{"id":5882,"date":"2025-05-27T16:30:00","date_gmt":"2025-05-27T08:30:00","guid":{"rendered":"https:\/\/dollarsandsense.sg\/business\/?p=5882"},"modified":"2025-05-27T16:37:42","modified_gmt":"2025-05-27T08:37:42","slug":"additional-wage-aw-ceiling-how-much-cpf-contributions-to-make-for-bonus-leave-encashment-employees","status":"publish","type":"post","link":"https:\/\/dollarsandsense.sg\/business\/additional-wage-aw-ceiling-how-much-cpf-contributions-to-make-for-bonus-leave-encashment-employees\/","title":{"rendered":"Additional Wage (AW) Ceiling: How Much CPF Contributions To Make For Bonus & Leave Encashment To Employees"},"content":{"rendered":"\n

CPF contributions are mandatory for all Singaporean and Singaporean PR employees. Each month, an employer contributes up to 17% of their employees\u2019 wages into their CPF accounts while employees also contribute 20% of their own wages. <\/p>\n\n\n\n

The current monthly cap on contributions is $7,400 in 2025. This cap is known as the Ordinary Wage (OW) ceiling, and will be raised to $8,000 in 2026.<\/p>\n\n\n\n

There is another CPF contribution known as the Additional Wage (AW) ceiling that employers also need to be aware of and is calculated each year or before an employee leaves the company. <\/p>\n\n\n\n

Read Also: 10 Types Of Employee Payments (Apart From Salary) That Businesses Need To Pay CPF For<\/a><\/em><\/strong><\/p>\n\n\n\n

What Is Considered Additional Wage (AW)? <\/strong><\/h3>\n\n\n\n

The Additional Wage (AW) refers to wages that are not granted wholly and exclusively for the month. It refers to other forms of remuneration provided to an employee beyond his\/her monthly salary. This can include annual bonuses, leave pay, incentive payments and other payments made at intervals of more than a month.\u00a0<\/p>\n\n\n\n

For example, if employers pay a year-end commission to an employee because they met the sales target for the year, this would be considered as AW wages. However, if the commission is part and parcel of your employee\u2019s monthly salary (e.g. each month, they get a fixed salary and a variable commission component that is dependent on their monthly sales), then it\u2019s considered as Ordinary Wage (OW) for the month.\u00a0<\/p>\n\n\n\n

What Is The Additional Wage (AW) Ceiling And How Do You Calculate It? <\/strong><\/h3>\n\n\n\n

The AW Ceiling sets the maximum amount of AW on which CPF contributions are payable per year. <\/p>\n\n\n\n

Unlike the OW ceiling, which is capped at a monthly salary of $7,400 (and will rise to $8,000 in 2026), the AW Ceiling is computed on a per employer per year basis. This means that if a sales manager worked for Company A from January to June, but leaves and works for Company B from July to December, his AW Ceiling will be computed twice – once for Company A and once for Company B.<\/p>\n\n\n\n

The formula for calculating the AW Ceiling is:<\/p>\n\n\n\n

($102,000) \u2013 (Ordinary Wages subject to CPF for the year) = AW Ceiling<\/strong><\/p>\n\n\n\n

Scenario 1: If an employee earns $8,000 a month:<\/strong><\/p>\n\n\n\n

$102,000 – ($7,400 x 12) = $13,200<\/em><\/p>\n\n\n\n

Firstly, even though the employee may earn $8,000 a month, their OW ceiling remains at $7,400.<\/p>\n\n\n\n

If the employee is then rewarded with $10,000 bonus at the end of the year, the entire bonus will be subject to CPF contributions since it falls below the AW Ceiling of $13,200. <\/p>\n\n\n\n

But if the employee received a three-month bonus worth $24,000 year-end bonus, the maximum AW that is subject to CPF contribution will be the AW Ceiling of $13,200. The remaining $10,800 would not require any employer\u2019s or employee\u2019s CPF contributions.<\/p>\n\n\n\n

