Salary is one of those topics that everyone wants to know but few are willing to disclose. After all, salary negotiation is often one of the trickiest steps in the hiring process and no one likes to find out that they are being underpaid compared to their peers.
Thus, many people end up referring to salary comparison sites and salary guides. Of all these resources, MOM’s salary data is probably the most definitive source available to the public. Every year, MOM publishes its Labour Force In Singapore report which analyses labour market indicators such as employment, unemployment, income and working hours. One key statistic is the median salary in Singapore.
Median salary in 2021 is $4,680 for all full-time employed residents aged 15 years and above, excluding Full-time National Servicemen). Specifically, this is reported as the median gross monthly income from work within the report.
While the median salary only how indicates 50th percentile of the population is doing: 50% of the population earns less than $4,680 while 50% earns more, some may feel that this number may seem unreasonably high (or low), especially in comparison to our own salaries.
So, let’s examine the median salary data in detail and see what leads to this difference.
Median Salary Data Includes Employer’s CPF Contribution
The first and most common misconception about the median salary data is the inclusion (or exclusion) of Employer CPF contributions.
The $4,680 median salary figure includes Employer CPF contributions. For employers, the cost of hiring Singaporeans includes not just the wages paid to the employee, but also the portion paid to CPF on behalf of the employees which ranges from 7.5% to 17% depending on the age of the employee.
If we exclude Employer CPF, the median salary is $4,000. For most Singaporeans, this may be more intuitive as the salary amount stated in our employment contracts or in job advertisements tend to exclude employer CPF contributions. Thus, we commonly see our salaries as the portion that is paid to us, instead of the cost to the employer.
Besides Basic Wages, Income From Work Includes Other Variable Pay
The second misconception is regarding variable salary components. Aside from looking at whether there are employer CPF contributions, we also need to examine what makes up the components of the median salary data.
According to MOM’s methodology, the gross monthly income from work comprises basic wages, overtime pay, commissions, tips, other allowances. These are variable components of pay that are not including in our basic salary.
For those of us who work in industries or job roles where variable components form a significant portion of our salary (such as commission-based sales or roles with overtime pay), it may be unrealistic to compare our base salaries with the median salary.
Median Salary Data Includes Annual Bonuses
Another component that people tend to miss out on is the annual bonuses. MOM’s Gross Monthly Income From Work includes one-twelfth of annual bonuses, which basically averages out the annual bonuses on a monthly basis.
Thus, if your monthly salary is $4,000 (with no variable components) and you receive a 13th month bonus or AWC, you are already earning more than the median salary of $4,000. This is because the 13th month bonus will be divided by 12 and added to the base wage to get a comparable salary of $4,333.
Your Disposable Income Will Be Lower After Employee CPF and Personal Income Tax
Another misconception is conflating disposable income with median salary.
This is because we also have to deduct our employee CPF contributions (on top of the median income excluding employer CPF contributions). Depending on our age, the employee CPF contributions can be between 5% (for those 70 and above) and 20% (for 55 and below). This means the take-home salary from our $4,680 median income can be as little as $3,200.
This doesn’t mean that we can spend $3,200 every month, we also have to account for income tax. As CPF contributions are not taxable, anyone who earns the median income in Singapore will have an assessable income of $38,400 each year.
According to our calculations in Disposable Income VS Discretionary Income, our income tax and property tax would likely be in the range of $519 which leaves us with a monthly disposable income of $3,157.
Thus, even if we earn the median salary, our take home salary is actually much lower which may explain why we feel that our salaries fall short of the median.
Regardless, median salary information is meant as a reference benchmark, it should not be a definite wage expectation. Depending on our age, educational qualifications and occupations, the median salary can also differ significantly.
The next time we make a salary comparison, we need to be aware of the things that can cause the difference. Does that salary offer include or exclude CPF contributions (both employer and employee’s contribution), does it include variable components including annual bonuses and the 13th month bonus?
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