Calculating Additional CPF Contributions

With the final pay for each year, the limit on additional CPF needs to be recalculated based on actual wages for the year. If the limit is higher than that of the previous year, extra CPF contributions may need to be made. If the limit is lower, some contributions may need to be reclaimed from the CPF Board. This reconciliation needs to be carried out in December for all employees who received additional wages during the year. It also needs to be done in the final pay for employees who are terminating.

Two deductions are used for the adjustment: One for the employer's share and one for the employee's (payee's) share.

  • CPF ADD ER — Employer Additional CPF.

  • CPF ADD EE — Employee Additional CPF.

The generation control CPF GC ADD ADJUST, using the formula CPF FM ADD ADJ GC, determines whether the payee is eligible for CPF adjustment.

Calculating the Additional CPF Adjustment Deduction

The generation control formula CPF FM ADD ADJ GC is used to calculate the additional CPF adjustment deduction when:

  • The month of the period end date is December, or

  • The segment end date is equal to the payee's termination date, and

  • Additional wages YTD accumulator > zero, and

  • Citizenship status is not '6' (foreign worker)

As with the normal CPF deductions, the pre-process formula performs the actual calculation for both the employer and payee CPF contributions. The amounts calculated are stored in variables, which will be used as the amounts. The CPF FM ADD ADJ GC formula determines whether the employee (payee) is eligible for CPF adjustment using the following elements:

  • The new limit is calculated based on current earnings. Both the old limit and the new limit variables default to 999,999,999,999 - (no limit).

  • The old limit is calculated based on last year's earnings.

  • If additional wages for the current year exceed the new limit and the new limit is less than the old limit, the employer can claim a refund from the CPF Board. The message Additional CPF Refund due informs you of this.

  • If their current year additional wages exceeded the old limit and the old limit was less than the new limit, additional CPF needs to be calculated. The historical rule CPF HR ADD ADJUST, using formula CPF FM ADD ADJ SEG calculates the adjustments (total CPF and payee CPF) for the year.

Calculating CPF Adjustments

If their current year additional wages exceeded the old limit and the old limit was less than the new limit, additional CPF needs to be calculated. The historical rule CPF HR ADD ADJUST, using formula CPF FM ADD ADJ SEG calculates the adjustments (total CPF and payee CPF) for the year as follows:

  • The processing period should be going back from the end date of the previous month, to 01/01 (1st January) of the current year, based on period end date. (Generally, it will start from 30/11, that is, 30th November, but for terminating employees, it will be a different month.)

  • The historical rule returns the following fields for use in the calculation — CPF ADD WAGES YTD (additional wages year-to-date accumulator), CPF ADD WAGES SEG (additional wages segment accumulator), CPF VR RT PCT ADD (employer percent variable), CPF VR RT RPCT ADD, (employee percent variable).

  • Processing of the historical rule stops when CPF ADD WAGES YTD are less than or equal to the old limit.

  • The formula CPF FM ADD ADJ SEG executed for each segment recalculates the additional CPF using the original rate applicable in each month, but based on the new limit. The difference between the original CPF amounts and the recalculated CPF amounts are returned in variables.

Calculating Additional CPF Adjustments in the Segment

The formula CPF FM ADD ADJ SEG calculates the additional CPF adjustment in the segment, which is called by the historical rule CPF HR ADD ADJUST.

This formula is executed for each segment returned by the historical rule. It recalculates additional CPF using the original rate, but based on the new limit. The difference between the original CPF amounts and the recalculated CPF amounts are returned in variables (Extra Emplr CPF and Extra Ee CPF). The processing is as follows:

  • If there were additional wages included in the segment and CPF was not calculated on them, the extra CPF that should have been taken is calculated.

  • If you hit the limit this month, just the CPF on wages up to the limit is calculated.

  • The CPF is calculated using the rates that were stored during the original calculation.

Method to Estimated Additional Wage Ceiling

There are two methods of calculating the additional wage limit for CPF contribution for the year (as of September 1, 2011):

  • The user can select the option based on the business need. The user decides the logic for the ordinary wages limit calculation for the current year, which is used to calculate the additional wage limit to CPF contribution.

    The user can select a Variable CPF VR CALC OPTION, which holds the user option to choose the logic of an ordinary wage limit calculation. The additional wage limit is defined by subtracting the option (1 or 2) from the Total CPF Ceiling. The options are:

    • Option 1: CPF VR CALC OPTION = 1. Previous year’s CPF contributed Ordinary wage YTD value. This is the default option.

    • Option 2: CPF VR CALC OPTION = 2. Current year’s Ordinary wage CPF contribution YTD plus the Current month Ordinary wage limit projecting for the remaining months of the current year.

    • Option 3: CPF VR CALC OPTION = 3. (As of year 2012) Actual current year’s Ordinary wage CPF contribution YTD. Set the variable’s value to 3 to use the actual current year’s Ordinary wage CPF contribution YTD as a ordinary wage limit while calculating the current year additional wage limit.

    For New Hire, Turning PR, and Terminated employees, as well as during the year end (December) process, the system uses the actual Current year Ordinary wage CPF contribution YTD value. The system calculates the additional wage limit using this formula:

    Total CPF Ceiling – (Current year Ordinary wage CPF contribution YTD) = Additional wage Limit

  • Allow the user to override the ordinary wage limit calculated using the above logics at pay entity, pay group, and payee levels, giving the user flexibility to maintain the employee’s ordinary wage estimation for the year.

    A variable CPF VR EE OW EST can be used to hold the user maintained employee’s estimated ordinary wage.

    As delivered, this variable can be overridden at pay entity, pay group and payee levels, which provides the flexibility to maintain the employee’s ordinary wage estimation. Users can leave the variable unaltered if they want to use the system-calculated ordinary wages limit to calculate the addition wage limit to CPF contribution.

    Note:

    For this method, system does not take into account the user maintained estimated ordinary wage limit for terminated employees and during the year end process.

Storing Additional Wage History

The system stores the Additional wages paid out for each month, the amount contributed to CPF based on the additional wage limit, and the rates applied thereon to calculate the additional CPF.

The following records hold the history data:

  • GPSG_CPF_AW_HIS

  • GPSG_CPF_AWH_VW

This additional wage history data can be used while doing the additional CPF re-adjustment for terminations and year end processing.

If there is a shortfall in the additional wage CPF contribution for terminations and year end processing, the system will calculate the CPF by using the appropriate rates instead of using the current month rate.

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