Mar 04

Central Provident Fund (CPF) Changes 2022 – How It Affects Businesses

The CPF is a mandatory social security savings scheme funded by contributions from employers and employees. It is a key pillar of Singapore’s social security system, and serves to meet retirement, housing and healthcare needs.

Prior to 1988, all workers in Singapore received the same CPF contribution rates regardless of age. However, changes for this scheme became necessary throughout the years in order to adjust to the economic status.

CPF Updates Over the Years

The changes to the CPF since 1988 are as follows:

    • Rates for older workers were reduced in 1988 to improve their employability at a time when seniority-based wage practices were commonplace. The rates changed according to age, with CPF rates lowered for older age groups.
    • In response to economic conditions and to protect employability, contribution rates were reduced in 1999 for workers aged 55 to 65, and in 2005 for those aged 50 to 65.
    • In 2016, CPF rates for workers aged 50 to 55 were equalised with that of younger age groups as their employability improved.

In 2020, the total CPF contribution rate was 37% for workers up to 55 years old. It drops progressively as age increases – 26% for workers aged 55 to 60, 16.5%for those aged 60 to 65, and 12.5% for those beyond 65.

During the Budget 2020 announcement, another change for the CPF was revealed. From 1 January 2022, Singapore will raise the CPF contribution rates coming from both employers and senior workers aged 55 to 70 years.

Along with this change, the government plans to gradually increase CPF contributions for those older workers over the coming decade to strengthen their retirement capability, and to support Singapore’s businesses’ foundations for older work employment.

Effects on Businesses

Although the increase aims to provide positive change to Singapore’s ageing workforce and economy in the long term, there are also concerns of negative short term effects from this change.

The main worry is the increased cost of employing older workers, something that businesses may not be able to afford in a still-recovering economy. For reference, the updated CPF rates are as follows:

Employee’s age

(years)

CPF Contribution Rates changes from 1 Jan 2022

(monthly wages > $750)

Total (% of wage)

By employer

(% of wage)

By employee

(% of wage)

55 & below

37

17 20

Above 55 to 60

28 14

14

Above 60 to 65

18.5

10 18.5

Above 65 to 70

14

8

6

       Above 70 12.5 7.5

5

The CPF is a mandatory social security savings scheme funded by contributions from employers and employees. It is a key pillar of Singapore’s social security system, and serves to meet retirement, housing and healthcare needs.

Prior to 1988, all workers in Singapore received the same CPF contribution rates regardless of age. However, changes for this scheme became necessary throughout the years in order to adjust to the economic status.

To offset the rise in business costs due to the increase in CPF contribution rates for senior workers, the government has introduced several schemes aimed at encouraging companies to recruit, retain and upskill their older workers.

Government Grants Available

Some support from the government to help businesses relieve their increasing manpower cost is available. The 2 grants are:

    • Senior Workers Early Adopters Grant: Incentivises and encourages companies to raise their own internal Retirement and Re-Employment Age, ahead of the legislative schedule. To be eligible, companies will need to increase both ages specified by at least 3 years above minimum statutory requirements.
    • Part-Time Re-employment Grant: Aims to support employers who are able to provide part-time employment opportunities to eligible senior workers upon their request.

By securing both grants, your company can provide up to S$5,000 per Singaporean or Permanent Resident employee 60 years and above ( up to S$250,000) . This lowers the employment cost significantly, giving your business support to offset the cost of the newly implemented CPF changes.

Learn More

Get Support For Hiring Older Employees

If you would like to apply for the grants or you have interest in securing other government grants, please contact Woon at woon@361dc.com or 9824 1643.

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