Payroll is rarely just salary. Once a Singapore employer adds statutory contributions to the monthly wage bill, the true cost of each employee can look quite different from the figure on the employment contract. This article on SDL, FWL and other statutory contributions explains what employers must budget for, so that cash flow and year-end accruals are not caught off guard.
Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.
If you are planning headcount or reviewing your monthly payroll, understanding SDL, FWL and other statutory contributions early will help you price work correctly and avoid underpayment penalties.
Who this applies to
These obligations apply to employers in Singapore, whether the business is a private limited company, a sole proprietorship or a partnership. Which contributions you owe depends on who you employ.
- Skills Development Levy (SDL): payable for every employee, including Singapore Citizens, Permanent Residents and foreigners, whether full-time, part-time or temporary.
- CPF contributions: payable for Singapore Citizens and Permanent Residents only. Foreign employees on an Employment Pass, S Pass or Work Permit do not receive CPF contributions.
- Foreign Worker Levy (FWL): payable for Work Permit and S Pass holders. Employment Pass holders do not attract a levy.
- Work injury compensation insurance: required for all employees doing manual work, and for non-manual employees earning up to the prescribed limit set by MOM.
Key rules and requirements in Singapore
Skills Development Levy
SDL is a levy that funds national skills training. It is calculated as 0.25% of each employee’s monthly gross wages, subject to a minimum of SGD 2 per employee and a maximum of SGD 11.25 per employee per month. The cap means that the levy stops growing once monthly wages pass SGD 4,500. SDL is paid to the CPF Board together with the CPF contribution, and it is a cost to the employer; it must not be deducted from the employee’s pay.
CPF contributions
For eligible employees, the employer pays a share of the CPF contribution on top of salary. For most Singapore Citizens and Permanent Residents aged 55 and below, the employer rate is 17% of qualifying wages, while the employee contributes a separate share through payroll deduction. Rates fall for older age bands and are lower for newer Permanent Residents in the early years. CPF is calculated on ordinary wages up to a monthly ceiling and on additional wages such as bonuses up to an annual ceiling, and both ceilings are reviewed from time to time.
CPF contributions are due by the 14th of the following month, so a payroll for October should be paid to the CPF Board by 14 November.
Foreign Worker Levy
The FWL is a monthly levy charged by MOM for each Work Permit and S Pass holder. The amount depends on the sector, the worker’s skill tier, the employer’s foreign worker quota and, in some sectors, the proportion of foreign to local workers. Because the levy structure has changed several times in recent years, the safest approach is to check the current rate for your sector on the MOM website before hiring.
Employers generally pay the levy by GIRO. For foreign workers, MOM sets rules on how much of the levy, if any, an employer may recover from the worker, and on which deductions are allowed from salary. Recovering amounts outside those rules can be an offence under the Employment of Foreign Manpower Act.
Other costs that sit alongside statutory contributions
Employers of Work Permit holders must also buy and maintain medical insurance with the minimum coverage required by MOM, and must provide acceptable housing for certain categories of workers. These are not payroll contributions, but they belong in the same budget.
Step-by-step process
- Classify each employee by residency status: Citizen, Permanent Resident, Employment Pass, S Pass or Work Permit.
- Work out gross wages for the month, separating ordinary wages from additional wages such as bonuses.
- Calculate employer and employee CPF for eligible staff, and SDL for everyone.
- Check MOM’s current FWL rate for each Work Permit and S Pass holder and confirm the monthly bill.
- Submit CPF and SDL through the CPF Board’s online services by the 14th of the next month.
- Reconcile the payments against payroll, and record the accrual in the accounts at the month end.
- Keep payroll records and payment confirmations for the retention period required by the Employment Act and IRAS.
Common mistakes to avoid
- Forgetting that SDL applies to foreign employees as well as locals.
- Applying CPF to an Employment Pass holder, or leaving out CPF for a Permanent Resident whose rates have stepped up.
- Budgeting the FWL at last year’s rate without checking the current schedule.
- Missing the 14th-of-the-month deadline, which can lead to late payment interest from the CPF Board.
- Treating bonuses, allowances and overtime as outside CPF wages without checking the rules.
- Deducting SDL or employer CPF from an employee’s pay, which is not permitted.
Practical examples
Consider a Singapore Citizen employee aged 40 who earns SGD 3,000 a month. The employer CPF at 17% is SGD 510, and SDL at 0.25% is SGD 7.50. The employer’s statutory cost on top of salary is therefore SGD 517.50 a month, before any bonus is considered.
Now consider a Work Permit holder earning SGD 1,800 a month. There is no CPF, but SDL is SGD 4.50 and the employer must also pay the FWL that applies to the worker’s sector and tier. For this employee, the levy is likely to be the largest statutory item in the budget, which is why it should be confirmed before the hire is approved.
A third case is an Employment Pass holder earning SGD 8,000 a month. There is no CPF and no FWL, but SDL is capped at SGD 11.25. The statutory cost is small, though the employer still carries pass-related costs and compliance duties.
How a corporate secretary can help
Statutory contributions sit at the intersection of payroll, accounting and compliance. A corporate secretary in Singapore can help directors understand which obligations apply when a company first hires, keep the company’s records in order, and make sure that filings with ACRA, IRAS and MOM are consistent with each other. Raffles Corporate Services can support employers with payroll processing, CPF and SDL submissions, accounting, tax and compliance filings, so that the true cost of employment is reflected accurately in the company’s budget and year-end accounts.
Frequently Asked Questions
Is SDL payable for foreign employees?
Yes. SDL is payable for all employees, regardless of nationality or residency status, including part-time and temporary staff.
Do Employment Pass holders attract the Foreign Worker Levy?
No. The levy applies to Work Permit and S Pass holders. Employment Pass holders are not subject to it, although other pass-related requirements still apply.
Can an employer deduct SDL or the employer share of CPF from salary?
No. The employer bears SDL and the employer share of CPF. Only the employee’s own CPF share is deducted from wages.
When are CPF and SDL due?
Payment is generally due by the 14th of the month following the wage month. Late payment can attract interest, so it is worth setting a recurring internal reminder.
Where can I find the current FWL rates?
MOM publishes the levy rates and requirements by sector on its website. Rates and conditions change, so confirm them before each new hire or renewal.
Key takeaways
- SDL is 0.25% of monthly wages, capped at SGD 11.25 per employee, and applies to all employees.
- CPF applies to Singapore Citizens and Permanent Residents only, with the employer share depending on age and residency status.
- FWL applies to Work Permit and S Pass holders, and the amount depends on sector, tier and quota.
- CPF and SDL are due by the 14th of the following month.
- Budget for statutory costs at the point of hiring, not after the first payslip.
Requirements may change, so always check the latest guidance from ACRA, IRAS or MOM, or consult a professional adviser.
If you would like to find out more about how Raffles Corporate Services can assist with your company’s compliance and corporate secretarial requirements, please get in touch with the team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services
Disclaimer: This does not constitute legal advice. If you require legal advice, please contact a lawyer.