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The SME Guide to Understanding and Managing CPF Payments
Understand the responsibilities of an SME business owner with regards to CPF requirements, and streamline your CPF payment process to ensure that you never incur a penalty.
Paying CPF to employees is part and parcel of every employer's monthly must-dos. Yet, without a streamlined payroll process or system, some CPF payments might get overlooked or paid late. Understanding CPF requirements is the first step to avoiding any penalties.
Recap: CPF Requirements for SMEs
Before anything else, make sure to familiarise yourself well with CPF requirements. It pays to know who, what and when your CPF payouts are for. If you are paying CPF for the first time, you might find this Checklist for New Employers useful.
In addition, the CPF board has an Employer's Guide to CPF that is worth reading. Another good resource is this video about CPF payments.
Regular review of employers’ CPF requirements will keep you updated on any changes or updates, such as the updated CPF contribution rates from 1 Jan 2014 onwards.
Now that you understand your CPF requirements as an employer…
Observing CPF Regulations
All employers should be aware that employees who are not paid with their CPF in full and on time have several channels through which they can notify the CPF Board directly.
In addition, the CPF Board conducts CPF Enforcement Inspections on employers in the form of on-site visits, employee and/or employer interviews and desk-top audits of wage records (obstruction to such inspections carry a hefty fine of up to $10,000).
If you are found to be guilty of failing to adhere to CPF regulations, there are several penalties that can be enforced against you.
Late CPF Payment Penalties
The CPF Board offers guidelines on when to pay CPF. All CPF contributions are due at the end of each month; however employers have a grace period of 14 days after the end of the month.
Late CPF Payment incurs a Late CPF Payment Interest Penalty (minimum $5 per month), which is calculated daily at a 1.5% interest rate per month starting from the first day of the following month after the CPF contributions are due.
Failure to Pay CPF
Employers who fail to pay CPF in full incur even stiffer penalties. You will be required to pay the arrears in full, including all late payment interest. You may also be taken to court and face a possible fine of up to $10,000, or imprisonment, or both.
Streamline Your CPF Contribution Process
If you never want to incur a CPF penalty, an efficient CPF contribution system is the solution.
The CPF Board has developed CPF e-Submit@web, a free web-based application that manages electronic CPF payments via GIRO. However, this leaves room for potential incurring of late CPF penalties - GIRO deduction will only take place on the 3rd working day from the date of submission, so if you e-submit your CPF contribution details late, then your CPF payments will be late as a result.
An alternative option is to use an automated payroll software that includes built-in templates for CPF submissions, such as Singtel's MecWise Payroll App. Not only do these automated solutions remove the possibility of late payments, they are also huge time-savers in terms of administrative hours incurred. MecWise Payroll goes one step further with automatic updates to policy changes, ensuring that CPF payments are both on time and accurate.
Finally, always check your Record of Payment (ROP) to ensure that your CPF payments have been processed in full. Any discrepancy should be raised to the CPF Board immediately.
With an efficient system in place, CPF penalties will never have to affect your business and its bottom line.