The Skills Development Levy (SDL) is one of Singapore’s smallest payroll taxes by per-employee amount, but one of the broadest by coverage. Every employer in Singapore must pay SDL for every employee — local or foreign, full-time or part-time, permanent or casual, regardless of CPF contribution status. Despite its small size (capped at S$11.25 per employee per month), missed SDL payments can compound across a workforce and trigger late-payment penalties from SkillsFuture Singapore (SSG).
This 2026 guide explains how SDL is calculated, who is exempt, when and how it must be paid, and how the SDL revenue is recycled into the Singapore SkillsFuture ecosystem from which employers themselves benefit.
What is the SDL?
The SDL is a statutory levy imposed on employers under the Skills Development Levy Act 1979. The Act requires every employer in Singapore to contribute a small percentage of each employee’s wages to the Skills Development Fund, which is administered by SkillsFuture Singapore (SSG).
The fund is used to support training and skills development programmes, including the Workforce Skills Qualifications system, training grants for SMEs, and the SkillsFuture Credit programme. Employers also indirectly benefit because they can claim training grants and absentee payroll funding from the same fund for sending their employees on approved courses.
SDL rate and ceiling
The SDL is calculated as 0.25% of each employee’s monthly remuneration, subject to:
- A minimum of S$2 per employee per month (even if 0.25% of remuneration would be less)
- A maximum of S$11.25 per employee per month — calculated as 0.25% on the first S$4,500 of monthly remuneration (the levy is capped on remuneration above S$4,500)
Worked examples:
- Employee A earns S$600/month → SDL = max(S$2, 0.25% × 600) = max(S$2, S$1.50) = S$2
- Employee B earns S$2,800/month → SDL = 0.25% × 2,800 = S$7
- Employee C earns S$5,000/month → SDL = 0.25% × 4,500 (capped) = S$11.25
- Employee D earns S$25,000/month → SDL = 0.25% × 4,500 (capped) = S$11.25
The cap is per employee per month, not per employer. An employer with 50 employees all above the S$4,500 cap will pay S$562.50 in SDL each month (50 × S$11.25).
What counts as “remuneration”?
Remuneration for SDL purposes is defined widely and includes:
- Basic salary or wages
- Overtime pay
- Commission and incentive payments
- Allowances (housing, transport, meal, shift allowances)
- Cash bonuses (including AWS / 13th-month pay)
- Director’s fees (where the director is also an employee)
- Cash gratuities and ex-gratia payments connected to employment
Excluded from remuneration:
- Pension contributions made by the employer to approved schemes
- Retrenchment benefits and ex-gratia payments on cessation of employment
- Reimbursements of business expenses
- Non-cash benefits in kind (e.g., company car, housing provided in kind)
SDL applies to ALL employees — including foreigners
One of the most commonly misunderstood aspects of SDL is its universal coverage. Unlike CPF (which is only payable for Singapore Citizens and Permanent Residents), SDL is payable for:
- Singapore Citizens
- Singapore Permanent Residents
- Employment Pass holders (including EP, ONE Pass, PEP holders)
- S Pass holders
- Work Permit holders (foreign workers)
- Personalised Employment Pass holders
- Dependant’s Pass holders with Letter of Consent
Employers who only pay CPF and forget SDL for foreign workers and EP holders frequently end up in arrears. The CPF Board’s payment portal automates SDL collection alongside CPF for local employees, but for foreign employees, employers must separately ensure SDL is paid.
Categories of employees covered
SDL is payable for every individual who is engaged by the employer under a contract of service, whether the engagement is:
- Full-time or part-time
- Permanent, temporary or casual
- Daily-rated, weekly-rated or monthly-rated
- Paid by piece-rate, commission or salary
- Working at the employer’s premises or remotely
Even an employee earning only S$200/month from part-time work attracts the minimum S$2 SDL. A casual employee engaged for only 3 days in the month attracts SDL based on what was actually paid that month.
Who is exempt from SDL?
The Skills Development Levy Act and supporting regulations exempt the following from SDL:
- Domestic helpers employed in private households (Migrant Domestic Workers) — exempt
- Employees on overseas postings who are physically based outside Singapore for the full month — exempt for that month
- Students attending school who are working as part of an industrial attachment, traineeship or formal training scheme arranged with their school — exempt
- Singaporeans serving full-time National Service — exempt
- Sole proprietors and partners (in their own businesses) — they are not employees of themselves, so no SDL
- Directors who are NOT also employees (e.g., non-executive directors who only attend board meetings and are paid director’s fees, where they have no contract of service) — generally exempt, but case-by-case
Independent contractors engaged on a contract for services (not contract of service) are not employees and not subject to SDL. However, MOM and IRAS apply a multi-factor test to distinguish genuine independent contractors from disguised employment.
