Managing employee wages in Singapore involves understanding the distinction between Ordinary Wages (OW) and Additional Wages (AW). This classification is crucial for accurate payroll processing, CPF contributions, and tax compliance. In this guide, we break down the key differences, calculation methods, and employer obligations related to OW and AW.

What Are Ordinary Wages (OW)?

Ordinary Wages (OW) refer to the monthly wages earned by an employee for work performed within the same month. These are subject to CPF contributions and are capped based on the CPF Wage Ceiling.

Examples of Ordinary Wages:

CPF Contributions and Ordinary Wages (OW) Ceiling:

CPF contributions for OW are calculated based on the employee’s monthly salary. In the Singapore Budget 2023, the CPF Ordinary Wages Ceiling will increase in stages from $6,000 to $8,000 by 2026. Here is the timeline of the increases:

CPF Monthly Salary Ceiling

CPF Annual Salary Ceiling

Before 1st September 2023

S$6,000

S$102,000

From 1st September 2023

S$6,300

From 1st January 2024

S$6,800

From 1st January 2025

S$7,400

From 1st January 2026

S$8,000

Source: Ministry of Finance

Overtime Pay Scenarios:

If an employee works overtime during this month and is paid by the 14th of the following month, it will be considered an Ordinary Wage (OW). Otherwise, it will be considered an Additional Wage (AW).
Overtime Period Payable Date for Overtime Pay Wage Classification CPF Payable By
1-30 June 10 July OW for June 14 July
1-30 June 31 July AW for July 14 August

What Are Additional Wages (AW)?

Additional Wages (AW) refer to payments made to employees that are not part of their fixed monthly salary. These payments are usually variable and may be given periodically rather than monthly.

Examples of Additional Wages:

CPF Ceiling for Additional Wages (AW):

Example 1: Employee earns less than $6,000 of Ordinary Wage (OW)

Jessie is 42 years old and earns a $4,500 monthly salary. She will be receiving a total Additional Wage (AW) of $100,000 in 2025.  As mentioned by the Minister of Finance, $102,000 is the total Ordinary Wages subjected to CPF for the year. Additional Wage (AW) Ceiling = $102,000 - (Monthly wage x 12) = $102,000 - ($4,500 x 12) = $48,000

Month in Year 2025

OW paid ($) OW subject to CPF ($) CPF payable on OW (Employer) ($) CPF payable on OW (Employee) ($) AW paid ($) AW subject to CPF ($) CPF payable on AW (Employer) ($)

CPF payable on AW (Employee) ($)

Jan 4,500 4,500 765 900
Feb 4,500 4,500 765 900
Mar 4,500 4,500 765 900
Apr 4,500 4,500 765 900
May 4,500 4,500 765 900
Jun 4,500 4,500 765 900 5,000 5,000 850 1,000
Jul 4,500 4,500 765 900 40,000 40,000 6,800 8,000
Aug 4,500 4,500 765 900
Sep 4,500 4,500 765 900
Oct 4,500 4,500 765 900
Nov 4,500 4,500 765 900
Dec 4,500 4,500 765 900 55,000 3,000 510 600
Total 54,000 54,000 9,180 10,800 100,000 48,000 8,160 9,600
The maximum AW that is subject to CPF in 2025 would be $48,000. Thus, the remaining AW of $52,000 would not be subject to CPF, if Jessie works till the end of the year.

Example 2: Employee earns more than $7,400 of Ordinary Wage (OW)

