CPF Contribution Ceiling Rise To $6,800 For 2024. How This Will Affect Both Employers & Employees In Singapore

In the 2023 Singapore Budget, important modifications to the CPF system were announced. One such change was the increase in the CPF monthly salary ceiling. This adjustment is intended to align the CPF contributions with the general increase in salaries, thereby enabling more middle-income earners to accumulate greater CPF savings in their CPF Ordinary, Special and MediSave accounts to fund their housing, retirement and medical expenses.

Previously capped at S$6,000, this ceiling will rise incrementally to S$8,000 by 2026. The first change started in September 2023 with an initial increase to S$6,300.

Source: CPF

As of January 2024, the CPF ceiling will increase to $6,800 for 2024.

What Does This Mean for Employers?

For employers, this change translates to an increase in the amount they must contribute to their employees’ CPF. For instance, under the previous system, an employer contributes 17% (for those who are 55 and below) of an employee’s salary to CPF, capped at a monthly salary of S$6,000. This translates into the employer’s CPF contribution of $1,020.

As of January 2024, the monthly salary ceiling has been raised to $6,800. This means employers will need to contribute a higher amount to their employees who are earning more than $6,000. Assuming a worker earns $6,800, their employers will now need to contribute $1,156, or about $136 more a month.

By January 2026, when the salary ceiling reaches S$8,000, the employer’s contribution for such an employee will increase to S$1,360 – an additional S$340 compared to the previous system.

This incremental increase in CPF contributions could be a financial strain for some, businesses, particularly small and medium-sized enterprises (SMEs), as it adds to their manpower costs. Industries with higher-income workers, such as technology and professional services, will also feel the impact more acutely.

What Does This Mean for Employees?

The increase in CPF monthly salary increase isn’t just applicable to the employer’s CPF contributions but also that which is required from employees. Previously, a worker who earns $6,800 a month will need to contribute 20% of his salary (assuming the worker is 55 and below) to his CPF, capped at a salary ceiling of $6,000. This translates to $1,200 a month.

With the salary ceiling increasing to $6,800 as of January 2024, the employee’s contribution will also rise to 20% of $6,800, amounting to $1,360 per month. This represents an increase of S$160 in their monthly CPF contribution. As a result of this adjustment, the employee will see a reduction of S$160 in their take-home salary each month.

The broader implication of this policy change is a dual financial impact. On one hand, employers will face increased costs due to higher CPF contributions for their local employees. On the other hand, employees will experience a decrease in their take-home salaries due to their increased CPF contributions.

Read Also: Businesses To Incur Higher Costs: Upcoming GST & CPF Increases To Prepare For

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