Singapore. The raising of the CPF monthly salary ceiling is set to affect companies that are already dealing with increasing costs.
Although the phased increase by 2026 is expected to help the impact, smaller businesses will still feel this heavy financial burden.
The ceiling sets the maximum amount of ordinary wages used to compute CPF contributions. This is set at S$6,000 and will go up in four stages before reaching S$8,000 in 2026. This was announced by Deputy Prime Minister Lawrence Wong in his Budget speech.
The first increase will start on 1 September 2023 (S$6,300). The next hike will be in 2024 (S$6,800), followed by 2025 (S$7,400), and the last increase will be in 2026 (S$8,000)
The gradual increase is set to ease the impact on employers.
Currently, employed individuals up to 55 years old contribute 20% of their salary to their CPF. Employers contribute 17%.
According to the Singapore Business Federation which represents 27,000 companies, this change will add to the manpower costs of businesses.
“SBF urges the Government to consider spacing out some of these wage and manpower-related policies to help businesses survive immediate cost challenges,” said Albert Tsui, executive director of the federation’s advocacy and policy division.
“Will this change cause a burden on employers? Clearly it will because it’s a tough time with rising costs and economic uncertainties,” said Professor Sumit Agarwal from the National University of Singapore.
That said, businesses may pass on these additional costs to customers.
From next year, worker CPF contribution rates for those 56 to 60 and 61 to 65 will increase by 1.5%. Meanwhile, the rates for workers 66 to 70 years old will increase by 1%.
More from OMY: A Comprehensive Guide to CPF in Singapore
Employers will get a one-year offset equivalent to half of the 2024 increase in the employer contribution rates for every Singaporean citizen and permanent resident they employ aged 56 to 70. This move is to mitigate the increase in their business costs.
More from OMY: Over 85,000 people born before 1984 will receive automatic monthly payouts from CPF