Nicholas is 45 years old and earns a $8,000 monthly salary. He will be receiving a total Additional Wage (AW) of $100,000 in 2025.  As mentioned by the Minister of Finance, $102,000 is the total Ordinary Wages subjected to CPF for the year. Additional Wage (AW) Ceiling = $102,000 - (CPF Ceiling in 2025 x 12) = $102,000 - ($7,400 x 12) = $13,200
Months Ordinary Wages (OW) Additional Wages (AW) Total CPF contributions payable ($)
OW ($) OW subject to CPF ($) CPF payable on OW ($) AW ($) AW subject to CPF ($) CPF payable on AW ($)
Jan 8,000.00 6,000.00 2,220.00 0.00 0.00 0.00 2,220.00
Feb 8,000.00 6,000.00 2,220.00 0.00 0.00 0.00 2,220.00
Mar 8,000.00 6,000.00 2,220.00 10,000.00 10,000.00 3,700.00 5,920.00
Apr 8,000.00 6,000.00 2,220.00 0.00 0.00 0.00 2,220.00
May 8,000.00 6,000.00 2,220.00 0.00 0.00 0.00 2,220.00
Jun 8,000.00 6,000.00 2,220.00 30,000.00 18,800.00 6,956.00 9,176.00
Jul 8,000.00 6,000.00 2,220.00 0.00 0.00 0.00 2,220.00
Aug 8,000.00 6,000.00 2,220.00 0.00 0.00 0.00 2,220.00
Sep 8,000.00 6,300.00 2,331.00 0.00 0.00 0.00 2,331.00
Oct 8,000.00 6,300.00 2,331.00 0.00 0.00 0.00 2,331.00
Nov 8,000.00 6,300.00 2,331.00 0.00 0.00 0.00 2,331.00
Dec 8,000.00 6,300.00 2,331.00 60,000.00 0.00 0.00 2,331.00
Total 96,000.00 73,200.00 27,084.00 100,000.00 28,800.00 10,656.00 37,740.00
The maximum AW that is subject to CPF in 2025 would be $28,800. Thus, the remaining AW of $71,200 would not be subject to CPF, if Nicholas works till the end of the year.

Payments Not Considered Wages (No CPF Contributions)

Some payments made to employees are not classified as wages and are therefore not subject to CPF contributions. Here are common examples:

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Understanding the distinction between Ordinary Wages (OW) and Additional Wages (AW) is essential for accurate payroll processing, CPF compliance, and financial planning. Employers must ensure proper classification and CPF contribution calculations to avoid penalties and payroll discrepancies. Staying updated on CPF wage ceilings and regulatory changes can further enhance compliance and workforce satisfaction. If you need expert assistance in managing payroll, CPF contributions, and employee wages efficiently, explore our Payroll Services for tailored solutions that meet your business needs in Singapore.

The Annual Wage Supplement (AWS) is a common component of employee compensation in Singapore. Often referred to as the "13th-month bonus," AWS is an additional payment given to employees at the end of the year. However, there are key differences between AWS and performance-based bonuses, and it is crucial for both employers and employees to understand its regulations and implications.

What is the AWS Bonus?

The Annual Wage Supplement (AWS) is a form of additional salary given to employees on top of their regular wages. Unlike performance-based bonuses, AWS is meant to help employees cope with year-end expenses and is usually equal to one month’s salary.

Is AWS Mandatory in Singapore?

AWS is not mandated by law in Singapore. Instead, it is subject to the terms of the employment contract or collective agreements between employers and employees. Employers who have agreed to AWS payments in their employment contracts must honour them, unless there are exceptional financial difficulties preventing them from doing so.

The Ministry of Manpower (MOM) encourages employers to provide AWS as a means of sharing economic prosperity with employees, but it is ultimately a discretionary payment unless stipulated otherwise.

Rules and Regulations on AWS in Singapore

Employers and employees should be aware of the following key regulations:

  1. No Legal Obligation: AWS is not a statutory requirement under the Employment Act. However, if stated in an employment contract, it becomes a contractual obligation.
  2. Collective Agreements: In some industries, unions negotiate AWS as part of collective agreements. Employers must comply with these agreements if they apply.
  3. Pro-Rated AWS: Employees who have worked for less than a full year may receive a pro-rated AWS payment, based on the number of months worked.
  4. Withholding AWS Payments: Employers facing financial difficulties may negotiate with employees or unions to reduce or withhold AWS payments. Such measures should be taken only when necessary and with proper communication.
  5. AWS and CPF Contributions: AWS is subject to CPF contributions, just like monthly wages.

For official regulations, refer to the MOM website on Variable Wage Components.

How AWS Differs from Other Bonuses

AWS is often mistaken for performance bonuses or profit-sharing incentives, but they serve different purposes:

Bonus Type Purpose Mandatory?
Annual Wage Supplement (AWS) Fixed bonus, typically one month’s salary, meant to help employees manage expenses No
Performance Bonus Based on individual or company performance No
Profit-Sharing Bonus Distributed based on company profits No
Retention Bonus Incentivises employees to stay longer No

While AWS is more predictable, performance bonuses fluctuate based on business outcomes and individual contributions.

