The recent announcements regarding Central Provident Fund (CPF) changes in Singapore are designed to strengthen the financial security of the workforce, particularly for older employees. Employers must prepare for key adjustments in 2025 and 2026 is crucial, including higher CPF contribution rates and increased wage ceilings. These changes will affect payroll processes, requiring proactive steps to ensure compliance with the new requirements.
Upcoming Changes to CPF
Increase in the CPF Ordinary Wage Ceiling
The first change is in the increase of the CPF Ordinary Wage (OW) Ceiling. Currently set at $6,800 in 2024, this ceiling will be raised in a phased manner:
|
Year
|
OW Ceiling
|
| 2024 |
$6,800 |
| 2025 |
$7,400 (+$600) |
| 2026 |
$8,000 (+$600) |
This adjustment enables higher contributions from both employers and employees, boosting the savings accumulated in CPF accounts. By aligning the OW ceiling with rising wage trends, the government aims to ensure that more workers can benefit from enhanced retirement savings.
Changes in CPF Contribution rates
There are also adjustments to CPF contribution rates for employees aged 55 and above:
|
Age
|
Total Contribution Rates in 2024(%)
|
Total Contribution Rates in 2025 (%)
|
Contribution by Employers (%)
|
Contribution by Employees (%)
|
|
55 and below
|
37
|
37
|
17
|
20
|
|
Above 55 to 60
|
31
|
32.5 (+1.5)
|
15.5 (+0.5)
|
17 (+1.0)
|
|
Above 60 to 65
|
22
|
23.5 (+1.5)
|
12 (+0.5)
|
11.5 (+1.0)
|
|
Above 65 to 70
|
16.5
|
16.5
|
9
|
7.5
|
|
Above 70
|
12.5
|
12.5
|
7.5
|
5
|
These changes are designed to boost retirement savings for older workers, ensuring they have adequate funds to support their needs during retirement.
Impact on Employers
Employers will need to adjust their payroll systems and budgeting strategies to accommodate their increased contribution rates and higher wage ceilings. This may require additional planning but ultimately supports a more financially secure workforce:
Increased Payroll Costs
Employers will face higher payroll costs due to the increased CPF contributions mandated by the new regulations. With the rise in OW Ceilings, employers will need to contribute more towards higher salaries. Companies must carefully assess their financial plans and adjust budget allocations accordingly to accommodate these additional costs whilst striving to maintain profitability.
Compliance Requirements
With new contribution rates and wage ceilings, compliance is crucial for employers. Companies must update their payroll systems to accurately reflect these changes, which may require investing in a new software. Non-compliance can lead to penalties or legal issues, making it essential for businesses to stay informed about CPF updates and adjust their practices accordingly.
How can PayrollServe help?
PayrollServe, a leading payroll outsourcing service provider, is here to support businesses through the upcoming CPF changes in 2025. With extensive experience managing payroll and CPF contributions, we are well-equipped to help you navigate these adjustments effectively while reducing administrative burdens.
By outsourcing your payroll to us, you can simplify payroll processes, minimise the risk of payment delays, and focus on core business activities, all while ensuring your payroll is managed smoothly and efficiently.
Contact us today to learn how our comprehensive payroll outsourcing services can streamline your operations.
