While setting aside more for the future is important, it also means there would be less money for today.<\/p>\n\n\n\n
With the first planned increase of the CPF Contribution Ceiling taking place from 1 September 2023, both workers and their employers will start to feel the effect of lower take-home salary (for workers), and higher salary cost (for employers).<\/p>\n\n\n\n
Timeline For The Increase In CPF Monthly Salary Ceiling<\/strong><\/h3>\n\n\n\n <\/td> CPF Monthly Contribution Ceiling<\/strong><\/td><\/tr>Before 1 September 2023<\/td> $6,000<\/td><\/tr> 1 September 2023<\/td> $6,300<\/td><\/tr> 1 January 2024<\/td> $6,800<\/td><\/tr> 1 January 2025<\/td> $7,400<\/td><\/tr> 1 January 2026<\/td> $8,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nThe CPF Contribution Ceiling caps the maximum amount that employers and employees have to contribute to their CPF accounts each month.<\/p>\n\n\n\n
For example, before 1 September 2023, a worker who earns $8,000 a month would only need to make employee contributions on the first $6,000 of monthly wages. Assuming the worker is below the age of 55, this means the worker contributes 20% of his monthly salary to the CPF account. Monthly take-home salary would be $4,800 (0.8 X $6,000) + $2,000 = $6,800<\/strong>.<\/p>\n\n\n\nFrom 1 September 2023 onwards, the worker will need to make an employee contribution of 20% up to the first $6,300 of monthly salary. Assuming the same $8,000 a month salary, this means take take-home salary will reduce by $60 to $5,040 (0.8 X $6,300) + $1,700 = $6,740.<\/strong><\/p>\n\n\n\nFrom 1 January 2026 onwards, the CPF monthly contribution ceiling would increase to $8,000. Assuming a salary of $8,000, this means the full salary of $8,000 is now subject to CPF contribution. Thus the worker\u2019s take-home salary will be $6,400<\/strong> (0.8 X $8,000), or $400 less than before.<\/p>\n\n\n\nGiven the current high inflation, this could be a challenge for some workers.<\/p>\n\n\n\n
Cost Of Hiring Will Also Increase For Employers<\/h3>\n\n\n\n
The other issue is that even with salaries remaining the same, employers will likewise need to contribute a higher amount each month as part of their employer\u2019s contribution.<\/p>\n\n\n\n
For example, assuming a $8,000 monthly salary for a worker below the age of 55, the monthly employers\u2019 CPF contribution is currently $1,020<\/strong> (17% of $6,000).<\/p>\n\n\n\nFrom 1 September 2023 onwards, the employers\u2019 CPF contribution will increase to $1,071 (17% of $6,300). From 1 January 2026, the employer\u2019s CPF contribution for a worker earning $8,000 will be $1,360 (17% of $8,000), $340 more than the current contribution.<\/p>\n\n\n\n
Thus, the irony here is that while employers will be incurring a higher cost for their local employees in the coming years due to higher CPF contributions required, the take-home salaries of their workers will be lower.<\/p>\n\n\n\n
How Many Singapore Workers Will Be Affected?<\/h3>\n\n\n\n
For workers earning less than $6,000 a month, the increase in the CPF Contribution Ceiling do not affect them or their employers since their full salary is already subject to CPF contributions.<\/p>\n\n\n\n
According to the Labour Force in Singapore 2022 Report<\/a>, about 800,000 workers (out of a total of 2.3 million workers in Singapore) earn a salary of $6,000 or higher. For these workers and their employers, 1 September 2023 will see their take-home salary reduced while their employers will be incurring higher salary costs. <\/p>\n\n\n\n![\"\"](\"https:\/\/dollarsandsense.sg\/business\/wp-content\/uploads\/2023\/08\/Wages-Of-Singapore-Workers.png\")
<\/figure>\n\n\n\n
| <\/td> | CPF Monthly Contribution Ceiling<\/strong><\/td><\/tr>| Before 1 September 2023<\/td> | $6,000<\/td><\/tr> | 1 September 2023<\/td> | $6,300<\/td><\/tr> | 1 January 2024<\/td> | $6,800<\/td><\/tr> | 1 January 2025<\/td> | $7,400<\/td><\/tr> | 1 January 2026<\/td> | $8,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n | The CPF Contribution Ceiling caps the maximum amount that employers and employees have to contribute to their CPF accounts each month.<\/p>\n\n\n\n For example, before 1 September 2023, a worker who earns $8,000 a month would only need to make employee contributions on the first $6,000 of monthly wages. Assuming the worker is below the age of 55, this means the worker contributes 20% of his monthly salary to the CPF account. Monthly take-home salary would be $4,800 (0.8 X $6,000) + $2,000 = $6,800<\/strong>.<\/p>\n\n\n\n From 1 September 2023 onwards, the worker will need to make an employee contribution of 20% up to the first $6,300 of monthly salary. Assuming the same $8,000 a month salary, this means take take-home salary will reduce by $60 to $5,040 (0.8 X $6,300) + $1,700 = $6,740.<\/strong><\/p>\n\n\n\n From 1 January 2026 onwards, the CPF monthly contribution ceiling would increase to $8,000. Assuming a salary of $8,000, this means the full salary of $8,000 is now subject to CPF contribution. Thus the worker\u2019s take-home salary will be $6,400<\/strong> (0.8 X $8,000), or $400 less than before.<\/p>\n\n\n\n Given the current high inflation, this could be a challenge for some workers.<\/p>\n\n\n\n The other issue is that even with salaries remaining the same, employers will likewise need to contribute a higher amount each month as part of their employer\u2019s contribution.<\/p>\n\n\n\n For example, assuming a $8,000 monthly salary for a worker below the age of 55, the monthly employers\u2019 CPF contribution is currently $1,020<\/strong> (17% of $6,000).<\/p>\n\n\n\n From 1 September 2023 onwards, the employers\u2019 CPF contribution will increase to $1,071 (17% of $6,300). From 1 January 2026, the employer\u2019s CPF contribution for a worker earning $8,000 will be $1,360 (17% of $8,000), $340 more than the current contribution.<\/p>\n\n\n\n Thus, the irony here is that while employers will be incurring a higher cost for their local employees in the coming years due to higher CPF contributions required, the take-home salaries of their workers will be lower.<\/p>\n\n\n\n For workers earning less than $6,000 a month, the increase in the CPF Contribution Ceiling do not affect them or their employers since their full salary is already subject to CPF contributions.<\/p>\n\n\n\n According to the Labour Force in Singapore 2022 Report<\/a>, about 800,000 workers (out of a total of 2.3 million workers in Singapore) earn a salary of $6,000 or higher. For these workers and their employers, 1 September 2023 will see their take-home salary reduced while their employers will be incurring higher salary costs. <\/p>\n\n\n\n |