It’s common knowledge that there is a salary ceiling of \$4,500 for both employer and employee CPF contributions.

If you earn more than \$4,500, you only need to contribute \$900 (=20% x \$4,500) to your CPF.

Even if you make \$20k a month, you still contribute \$900. Your employer contributes \$652.50 (=14.5% x \$4,500). The rates are lower if you are above 50 years old.

But do you know there’s also a ceiling for bonuses?

It is known as Additional Wage Ceiling, or AW Ceiling in short.

The key idea is this: Your total wages subject to CPF cannot exceed \$76,500 for the entire year.

This means: If you earn more than \$4,500 per month and receive a huge bonus for 2009, only \$22,500 of that bonus is subject to CPF.

Why? Because your ordinary wages’ CPF already amounts to \$4,500 x 12 = \$54,000. So this leaves \$76,500 – \$54,000 = \$22,500 for your bonus’ CPF contribution.

When did you first hit the \$76,500 limit?

Share.

1. Hitting the limit is a function of how many months of your bonus did you receive and your salary.

The \$22,500 figure is based on 5-month of \$4,500 principle. If you work in an industry with 12-month bonus of \$3,000, you will hit the limit. Howevever, if your work only has a 2-month bonus (including AWS), but your salary is \$10,000, you will still be able to stay within the limit. This subtlety can make a difference to your CPF portion of your salary, when trying to assess the total package.

I first knew this when I became a self-employed contractor and wanted to mimic CPF contributions as the policy. Realized I didn’t get the best deal when I started computing!

2. Hi Kevin,

Care to share more on this aspect? Thanks!