslip, the calculations are done for you.
Frequently Asked Questions
Yes. The Singapore government reviews and adjusts CPF rates periodically, often to support older workers or strengthen retirement savings. Officaid automatically updates to reflect these changes.
Each employee's CPF is calculated individually based on their own age and salary. Officaid handles this automatically, so you do not need to track rates for each age group.
Officaid checks salary against the current OW and AW ceilings during payroll processing. If wages exceed the ceiling, CPF is calculated only on the capped amount.
Yes. Payslips generated in Officaid show the employee contribution, employer contribution, and total CPF amount for full transparency.
Official Resources
For the latest CPF contribution rates, visit these official government websites:
What's Next?
Continue learning about Singapore compliance:
- What is CPF covers the basics of Singapore's savings scheme.
- What is IRAS explains the tax authority and employer obligations.
- What is One Stop Payroll (OSP) shows how Officaid submits to government agencies.