Scenario 2: If an employee earns $6,000 a month:<\/strong><\/p>\n\n\n\n

$102,000 – ($6,000 x 12) = $30,000<\/em><\/p>\n\n\n\n

In this scenario, the employee\u2019s AW Ceiling is $30,000. So, if your employee enjoys an annual bonus worth three months of their salary, at $18,000, the entire bonus will be subject to both employer\u2019s and employee\u2019s CPF contributions.\u00a0<\/p>\n\n\n\n

As an employer, it\u2019s important to calculate the AW ceiling correctly so that you don\u2019t overpay or underpay the government-mandated CPF contributions. <\/p>\n\n\n\n

Read Also: Complete Guide To Employer\u2019s CPF Contribution In Singapore<\/a><\/em><\/strong><\/p>\n\n\n\n

When To Calculate Additional Wage (AW) Ceiling? <\/strong><\/h3>\n\n\n\n

According to the CPF Board, you should calculate the AW Ceiling twice during the year. <\/p>\n\n\n\n

Step 1<\/strong>: At the start of the year, employers should first estimate the AW ceiling by using the current year\u2019s estimated monthly OW.<\/p>\n\n\n\n

For example, if your employee earns $7,400 or more a month, then the estimated AW ceiling for the employee will be $13,200.\u00a0This is derived from the AW ceiling formula.\u00a0$102,000 – ($7,400 x 12) = $13,200.\u00a0<\/strong><\/p>\n\n\n\n

Step 2:<\/strong> At the 1) end of the year, 2) upon an employee\u2019s resignation, or 3) if there are changes in the employee\u2019s salary, employers should re-calculate the AW ceiling for the year based on the OW paid. Any shortfall in contributions should be paid together with the CPF contributions at the end of the year in December, or in the employee\u2019s last month of employment. <\/p>\n\n\n\n

For example, if an employee receives a salary increment or reduction after AW Ceiling had been estimated at the start of the year, the employee\u2019s AW Ceiling will be recalculated and adjusted to reflect the new wages. Any shortfall should be paid to the employee at the end of the year in December or in the employee\u2019s last month of employment.<\/p>\n\n\n\n

As an example scenario, take an employee earning $7,400 a month from January to October 2025, but his monthly salary was reduced to $3,000 in November and December. At the same time, he received a bonus of $40,000 in June.\u00a0<\/p>\n\n\n\n

At the start of the year, the estimated AW ceiling for the employee is $13,200 (from step 1 above). Thus, when the additional wages of $40,000 was paid in June 2025, only $13,200 of the AW required CPF contribution. However, due to his salary reduction in November and December, his AW ceiling is now at $22,000. Thus, an additional $8,800 for the AW wages already paid in June 2025 would now require CPF contribution by the end of the year.\u00a0<\/p>\n\n\n\n

In the event that an employer contributed excess AW, they can arrange for a refund via an online application with the CPF Board.<\/p>\n\n\n\n

Lastly, note that even though the OW ceiling has been raised to $7,400 in 2025 (from $6,800 in 2024) and will be gradually raised to $8,000 in 2026, the AW ceiling does not change from the current $102,000. As the monthly ceiling is raised towards the $8,000 cap, less of an employee’s bonus may attract CPF Contributions.<\/p>\n","protected":false},"excerpt":{"rendered":"Calculating your employee’s Additional Wage (AW) may not be that straightforward.\n","protected":false},"author":16,"featured_media":10729,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[95],"tags":[676,677,130,354,678],"yoast_head":"\nAdditional Wage (AW) Ceiling: How Much CPF Contributions To Make For Bonus & Leave Encashment To Employees | DollarsAndSense Business<\/title>\n<meta name=\"description\" content=\"Calculating employees' Additional Wage (AW) ceiling can be tricky, especially if they get a raise, pay cut or resign in the middle of the year.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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