Forms of AWS Payments

Employers may structure AWS payments in different ways, including:

Employers should ensure AWS payment structures are clearly communicated in employment contracts and employee handbooks.

How to Prorate Annual Wage Supplement (AWS)

Since AWS is not a statutory requirement, the method of prorating AWS depends on the terms outlined in the employment contract. Here are two commonly used methods for prorating AWS for employees who join mid-year:

  1. Basic salary ÷ 365 days × Days worked in the year
  2. Basic salary ÷ 12 months × Months worked in the year

Employers should ensure transparency in their calculations and communicate the prorated AWS amount clearly to employees.

Is Annual Wage Supplement Subject to CPF and Taxes?

According to the Central Provident Fund (CPF) Board, AWS is classified as "remuneration in money," which includes bonuses and other salary components. As a result, AWS is subject to CPF contributions, just like regular wages.

Similarly, the Inland Revenue Authority of Singapore (IRAS) considers AWS as taxable income. It is treated in the same way as regular salary and other forms of remuneration, meaning employees should account for AWS in their annual tax declarations.

AWS and Payroll Considerations

When managing payroll, employers must consider AWS’s impact on:

  1. Salary Deductions: Since AWS is part of an employee’s taxable income, it may impact CPF contributions and income tax calculations.
  2. Payroll Processing: Employers should ensure AWS is calculated accurately and disbursed in a timely manner.
  3. Budgeting for AWS: Employers should plan finances accordingly, as AWS represents a significant year-end expense.

For businesses looking for efficient payroll management, consider using GutsyHQ’s payroll services to streamline AWS and other salary components.

Common Misconceptions about AWS

  1. AWS is the same as a bonus.
  1. AWS is compulsory.
  1. AWS must always be equal to one month’s salary.

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Understanding AWS is essential for both employers and employees. While it is not a legal requirement, many companies provide it to boost employee satisfaction and financial security. Employers should clearly outline AWS policies in employment contracts, while employees should be aware of their entitlements and how AWS affects their overall earnings.

Managing AWS calculations, payroll processing, and CPF contributions can be complex and time-consuming. At GutsyHQ, we offer expert payroll solutions to ensure seamless compliance with AWS payments, CPF deductions, and tax regulations. Let us help you simplify your payroll processes, so you can focus on growing your business with confidence!

Salary deduction is a common yet often misunderstood aspect of payroll in Singapore. Whether you’re an employer managing payroll or an employee trying to understand your rights, knowing the rules around salary deductions is essential to ensure fair and legal practices.

In this guide, we’ll cover everything you need to know about salary deductions in Singapore, including what is legally allowed, the limits imposed by the Ministry of Manpower (MOM), and best practices for compliance.

What is Salary Deduction?

Salary deduction refers to any amount withheld from an employee’s salary by an employer. Some deductions are mandatory, while others require employee consent. However, all deductions must comply with Singapore’s Employment Act and MOM regulations.

Employers cannot make arbitrary deductions. Any unauthorised salary deduction can result in penalties under the law.

To get the most up-to-date and detailed information, visit MOM’s official salary deduction guidelines.

Types of Salary Deductions Allowed in Singapore

The Ministry of Manpower (MOM) allows certain types of salary deductions, which fall into two categories: mandatory deductions and permissible deductions.

1. Mandatory Salary Deductions

Employers are legally required to make these deductions:

CPF Contributions

Tax Clearance for Foreign Employees (IR21)

2. Permissible Salary Deductions (With Employee Consent)

These deductions can only be made if the employee provides written consent:

Absence from Work

Damage or Loss of Goods

Employee Accommodation

Salary Advances and Loans

Employee Benefits (Insurance, Medical Co-payment)

Union Membership Fees

Salary Deduction Limits in Singapore

To protect employees from financial hardship, MOM has set strict limits on salary deductions:

Employers must ensure they do not exceed these limits, or they could face penalties from MOM.

