The Additional Wage (AW) Ceiling determines the maximum amount of AW subject to CPF contributions for the year. An employee’s AW Ceiling is computed on a per employer, per year basis. The Ceiling applies to all Singapore Citizens and Singapore Permanent Residents (SPRs).
Determining the AW ceiling helps employers pay the correct CPF contributions to employees so as to avoid the hassle of over-payment and applying for refund of excess contributions. Monthly contributions are calculated on the minimum ordinary wage of $50 and the maximum ordinary wage of $6,300 per month from September 2023 and $6,800 from January 2024 or $8,000 per month for pensionable employees.
The AW ceiling formula
Where the employee has additional wages, the additional wage cap is calculated as follows:
Step 1: At the start of the year, the system first estimates an AW ceiling by using the employee's current monthly OW. This includes the employee's default earnings plus any recurring additional earnings set up for the employee.
Step 2: At the end of each year, at any time an employee resigns or increases their salary, the system re-calculates the AW ceiling for the year.
Any shortfall in contributions will be paid together with the CPF contributions at the end of the year in December or in the employee's last month of employment.
If excess CPF contributions were made, the system will show a warning in the warnings tab (within the pay run) in an employee's termination pay run or the December pay run for active employees.
The platform does not currently support using opening balances for historic earnings when calculating the CPF additional wage ceiling.
If there are excess CPF contributions, employers should apply for a refund via the CPF Board's digital services. Check this guide on how to do refund and adjustments.
A helpful Additional Wage ceiling calculator from CPF website can be found here.
In the pay run
To review these calculations in pay run, look for the '?' icon found beside the CPF value for the employee.
When you click this icon, a context panel will display at the right side of the screen, displaying the details and values used for the calculation
Select Calculation Method to see the full break down.
The employer amount is rounded up to the nearest $ and the employee amount has cents dropped.
If multiple pay runs are processed in the same month, the context panel shows the month to date CPF calculation. If the CPF limit was reached in the first pay run, the second pay run will show $0 CPF with the context panel showing the calculation for that.
Multiple employing entities in the same basis year
For cases when an employee is reassigned to a different employing entity in the same basis year, the AW ceiling calculations will calculate separately for each employing entity. Let's take this example:
Employee was assigned to employing entity A from Jan - Mar 2022 (3 months)
The same employee was then reassigned to employing entity B starting April 2022
When April 2023 pay run is generated, the AW ceiling will factor in the remaining months of the year (April - Dec which is 9 months) in order to arrive at the new AW ceiling for this employee.
As for the AW CPF for Jan - Mar 2023, it is advised to manually recalculate this before the end of the year so as to arrive at the correct CPF cap for this basis year.
If you have any questions or feedback, contact us via support@yourpayroll.io.
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