Resource

Risk of calculating CPF separately for Bonus

 

CPF is calculated based on a percentage of an employee’s salary. To facilitate account accrual, some accounts calculate CPF amount for bonus separately from employees’ basic salary. This practice poises some risk to the company and the below example illustrates this.

We assume that we have an employee with $3510 for Basic and $3510 for Bonus in July. The employee is Chinese around 42 years old.

 

Case 1: Submit CPF for Bonus and Basic separately.

  For Bonus of $3510, cpf submission is calculated as:
     Employer CPF: $597
     Employee CPF: $702
     CDAC: $1.50

  For Basic of $3510, cpf is calculated as:
     Employer CPF: $597
     Employee CPF: $702
     CDAC: $1.50

 

Case 2: Submit CPF for Bonus and Basic together.

  For Bonus of $3510 and Basic of $3510, cpf submission is calculated as:
     Employer CPF: $1193
     Employee CPF: $1404
     CDAC: $2

We can see that for this example, the total employer CPF and CDAC are different. The differences can be more significant if you have more than 100 employees.

The calculations from the above example are from CPF calculator. CDAC rate is at https://www.cpf.gov.sg/Employers/EmployerGuides/employer-guides/hiring-employees/contributions-to-self-help-groups-(shgs)-and-share-donations

Another example is on SDL. SDL is also part of CPF submission. We assume we have 3 employees with different salary.

 

Case 1: Submit CPF for Bonus and Basic separately.

 

Case 1: Submit CPF for Bonus and Basic together.

 

We can also see from this example that the total SDL payable by the company are different. SDL rate can be found at https://www.cpf.gov.sg/Employers/FAQ/employer-guides/hiring-employees/skills-development-levy-(sdl)#. The differences can be more significant if you have more than 100 employees.

These 2 examples illustrate why you should combine both Bonus and Basic when performing CPF submission.