An employee’s total wage for any calendar month is the sum of his or her ordinary wage and the additional wage paid to him or her in that month.
We look at why it matters for employers and employees to know the difference of OW and AW when it comes to paying salary and, even more particularly, CPF contributions.
Read Also: Complete Guide To Employer’s CPF Contributions In Singapore
What Is Ordinary Wage And What Is Additional Wage?
Ordinary Wages (OW) refers to wages due or granted wholly and exclusively for an employee’s employment in that month. OW includes allowances (such as food allowance and overtime payments) earned by an employee in the month. OW must be paid before the due date for payment of CPF contributions for that month.
Additional Wages (AW) refers to wages which are not granted wholly and exclusively for the month such as annual bonus, leave pay and incentive payments, such as long service awards.
Why Is It Important To Classify Ordinary Wages And Additional Wages Correctly
CPF contributions are computed based on an employee’s total wages. Hence, employers need to correctly classify OW and AW because there are different ceilings for the two. This, in turn, will affect the amount of CPF contributions payable.
There is a different ceiling for Ordinary Wage and Additional Wage. The Ordinary Wage Ceiling limits the amount of OW that would attract CPF contributions each month. The OW Ceiling is capped at $7,400 from January 2025. This OW ceiling will be raised to the first $8,000 by 1 January 2026.
The amount of CPF contributions payable on AW is capped at the yearly AW Ceiling of
$102,000* – Total OW subject to CPF for the year
This will lead to the CPF Annual Limit of $37,740. As you can tell, the maximum OW that will attract CPF contributions will only be $88,800 ($7,400 x 12). This means the first $13,200 in an employee’s Additional Wage will attract CPF contributions ($102,000 – $88,800 = $132,00).
The AW Ceiling is applied on a per employer per year basis. Employers are required to monitor and limit the contributions on additional wages of their employees. You can compute the AW ceiling for your employees using the Additional Wage Ceiling Calculator. The Ceiling applies to all Singapore Citizens and Singapore Permanent Residents (SPR).
Ordinary Wage Has To Be Paid By 14th Of The Following Month, Otherwise It Is Considered Additional Wage For The Month
For wages to be classified as Ordinary Wages for the month, it must satisfy both conditions below:
- The wages are due or granted wholly or exclusively in respect of an employee’s employment during that month; and
- The wages for that month are payable by 14th of the following month.
Wages which are not classified as Ordinary Wages will be Additional Wages for the month.
For example, if an employee does overtime (OT) during a month, but will only be paid for their overtime the following month, this will be considered AW, rather than OW. If they are paid before the 14th, it will be considered OW.
| OT performed | Payable date for OT pay | Classification | CPF payable by |
| 1 to 30 Apr | 31 May | AW for May | 14 Jun |
| 1 to 30 Apr | 30 Apr | OW for Apr | 14 May |
Similarly, if an employee performed OT across multiple calendar months, e.g. 25 Mar to 24 Apr, but paid at the end of a particular month or quarter, the classifications of OW and AW may differ.
For example:
| OT performed | Payable date for OT pay | Classification | CPF payable by |
| 25 Apr to 4 Jun | 30 Jun | OT pay from 25 Mar to 30 Mar = AW for Jun OT pay from 1 Apr to 30 Apr = AW for Jun OT pay from 1 Jun to 4 Jun = OW for Jun | 14 Jul |
In the above example, as CPF contributions are computed based on a calendar month, the OT component from 25 Apr to 30 Apr and 1 May to 31 May can only be classified as OW if it is payable by 14th of the month following Mar i.e. 14 May and 14 Jun respectively. Since the OT pay is only payable on 30 Jun, it does not fulfil the 2nd condition for it to be classified as OW. However, the payment for OT between 1 Jun and 4 Jun fulfils the criteria and hence must be considered OW.
For some employees, commissions may be their OW or AW. Examples of OW include commissions for monthly sales or for exceeding sales targets during the month. There are other forms of commissions such as quarterly, yearly or others not payable during the month – which would be considered Additional Wages.
Wrong Classification Of Payments As Reimbursement Instead Of Allowance
An allowance is typically given to the employee for a particular purpose and he does not need to return the unspent amount. On the other hand, reimbursements are monetary payments given to employees for actual expenses incurred by them in the course of their employment.
