There have been some recent updates in the Ordinary Wage (OW) cap and Additional Wage (AW) ceiling based on the SG 2023 Budget Changes. Starting 1 September 1, 2023, the OW cap (maximum OW subject to CPF) will increase to $6,300 from $6,000, which also means that the AW Ceiling will change as well.
Previous years’ AW Ceiling year-end calculation:
$102,000 - ($6,000 * 12 months) = $30,000
Updated year-end AW Ceiling calculation:
$102,000 - ($6,000 * 8 months) - ($6,300 * 4 months) = $28,800
- 8 months - January to August 2023
- 4 months – September to December 2023
CPF will apply to all relevant pay elements subject to CPF. While the OW cap is computed on a monthly basis, the AW ceiling on the other hand, is very dependent on the whole year’s total OW.
Here is an example of a payrun carried out in 2023:
This employee is a Citizen, 45 years old.
Because the employee's age falls between 55 and under, the wage contribution rate is 20%.
We shall use the New Year's end ceiling of $28,800.
January 2023 Payrun
In this January Payrun, the Basic Pay and Bonus are both calculated at 20% each.
From January through August, the OW cap will remain at $6,000; therefore, the calculation is $6,000 * 20% = $1,200.
The Bonus is regarded as Additional Wage and has a $28,000 annual cap. All of the $20,000 will be subject to CPF. Calculation: $20,000 * 20% = $4,000
Let's assume the employee received a further $20,000 bonus for the month of May. Here is the computation.
May 2023 Payrun
From January through August, the OW Cap will remain at $6,000; therefore, the calculation is $6,000 * 20% = $1,200.
Bonus is considered as Additional wage, and the AW has a $28,000 annual ceiling. However, since we previously determined the first $20,000 in January, we will only utilize $8,800 to reach the $28,800 yearly cap for May 2023. Therefore, the computation is $8,800 * 20% = $1,760.
By September, the OW cap will be $6,300 per month. So if a payrun is processed for September, the OW computation will be different.
September 2023 Payrun
The calculation for the Employee CPF - Ordinary will be the capped at of $6,300 * 20% = $1,260.
No Additional Wage is calculated for the Bonus because the employee has already met the $28,800 annual cap.
By looking at the Yearly Report data for 2023, you will see that the CPF - Ordinary from January to August is $1,200. Due to the increase in the OW monthly cap, the CPF - Ordinary would rise to $1,260 from September to December.