Is it Compulsory to Show Salary Deductions on My Employees’ Itemised Payslips?

Yes, it is compulsory to show salary deductions on your employees’ itemised payslips in Singapore.

Under the Employment Act, all employers must issue itemised payslips that include details of any salary deductions made. The payslip should clearly outline:

Failure to provide itemised payslips can result in penalties from the Ministry of Manpower (MOM).

Unauthorised Salary Deductions (What Employers Cannot Deduct)

MOM prohibits employers from making deductions for certain reasons, including:

Best Practices for Employers

To ensure compliance and avoid disputes, employers should:

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What Can Employees Do If They Face Unauthorised Deductions?

If an employer makes an unfair salary deduction, employees can:

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Managing salary deductions can be complex, but with the right system in place, you can ensure full compliance with MOM regulations while maintaining transparency with your employees. Let GutsyHQ’s Singapore Payroll Services handle auto-calculated salary deductions, generating itemised payslips, and keeping you compliant effortlessly. Simplify your payroll process today! 

Ensuring transparency and compliance in payroll management is crucial for businesses in Singapore. One of the key requirements set by the Ministry of Manpower (MOM) is the provision of itemised payslips to employees. In this guide, we will explore the definition, key components, regulations, and employer obligations related to itemised payslips in Singapore.

What is an Itemised Payslip?

An itemised payslip is a detailed breakdown of an employee’s salary, allowances, deductions, and net pay for a specific pay period. It serves as a formal record of salary payments and ensures that employees receive transparent and accurate compensation.

Under Singapore’s Employment Act, all employers must issue itemised payslips to employees covered under the Act, ensuring fair labour practices and proper documentation of salary-related transactions.

For an official itemised payslip template from the Ministry of Manpower, you can refer to this template  PDF.

What are the Key Components Inside the Itemised Payslip?

An itemised payslip must contain essential details to ensure clarity in salary calculations. According to MOM guidelines, the key components include:

These details help both employers and employees track payments accurately and resolve discrepancies when necessary.

Why is an Itemised Payslip Mandatory for All Employees?

Itemised payslips are not just a formality—they serve crucial purposes such as:

The requirement for itemised payslips is part of Singapore’s effort to protect employees’ rights and promote fair employment practices.

When Should the Employer Issue Payslips to the Employees?

Employers are required to provide itemised payslips at the time of salary payment or within three working days after payment. If an employee is terminated, their final payslip must be provided along with their last salary payment.

Payslips can be issued in either hardcopy or softcopy format (e.g., PDF or email). However, they must be easily accessible for employees to review and retain.

How to Generate Itemised Payslips for Employees?

Employers can generate itemised payslips through various methods, including:

  1. Manual Payslips: Small businesses with a few employees may use Excel templates or printed forms to create payslips manually.
  2. Payroll Software: Automated payroll systems streamline the process, ensuring compliance with MOM requirements while reducing errors. Employers can use payroll software like GutsyHQ to automatically generate payslips and calculate salaries effortlessly.
  3. HR and Payroll Service Providers: Outsourcing to professional payroll firms can help businesses ensure compliance without handling payroll in-house.

Using payroll software or outsourcing services can significantly reduce administrative burdens and ensure timely salary processing.

What are the Penalties if an Employer Fails to Provide Itemised Payslips?

Non-compliance with MOM’s payslip requirements can lead to severe penalties, including:

In addition, if an employer submits false payslips after the deadline, they could face a hefty penalty of up to $5,000 and court charges. Ensuring compliance with itemised payslip regulations helps businesses avoid legal issues and maintain a positive reputation in the job market.

As an Employer, How Long Should I Keep the Records of the Payslips?

For Current Employees: Employers must retain payslip records for the past two years to ensure proper documentation and compliance. Keeping these records organised helps maintain accurate payroll records and simplifies audits.

For Former Employees: Payslip records for ex-employees should be kept for up to two years, with an additional one-year retention period after their departure. This ensures that any payroll-related queries or disputes can be addressed effectively.

Maintaining proper payroll records not only ensures compliance with MOM regulations but also helps businesses manage financial audits and employee disputes efficiently.

