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Singapore
CPF contribution
rate changes
On 11 October 2000, the
Government announced that the
employer's CPF contribution rate is to
increase by four percentage points to
16% with effect from 1 January 2001.
Apart from additional payroll cost, the
likely impacts to benefit strategies are
as follows:
- Employers who have been
compensating the employees on CPF
cuts probably need to review the
levels of compensation.
- Employers who have used the
CPF cuts to finance incentive bonuses
should consider reviewing this
strategy given the reduced amounts
available.
- For companies who hire
foreigners on local terms, the
discrepancy between compensation
for foreigners and that for local
employees widens further.
- For companies who offer
retirement plans which integrate with
the CPF, both employees and employers are generally no better nor
worse off in terms of cost-benefit
issues. However, for companies with
defined benefit plans, the CPF rate
revision would increase the companies
cash outflow because contribution to
CPF is immediately vested.
- For companies who offer
retirement plans which do not
integrate with the CPF, the CPF
revision would mean higher benefit to
the employee and thus higher cost to
the employers.
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