How and when to pay SDL
SDL is payable monthly, by the 14th day of the following month. Payment channels:
- For local employees with CPF contributions: SDL is automatically deducted alongside CPF contributions when the employer files the monthly CPF return through the CPF e-Submission portal.
- For foreign employees (no CPF) and other employees not covered by CPF auto-deduction: SDL must be paid separately via the SkillsFuture Singapore payment portal, or by GIRO, internet banking or AXS payment.
The employer files the levy return (showing the SDL payable for each employee that month) and remits payment. Records must be kept for at least 5 years for SSG inspection.
Late payment penalties
Late SDL payment attracts a penalty of 10% per annum on the outstanding levy, accruing from the due date until paid in full. SSG may also:
- Issue demand notices and recover unpaid SDL as a civil debt
- Refer persistent non-compliers for prosecution under the Skills Development Levy Act, with fines up to S$10,000 per offence and/or imprisonment up to 12 months
- Inform other agencies (MOM, IRAS) of the non-compliance, with knock-on effects on the employer’s broader regulatory standing
Small employers sometimes overlook SDL because the per-employee amount is small. Across 20 employees over 12 months, however, missed SDL can run to thousands of dollars plus penalties.
What employers get back from the SkillsFuture ecosystem
The SDL is not a one-way payment. Employers can claim back substantial training support from the SkillsFuture ecosystem, including:
- Course fee funding — up to 70% for non-SME employers and up to 90% for SMEs, for approved courses
- Absentee payroll funding — partial reimbursement of salaries paid to employees while attending approved training
- SkillsFuture Enterprise Credit (SFEC) — S$10,000 credit for eligible SMEs to defray the out-of-pocket costs of business transformation and workforce upskilling (see our SFEC guide)
- Career Conversion Programmes (CCP) — funding to support mid-career hires transitioning into new sectors
- Productivity Solutions Grant (PSG) training — see our PSG 2026 guide
A well-organised SME that fully utilises SkillsFuture support typically receives back far more in training value than it pays in SDL.
Common SDL compliance mistakes
The recurring errors we see in SDL compliance:
- Forgetting SDL for foreign workers and EP holders. CPF auto-handles SDL for locals; foreign workers must be tracked separately.
- Applying the wrong cap. The S$11.25 maximum is per employee per month; not per employer per month.
- Missing the S$2 floor. A part-time worker earning S$400 attracts S$2 SDL (not S$1).
- Treating directors’ fees inconsistently. A director who is also an employee (executive director) attracts SDL on remuneration; a non-executive director paid only director’s fees with no contract of service does not.
- Excluding overseas posted employees incorrectly. The exemption only applies for full months overseas — partial month overseas still attracts SDL.
- Not paying for casual/short-term staff. SDL applies even to one-day engagements where wages were paid.
Practical SDL workflow for Singapore employers
A clean monthly SDL workflow:
- At month-end, prepare the payroll for all employees (local and foreign)
- For local employees: file CPF return — SDL is deducted automatically
- For foreign employees (EP, S Pass, WP): compute SDL per employee using the 0.25% / S$2 floor / S$11.25 cap formula
- File the SDL return via SSG payment portal and pay by the 14th of the following month
- Reconcile total SDL paid against payroll records
- Retain payroll registers and SDL filings for 5 years
Most Singapore SMEs handle this via their payroll service provider or accounting firm. For employers with mixed workforces (locals plus EP plus Work Permit holders), automating the calculation in payroll software prevents manual errors.
Resources and further reading
The statutory framework is the Skills Development Levy Act 1979 on Singapore Statutes Online. SSG publishes practical guidance in its SDL employer portal. For CPF integration, see the CPF employer portal.
For related employer compliance topics, see our Foreign Worker Levy guide, our S Pass guide, and our sister site singaporesecretaryservices.com.
Raffles Corporate Services prepares monthly payroll for Singapore SMEs, including correct SDL computation for mixed local-foreign workforces, monthly CPF and SDL filing, and integration with claims for SkillsFuture training grants and the SFEC.
— The Editorial Team, Raffles Corporate Services