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Understanding and implementing itemised payslips is essential for both employers and employees in Singapore. Compliance with MOM regulations ensures transparency, accountability, and smooth payroll management. Employers should leverage payroll software or services to streamline payslip generation while maintaining accurate financial records.

For a hassle-free payroll process, employers can use Gutsy’ Payroll Service to automatically generate itemised payslips and calculate salaries like a breeze. By adhering to itemised payslip requirements, businesses can build a more trustworthy and legally compliant work environment while avoiding unnecessary legal risks.

Backdated pay is a crucial aspect of payroll management that employers in Singapore must handle correctly. It refers to payments made to employees for wages earned in a previous payroll period but processed at a later date. Employers need to understand the legal, tax, and CPF contribution implications of backdated payments to ensure compliance with Singapore's employment laws. This guide provides insights into backdated pay, its classification, and best practices for handling it efficiently.

What is Backdated Pay?

Backdated pay refers to wages paid to an employee for work performed in a previous payroll period but not processed in the regular payroll cycle. This can occur due to payroll errors, salary adjustments, or contract revisions. Employers in Singapore must ensure backdated payments comply with local employment laws and regulations.

The Reasons for Backdated Pay

Backdated pay can arise from various circumstances, including:

  1. Payroll Errors – Mistakes in payroll processing can lead to unpaid wages, which must be corrected through a backdated payment.
  2. Salary Increments – Employers may decide to increase an employee’s salary retrospectively, necessitating a backdated payment.
  3. Bonuses and Incentives – Performance-based rewards may sometimes be paid out later than the intended date.
  4. Contract Adjustments – Changes in employment terms, such as promotions or revised compensation agreements, can result in backdated payments.
  5. Late Approvals – Delays in managerial approval of overtime or commissions can lead to payments being pushed into a later payroll cycle.

Is Backdated Pay Classified as Ordinary Wages (OW) or Additional Wages (AW)?

In Singapore, wages are categorised into Ordinary Wages (OW) and Additional Wages (AW) under the Central Provident Fund (CPF) framework:

Backdated pay can be classified as OW or AW, depending on the nature of the payment:

Can a Salary Increment Payment Be Backdated?

Yes, salary increments can be backdated if the employer decides to adjust an employee’s salary retrospectively. However, the following factors should be considered:

Is Backdated Pay Subjected to CPF Contribution?

Yes, backdated pay is subject to CPF contributions based on the CPF Board’s regulations. The treatment of CPF contributions depends on the classification of the payment:

Employers must report backdated wages correctly in their payroll records and submit CPF contributions to the CPF Board promptly. For seamless payroll compliance, businesses can use automated payroll software like GutsyHQ Payroll to avoid calculation errors.

Can an Employer Pay for New Hires Who Joined After the Payroll Cut-Off Date as Backdated Pay?

Yes, employers can process backdated pay for new hires who miss the payroll cut-off date. This typically happens when an employee starts work late in the month, but payroll has already been processed. Here’s an example:

Example:

New Hire: Josh

Joining Date: 25th February 2025

Payroll cut-off date for each salary month: 20th of every month 

Monthly Salary: $5,000

Sarah’s prorated salary in February 2025 =

5/20 working days x $5,000 = $1,250

Josh' CPF Contribution in February 2025 is therefore $1,250.

Even though Josh joined after the payroll cut-off date, his prorated salary for February 2025 should still be paid by the latest 7 March 2025 to comply with the Employment Act. His prorated salary for February is $1,250, resulting in a CPF contribution of $462.5.

Considerations for Employers:

For employers looking for a payroll system that automates salary calculations, CPF contributions, and tax compliance, GutsyHQ Payroll provides an efficient solution.

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Backdated pay is a common payroll issue that employers must manage with accuracy and compliance. Mismanagement can lead to payroll discrepancies, CPF miscalculations, and employee dissatisfaction. By understanding backdated pay classifications, CPF contribution requirements, and best payroll practices, businesses can ensure smooth and transparent payroll processing. Employers can also leverage GutsyHQ Payroll for automated calculations and compliance, reducing the risk of payroll errors and ensuring timely payments to employees.

