This article was first published on 11 February 2021 and has been updated with the latest information from IRAS. By 31 March 2021, employers will receive their Wage Credit Scheme (WCS) payouts. In total, over 98,000 employers will receive $940 million in Wage Credits.
What Is The Wage Credit Scheme (WCS)?
Introduced in 2013, the Wage Credit Scheme (WCS) provides government co-funding for businesses that give their employees a salary raise, of at least $50, up to a gross monthly wage ceiling. If the salary raises is sustained in subsequent years of these scheme, it continues to be co-funded.
In Budget 2015 the Wage Credit Scheme was extended. Again, in Budget 2018, the Wage Credit Scheme was extended up to 2020. For the latest extension, the government will co-fund salary raises given in 2020 ANDsustained salary raises from 2017 to 2019.
Most recently, in Budget 2020, the government also increased its co-funding ratio for 2020 salary raises to 15% from 10% and gross monthly wage ceiling to $5,000 from $4,000.
| Years That Salary Raises Were Given | Government Co-Funding | Gross Monthly Wage (GMW) Ceiling |
| 2013 | 40% | $4,000 |
| 2014 | 40% | $4,000 |
| 2015 | 40% | $4,000 |
| 2016 | 20% | $4,000 |
| 2017 | 20% | $4,000 |
| 2018 | 20% | $4,000 |
| 2019 | 20% (increased from 15% announced in Budget 2018) | $5,000 (increased from $4,000 announced in Budget 2018) |
| 2020 | 15% (increased from 10% announced in Budget 2018) | $5,000 (increased from $4,000 announced in Budget 2018) |
Currently, there has been no indication that the Wage Credit Scheme will be extended beyond 2020.
Which Employees Are Eligible?
The Wage Credit Scheme payouts are not just for employees who have been working for the same company. Even new employees being given a salary bump will be eligible for Wage Credit Scheme payouts as long as you pay the new employee a gross monthly wage of at least $50 higher than the previous employer. IRAS will be able to recognise the employee’s CPF contributions from his or her previous job and no further application is required from you.
However, only employees who have been working with a business for 3 months or longer and have received CPF contributions for 3 calendar months in each qualifying year will be eligible. This means employers must also bear in mind to pay CPF contributions in a timely manner to be eligible for Wage Credit Scheme payouts.
Read Also: Complete Guide To Employer’s CPF Contributions In Singapore
As mentioned, salary raises to eligible employees need to be at least $50 per month. Of course, employees must also be earning less than the gross monthly wage of $5,000 to be eligible.
Employees cannot also be the business owner, including sole proprietor of a sole proprietorship, partner in a partnership, or both shareholder and director of a company.
Wage increases between 2013 to 2015 are no longer eligible. Only wage increases from 2016 onwards are eligible for the current Wage Credit Scheme payout in 2021.
Businesses that have no substantial trade or business will be ineligible. Similarly, employees who do not carry out substantive work will also be ineligible. For other ineligibility, you can refer to the IRAS website.
How Much Will Employers Receive In 2021?
There were two main enhancements to the Wage Credit Scheme in Budget 2020 that will increase the payouts employers will receive.
- Government co-funding of wage increases in 2020 was raised to 15% from 10%.
- The gross monthly wage ceiling was also raised to $5,000 from $4,000.
What this means is that employers will receive 15% co-funding of salary raises, of at least $50, given to employees who earn under $5,000 in 2020. In addition, employers will also receive 15% co-funding of eligible salary raises given to employees in 2019, 2018, 2017 and 2016.
For example, an employer gives their employee, who earns $3,500 a month in 2016, a $100 monthly salary increase each month between 2016 to 2020. This means the employee earns $3,600 in 2017, $3,700 in 2018, $3,800 in 2019 and $4,000 in 2020. In 2021, the employer will receive (15% co-funding x $400/month = $60/month or $720/year) in Wage Credit Scheme payouts in 2021.
Similarly, if an employer only gave the employee a raise in 2017 – from $3,500 to $3,600 – and no subsequent raises, they would get (15% co-funding x $100/month = $15/month or $180/year) in Wage Credit Scheme payouts in 2021.
As the gross monthly wage ceiling for the Wage Credit Scheme was also enhanced recently, ineligible pay raises given in the past may now be eligible. For example, if an employer only gave another employee earning a monthly salary of $4,000 a raise of $200 in 2017 – from $4,000 to $4,200 – and no subsequent raises, they would now get (15% co-funding x $200/month = $30/month or $360/year) in Wage Credit Scheme payouts in 2021. This is despite not being eligible for the raise in 2017 and 2018. Note that the qualifying gross monthly wage was increased from 2019, hence the employer would also have been eligible for this previously ineligible Wage Credit Scheme payout last year.
When Will Employers Receive Their Wage Credit Scheme Payouts In 2021?
IRAS will notify eligible employees of their Wage Credit Scheme payouts by 31 March 2021. Employers can also check their payout eligibility from the last week of March 2021 till 31 October 2021.
Wage Credit Scheme payouts are typically paid out in March of the following year. This means for salary raises given to employees in 2020, employers can expect to receive their Wage Credit Scheme payouts in March 2021.
However, additional Wage Credit Scheme payouts, arising from the enhancements to the scheme in Budget 2020, will only be paid in end June 2021.
Employers do not need to apply to receive their Wage Credit Scheme payouts, as it will automatically be calculated based on your CPF payments to employees.
Employers will be paid either through GIRO (that they have signed up with for income tax/GST) or PayNow Corporate.
Read Also: What Is PayNow For Business And 4 Reasons Why Businesses Should Adopt It
Wage Credit Scheme Payouts Are Taxable
While counterintuitive, what employers may not realise is that your Wage Credit Scheme (WCS) payouts are considered taxable revenue by IRAS.
These payouts will be taxed in the year that employers receive the payouts. For example, Wage Credit Scheme payouts for 2020 are only received in 2021. Employers will subsequently be taxed for it in YA2022.
For sole-proprietors and partnerships, IRAS will automatically include your Wage Credit Scheme payouts in your income tax return, so there is no further need to include it.
Read Also: Complete Guide To Singapore Corproate Taxes: Tax Rates, Tax Rebates, And Tax Exemptions
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