CPF contribution

[rahul_1]

I got my PR a few days back. My employer is deducting their share of CPF contribution from my salary.

I'd like to know if this is a regular practice ? Are there any laws that forbid them to do so ?

They did tell this to me upfront when I was applying for PR. I have spoken to few others who've told me that similar policies exist in their companies. But I also read on some forum that doing so may be illegal.

Please advise.

[cmdsea]

There are laws that require them to do so..!

Take a look at the CPF website. All the info is tere

[To CMDC]

I think if you read his post, you'll find that they are taking their chunk as well as his chunk out of his salary, ie they are not making any company contribution. Sounds stinky to me, but if they told you about it before.... But it's now buried until you're 55 or whatever.

[Seems logical]

If they didn't deduct it then you'd effectively be getting the employer's CPF contribution as a pay rise, just by virtue of you securing PR.

What they should do now is regularise you basic salary (yes on paper a pay cut), which will then be the basis for any future pay increments (like locals).

Actually this is the reason why I haven't taken up PR after 15 years here. I prefer to take the disposable cash in had now, even though there will be a tax hit.

[...]

It is actually a criminal offence for the employer to do that.   The CPF Act operates so that the employer is required to pay 34.5% (I think that is the current amount) of the employees salary to the CPF board.  The employer is only permitted to recover an amount equal to 20% of the salary from the employee.  Thus the employee contribution is capped at 20%

[Seems Logical]

Indeed ...

So the question to the original poster is has your employer formally notified you in writing of an adjustment (reduction) to your basic wage to compensate for his CPF contribution arising from your change in immigration status? If he has then I don't think he's contravening the Act.

[CPF rip off]

My employment contract states that since I am not a citizen of Singapore, I will get the CPF contribution that they would normally deduct. It is equivalent to 3.4% of a monthly salary which is capped at S$ 3,500. Since my gross monthly pay is S$17,000 there seems to be a mismatch. I am supposed to pay my own US Social Security contribution out of these. In the US I would get a matching employer contribution. Any way i look at it I loss out of the deal. Am I reading this right? Appreciate your opinion esp. US expats. Muchas Gracias!!

[Vulcanl]

CPF Ripoff,

Unless you are working for a US company and/or being tax equalized you do not have to pay Social Security taxes whilst you are residing/working here. 

Pls clarify

[Frank the Yank]

Agreed.  I haven't paid into SS for several years due to overseas assignments I've been on.

[CPF rip off]

I work for a US corporation (NYSE publicly traded) with global ops. My employment contract's out of our Asia Pac branch with offices in Sydney & Singapore. I will be paid $220,000 + 15% perf bonus + housing and health/dental and other relo benefits.Singapore has no tax reciprocity with the US so it seems that I don't have to pay into the CPF. But I still have to pay to the US SS. My contract also includes a free tax consult with PWC before I leave. So I guess I'll know more by then. But thanks for your comments.

[...]

@ seems logical

The point is that en employer cannot simply notify you of an reduction to your pay - that would be a unilateral variation, which is a breach of contract.

This may end being of little comfort to the employee as there are no employment protection laws in Singapore, so the employer could simply dismiss the employee if he complains.

We do however need to understand how the CPF act and the general law of contract interact.

[cmdsea]

See it from the employers point of view. He makes a job offer to a foreign employee based on whichever employment pass his salary is eligible to apply for and at a certain salary level.

The employee then decides to apply for PR which might suit him but provides no benefit to the employer and yet creates an obligation to the employer to pay an additional monthly cost for that employee.

Why shouldnt the employer then re-adjust the employees net pay to maintain the same overall monthly cost that the company used to as the basis for its job offer....

 It happened to me many years ago and seemed entirely fair and logical. In the meantime the PR enjoys certain tax benefits (now much reduced unfortunately) and in any case if he decides to leave Sg and rescind his PR he can scoop the pot and take all his CPF money so its not like he has "lost" anything in case.!

[Seems Logical]

...

Your argument that such a variation to salary is a breach of contract presumes that the OP change in residential status has no effect on the terms upon which the original employment contract was formed, i.e. that the OP was engaged and salary was determined on the basis that he was an employment pass holder.

It is arguable that the change in residential and thus employment status is a change of a term so fundamental that the original employment contract has come to an end and the employer and OP are now continuing on the basis of a quasi contract where the essential terms have yet to be agreed.
 

[...]

The fundamental change would be the employer making an unlawful deduction from the payments he is obliged to make.I agree, it may be arguable, but not a strong one as the law rarely steps in to rewritwe contracts.  As an expat I have been on both employment pass and am now PR and have looked into this situation in detail.  Generally the only relevant condition in the employment contract is the right to work in Singapore - none of my contracts have stipulated that this would vary between EP and PR, rather to the contrary where the employer undertakes where necessary to sponsor any application for an EP.  The risk of change in residence status should lie with the employer.  I also partially agree that it might seem fair and reasonable from the employers point of view to reduce pay, but that is not how the legislation works.

I think that  s7(5) of the CPF Act demonstrates the legislative intent behind this provision is that:

"(5) Notwithstanding any contract to the contrary, an employer shall not be entitled to recover in any way from an employee in respect of contributions payable under this Act any sum in excess of that permitted to be recovered under subsection (2) together with any sum contributed voluntarily by the employee under subsection (4) and any employer who recovers or attempts to recover any greater sum shall be guilty of an offence."

This provision means that even if contracts of employment say that the employer can deduct the employer portion of the CPF contribution from the employee, if the employer does so, he comits a criminal offence.

Given how fundamental the CPF system is in Singapore society, I cannot see thatthe courts would take anything other than a dim view of anyone who breaches provisions of the CPF act.

As I said this discussion is all rather academic given the lack of employment rights in Singapore - you can be sacked for any reason and have no claim against the employer.

[Frank the Yank]

To 'CPF Rip Off' - you don't have to pay US SS.  You have to pay US Federal Income Tax and maybe US State Income tax.  I guess you could pay into SS, but why?  It will not deliver anything to you compared to wise investment of your funds now.