Taking time off work for emergencies is sometimes unavoidable, but many employees in Singapore are unsure about their rights when it comes to urgent leave. Whether it's a sudden family emergency, a medical crisis, or an unforeseen legal matter, knowing your options can help you navigate these situations smoothly. Unlike statutory leave types such as annual leave or medical leave, urgent leave is not explicitly covered under Singapore’s Employment Act, making it a grey area that depends on company policies. In this guide, we’ll explore the rules, eligibility criteria, and best practices for urgent leave in Singapore—ensuring both employers and employees have a clear understanding of their rights and responsibilities.

What is Urgent Leave?

Urgent leave refers to time off that employees take on short notice due to unforeseen personal emergencies. These emergencies often include family emergencies, medical crises, or bereavement. Unlike scheduled annual leave, urgent leave is unplanned and requires prompt approval from employers.

In Singapore, urgent leave is not a statutory leave type under the Employment Act. However, companies may grant it based on their internal HR policies. Employers who provide urgent leave typically outline the conditions under which it is granted in their leave policies.

Who is Eligible for Urgent Leave?

Since urgent leave is not legally mandated, eligibility depends on the company’s HR policy. Common eligibility criteria include:

Employers are encouraged to outline their policies clearly to avoid confusion and disputes.

What’s the Difference Between Urgent Leave and Compensation Leave?

Both urgent leave and compensation leave serve different purposes:

Employers should distinguish between these leave types in their HR policies to ensure clarity for employees.

What Are Acceptable Urgent Leave Reasons?

Acceptable reasons for urgent leave typically include:

Employers should establish clear guidelines on acceptable urgent leave reasons to ensure fairness and prevent misuse.

Is Urgent Leave Compulsory in Singapore?

No, urgent leave is not mandatory in Singapore under the Employment Act. However, employees can use their annual leave, unpaid leave, or special leave provisions (if offered by their employer) to accommodate emergencies.

Some employers may provide urgent leave as part of their employee benefits to enhance work-life balance and foster goodwill.

How Many Days of Urgent Leave in Singapore Can an Employee Receive?

Since urgent leave is not a statutory entitlement, the number of days an employee can receive depends on the company’s HR policy. Common industry practices include:

Employers should establish a clear policy on urgent leave days to ensure fairness and transparency.

How to Create a Leave Policy for Urgent Leave?

To manage urgent leave effectively, companies should develop a well-defined leave policy. A good policy should include:

  1. Definition of urgent leave – What qualifies as urgent leave?
  2. Eligibility criteria – Who is entitled to take urgent leave?
  3. Notice period – How much notice is required? (E.g., same-day notice via email or call)
  4. Documentation requirements – Should employees provide supporting documents (e.g., medical certificates, death certificates)?
  5. Approval process – Who approves the leave? (HR, direct manager, etc.)
  6. Alternative leave options – Can employees use annual leave or unpaid leave instead?

For businesses using an HR software like GutsyHQ, implementing a digital leave management system ensures smooth tracking and approval of urgent leave requests.

Can an Employer Exchange Urgent Leave with Annual Leave?

Yes, many companies allow employees to use their annual leave for urgent matters. However, policies vary across organisations:

Employers should specify their policy on urgent leave and annual leave conversions in their employee handbook.

What Alternatives Does an Employer Offer to Replace Urgent Leave?

If an employer does not have a formal urgent leave policy, they may offer alternatives such as:

Using HR software like GutsyHQ can help streamline leave applications and alternative leave options efficiently.

Can an Employee Take Urgent Leave During Notice Period?

Whether an employee can take urgent leave during their notice period depends on company policy and managerial discretion. Common practices include:

Employers should communicate their policies on urgent leave during notice periods to ensure clarity for both parties.

Navigate Urgent Leave Without Hassle With Clear Policy and HR Software

Urgent leave is a crucial aspect of work-life balance, but it is not a statutory requirement in Singapore. Companies should establish clear policies to handle urgent leave requests fairly. Employers can also leverage GutsyHQ to manage leave applications, ensuring a smooth and transparent process for both HR and employees.

A well-defined urgent leave policy fosters a supportive work environment and enhances employee satisfaction. Whether offering urgent leave as a benefit or providing flexible alternatives, employers should prioritise clear communication and efficient leave management.

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