Reimbursements do not attract CPF contributions as they are not classified as wages. Some examples are transport charges, meal expenses incurred by employees for overtime work etc. The reimbursement amounts cannot exceed the actual expenses incurred by the employees and have to be supported by official receipts or claim forms.
This is an important distinction for employees as well, as they would have to make CPF contributions on the employee share of such payments.
Read Also: Why Some Companies Choose To Give Allowance, And Others Pay Reimbursements
Two Reasons Why Employers Need To Monitor The AW Ceiling
#1 To Prevent Refund Of Excess Payment Of CPF
AW Ceiling needs to be re-calculated accordingly to prevent refund of excess payment and avoid situations where refunds cannot be made due to insufficient funds in their employees’ CPF accounts.
Example:
Your employee, 48 years old, earn a monthly salary of $6,000 from Jan to Aug 2025. You then decide to increase his salary to $7,500 from Sep to Dec 2025 following a promotion. Due to good performance, you also paid him an Additional Wage of $35,000 in June 2025.
When you do an estimation of his Additional Wage (AW) Ceiling at the start of the year, you will land on the figure of $30,000:
$102,000 – ($6,000 x 12) = $30,000
This means you would only end up paying CPF contributions on the $30,000 of his $35,000 Additional Wage in June 2025. However, because his salary was increased during the year, employers have to note that he is no longer entitled to CPF contributions on $30,000 of Additional Wage.
Re-calculation of AW Ceiling as at Sep 2025*:
$102,000 – [($6,000 x 8) + ($7,400 x 4)] = $24,400**
* Re-calculation to be done as there were adjustments to the salary in Sep.
** To use $7,400 (instead of $7,500 new monthly salary) as monthly OW ceiling during 2025.
With the increment of the employee’s OW in Sep 2025, his AW subject to CPF in 2025 would be $24,400 instead of $30,000. $5,600 ($30,000 – $24,400) of the bonus amount will no longer be subject to CPF, if he works till the end of the year.
If employers do not re-calculate the AW ceiling, they would have paid CPF for his OW of $7,400 every month till the end of the year. In this case, an excess CPF payment would have been made.
Read Also: Is It Legal For An Employee To Have Two Jobs (With Two CPF Contributions)?
#2 To Ensure Payment Of CPF Shortfall
Similarly, if a pay deduction happens, additional CPF contributions for bonuses may be required.
For example, an employee earning a monthly wage of $3,000 is given a year-end bonus worth two months of their pay, or $6,000, at the end of the year. If the employee did not reach the AW Ceiling for the year, the employer has to compute the CPF contributions for the year based on their Ordinary Wage of $3,000 and their Additional Wage of $6,000.
Should there be any changes to the employee’s salary or employment status i.e. leaves or joins company during the year, employers will need to re-calculate the AW Ceiling and pay the CPF shortfall where required.
Example:
Your employee, 48 years old, earns a monthly salary of $8,000 from Jan to Aug 2025. His salary decreased to $4,000 from Sep to Dec 2025 – as he wanted to go on part-time work arrangements. You similarly give him a bonus Additional Wage (AW) of $30,000 in June 2025.
Estimated Additional Wage (AW) Ceiling before OW changed:
$102,000 – [($7,400 x 12) = $13,200
Re-calculation of AW Ceiling at end of the year:
$102,000 – [($7,400 x 8) + ($4,000 x 4)] = $26,800
With the decrease in your employee’s OW from Sep 2025, his AW subject to CPF in 2025 would be $26,800 instead of $13,200. This means he is entitled to full CPF contributions from his Additional Wage rather than just $20,400.
As the employer, you are required to re-calculate the AW Ceiling at the end of the year and pay the CPF shortfall on AW of $13,600 in Dec 2025. This will also affect his employee CPF contributions and take-home pay.
Employers Can Recover Their Employee’s Share Of CPF Contributions Within The Month
As an employer, you must pay both the employer’s and employee’s share of the monthly CPF contributions. However, you can recover your employee’s share by deducting it from their wages in the month that the CPF contribution was made.
If you fail to do so, you would need to recover your employee’s share within 6 months from the time the contribution should have been recovered.
Read Also: 10 Types Of Employee Payments (Apart From Salary) That Businesses Need To Pay CPF For
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