Higher CPF contribution rate kicked in from 1 January 2015
Employers now have to contribute slightly more to their employees’ Central Provident Fund savings. The change was originally announced in 2014 Budget, but the start date was deferred until 1 January 2015 to ensure employers had ample time to cope with the change and plan their budgets accordingly. The move is aimed at enabling locals to save enough for their future medical needs. As a result of this adjustment, the overall CPF contribution rate will be 37%, of which 17% is from the employers and 20% is from the employees.
Changes to rate of workers aged 50 or belowEmployers’ contributions will go up by one percentage point. The entire increase will be credited to the workers’ Medisave Accounts.
Changes to contribution rate of self-employedSelf-employed persons with annual Net Trade Income (NTI) of $18,000 and above will have to contribute one percentage point more to their Medisave Account.
Changes to the rate of older workersAged 50-55
The rates for those aged 50 to 55 will go up by 1.5%, out of which the employer will contribute 1% and the remaining 0.5% will come from the worker.
The contribution rate paid by companies for workers aged 55 to 65 will also be raised by 0.5%. The higher employer contributions will go to the Special Account, while the higher employee levy is for the Ordinary Account.
Government AssistanceEnhancement to Temporary Employment Credit (TEC)
Government will pitch in and offset 50% of the rate hike through TEC. Companies that hire Singaporean and permanent resident workers earning up to $5,000 a month will get a Temporary Employment Credit of 0.5% of their wages.
Special Employment Credit
Employers who hire Singaporean workers over the age of 50 and earning up to $4,000 a month, will get a Special Employment Credit of up to 8.5% of wages; this is a 0.5% incremental assistance from the previous 8%. Both employer credit schemes will last for one year.
The changes to rates were deemed necessary given the growing challenges of the ageing workforce and healthcare needs. That is why bulk of the increase is being credited into the Medisave account.
It is indeed a testing time for the businesses; they are severely challenged by the global economic conditions and the labor crunch caused by restructuring measures. The government help should come as respite and the latest economic data from the US is reassuring. Businesses have to shoulder this as a social responsibility, as a healthy and assured workforce is vital for benefits to be reaped in the longer run. Life expectancy has increased in recent years and more Singaporeans choose to remain economically active for a longer period. It is anticipated that Singapore will, nevertheless, continue to remain competitive as the government has promised no further hikes in the longer term.