CPF Obligations for Employers

Topics:

1. Introduction to CPF

2. Why does CPF matter to employers

3. What new employers need to do

4. Contributing CPF correctly

5. Examples

Introduction to CPF

The Central Provident Fund (CPF) is a key element of Singapore's social security system, established in 1953 and effective from July 1, 1955. The CPF mandates that both employers and employees contribute a portion of the employee's monthly gross salary to a savings fund. At the time of its introduction, many workers lacked retirement benefits, relying solely on personal savings. The government introduced CPF to ensure workers could support themselves post-retirement.

The CPF concept was first proposed on May 22, 1951, when the Central Provident Fund Bill was introduced in the Legislative Council. The bill was passed on November 24, 1953, after delays due to factors like the examination of the proposal by a select committee and the introduction of a competing pension scheme by the Retirement Benefit Commission. This alternative scheme suggested a weekly contribution from employers and employees, leading to a monthly pension upon retirement. Ultimately, the Legislative Council chose the CPF scheme and recommended creating a statutory board to manage the fund.

Consequently, the CPF Board was established on January 28, 1954, following the Central Provident Fund Ordinance's enactment on December 11, 1953.

Initially, all workers earning less than $500 were required to contribute 5% of their monthly salary to CPF, matched by their employers. An amendment in July 1955 exempted workers earning less than $200 from contributing, though their employers still had to contribute. Since 1955, CPF has evolved significantly, introducing the Special Account in 1977 and the Medisave Account in 1984. It has also allowed the use of CPF funds for housing since 1981 and investments since 1986.

Why does CPF matter to employers

The Central Provident Fund (CPF) matters to employers for several reasons:

1. Legal Compliance: Employers are legally required to contribute to the CPF for their employees. Failure to comply with CPF regulations can result in legal penalties and fines.

2. Employee Benefits: CPF contributions form a significant part of the employee benefits package. Providing CPF contributions helps employers attract and retain talent, as it enhances the financial security and well-being of their employees.

3. Employee Retention and Satisfaction: Offering CPF benefits can improve employee satisfaction and loyalty. Employees are more likely to stay with a company that contributes to their long-term financial stability.

4. Corporate Reputation: Compliance with CPF regulations and providing appropriate employee benefits contribute to a positive corporate reputation. It shows that the company cares about its employees' welfare and adheres to national standards.

5. Financial Planning and Budgeting: Employers need to account for CPF contributions in their financial planning and budgeting. Understanding and managing these costs are crucial for maintaining the financial health of the business.

6. Workforce Productivity: By ensuring that employees have financial security in retirement, employers can contribute to a more focused and productive workforce, as employees are less likely to be stressed about their future finances.

What new employers need to do

New employers in Singapore need to follow several steps to comply with the Central Provident Fund (CPF) regulations:

1. Register as an Employer: New employers must register with the CPF Board as soon as they hire their first employee. This can be done online through the CPF Board's website.

2. Set Up CPF Accounts: Employers need to set up CPF accounts for their employees. This involves ensuring that all new employees have a CPF account. If an employee does not have one, the employer should assist them in opening it.

3. Determine CPF Contributions: Employers must calculate the appropriate CPF contributions based on the employee's wages. Both the employer and the employee contribute to the CPF, with the exact amounts varying based on the employee's age and wage bracket.

4. Make Timely Contributions: Employers must make CPF contributions by the 14th of the following month. Contributions can be made online via the CPF e-Submission system.

5. Maintain Accurate Records: Employers need to keep accurate records of all CPF contributions and provide employees with monthly payslips detailing their CPF deductions and contributions.

6. Stay Updated on Regulations: Employers should stay informed about any changes to CPF regulations to ensure ongoing compliance. The CPF Board regularly updates guidelines and contribution rates.

7. Submit CPF Contributions: Employers must submit the monthly CPF contributions electronically through the CPF e-Submission platform. This ensures timely and accurate processing of the contributions.

8. Handle Employee Queries: Employers should be prepared to answer any questions employees might have about their CPF contributions and provide guidance on CPF-related matters.

Contributing CPF correctly

CPF must be contributed for Local employees which includes Singaporeans and Singapore Permanent Residents who are under a contract of service with the employer. The job type may vary, such as full time, part time, temporary employment or contract basis.

Examples of Employees (from CPF website)

Entitled to CPF contributions	Exempted from CPF contributions
Salaried company directors engaged under a contract of service	Partners, Sole proprietors, or Self employed persons under contract for service
Employees on concurrent employment	Singaporeans or PR working overseas
Family workers drawing salaries	Foreigners working in Singapore
Students whose employment is self sourced i.e. not on training or attachment programs approved by institutes	Tertiary students employed under training programs such as internships
School leavers, or students working during school terms & A level students after exams	Students working during school holidays
NS men on in-camp training

Example 1

An "N" level student working part-time during scheduled school holidays earning an income of $400 monthly. Does CPF apply in this case?

1. CPF contributions are not payable for "N" and "O" levels students who work during scheduled school holidays.

2. However, CPF contribution are required when they work on part-time or temporary basis during normal school term, or after final exams.

Example 2

Mike went for NS training (ICT). His Employer has to compute his CPF contributions based on salary given by the Employer and Make-up Pay given by MINDEF/SCDF/SPF as though he was not away from work. True or false?

The Employer will bear the full share of CPF contribution but he can recover the full employee's share from the employee's salary as the employee would have been compensated in full by the NS unit.