Loading...
Payroll Tax in Singapore: What Employers Pay in 2026
Key Takeaways
- Singapore has no single payroll tax; employers pay employer CPF contributions, the Skills Development Levy (SDL) and, for some work pass holders, the Foreign Worker Levy.
- Employer CPF is 17% of wages for employees aged 55 and below, on Ordinary Wages up to the S$8,000 monthly ceiling that applied from 1 January 2026.
- SDL is 0.25% of each employee’s monthly wages, between S$2 and S$11.25 per employee, and applies to foreigners too.
- Employers do not withhold monthly income tax from resident employees, but they report income annually and handle tax clearance for departing foreign staff.
- A Singapore Citizen aged 55 or below earning S$5,000 a month costs the employer about S$5,861 a month before benefits; verify every figure with CPF Board calculators.
Founders coming from other countries often ask how much “payroll tax” they need to budget when hiring in Singapore. The honest answer is that Singapore does not have a payroll tax in the usual sense. Instead, employers pay a small set of statutory contributions and levies that depend on each employee’s citizenship, age, pass type and wages.
Getting these right matters for two reasons: they add materially to the cost of every hire, and errors in them trigger CPF Board interest, MOM attention and year-end reporting problems. This guide explains each charge, shows a worked cost example and lists the mistakes we see most.
What Counts as Payroll Tax in Singapore?
Payroll tax in Singapore refers to the mandatory costs an employer pays because it employs staff. Unlike many countries, Singapore does not require employers to withhold monthly income tax from resident employees’ salaries. Employees file and pay their own income tax to the Inland Revenue Authority of Singapore (IRAS), based on the income their employer reports each year.
| Charge | Who it applies to | 2026 rate | Paid to |
|---|---|---|---|
| Employer CPF contribution | Singapore Citizens and Permanent Residents | 17% of wages for employees aged 55 and below, on Ordinary Wages up to S$8,000 a month | CPF Board |
| Skills Development Levy (SDL) | All employees, including foreigners | 0.25% of monthly wages, minimum S$2, maximum S$11.25 per employee | CPF Board, on behalf of SkillsFuture Singapore |
| Foreign Worker Levy | S Pass and Work Permit holders | Varies by pass type, sector and quota tier | Ministry of Manpower (MOM) |
Employment Pass holders attract SDL but neither CPF nor the Foreign Worker Levy. For definitions of every payroll term used here, see Singapore Payroll Terms: CPF, SDL, IR8A & AIS Guide.
How Much CPF Does an Employer Pay in 2026?
An employer pays 17% of wages for a Singapore Citizen or third-year Permanent Resident aged 55 and below, and deducts a further 20% from the employee’s pay, for a total of 37%. Three ceilings limit the wages subject to CPF in 2026.
Ordinary Wage ceiling. S$8,000 a month, up from S$7,400 in 2025. Monthly salary above this attracts no CPF.
Annual salary ceiling. S$102,000 a year across Ordinary and Additional Wages.
Additional Wage ceiling. S$102,000 minus the total Ordinary Wages subject to CPF in the year, which caps CPF on bonuses.
Rates fall for employees above 55, and first and second-year Permanent Residents contribute at graduated rates unless both parties opt for full rates. CPF contributions fall due by the 14th of the following month, and CPF Board charges interest on late payments. Our full guide to Employer CPF Contribution covers age bands in more detail, and Ultimate Guide To Setting Up CPF Payments with GIRO helps you avoid late payments.
How the Skills Development Levy Works
SDL funds workforce training through SkillsFuture Singapore. Employers pay 0.25% of each employee’s total monthly wages, with a minimum of S$2 and a maximum of S$11.25 per employee. The cap applies once monthly wages exceed S$4,500. You pay SDL together with CPF contributions, and it applies to every employee, including foreigners, part-timers and temporary staff. We explain the levy in depth in Mastering Skills Development Levy: Expert Guide.
How the Foreign Worker Levy Works
The Foreign Worker Levy applies to S Pass and Work Permit holders. MOM sets the monthly amount by pass type, sector and the proportion of foreign workers in your workforce, so two companies hiring the same role can pay different levies. The levy is payable even when the worker is on leave, and it stops only when the pass is cancelled. Our guide to How Foreign Worker Quota Works in Singapore explains how quota tiers affect cost. Check MOM’s levy calculator for current rates before budgeting.
What Does an Employee Really Cost? A Worked Example
The table shows illustrative monthly employer costs for a Singapore Citizen aged 55 and below in 2026.
| Monthly salary | Employer CPF (17%) | SDL | Total monthly employer cost |
|---|---|---|---|
| S$3,000 | S$510.00 | S$7.50 | S$3,517.50 |
| S$5,000 | S$850.00 | S$11.25 | S$5,861.25 |
| S$10,000 | S$1,360.00 (capped at S$8,000 OW) | S$11.25 | S$11,371.25 |
For the S$5,000 employee, the company also deducts S$1,000 of employee CPF from the salary, so the employee receives less than the headline figure. These figures exclude bonuses, benefits, insurance and leave costs, and CPF Board’s rounding rules may change the result by a few cents. Treat them as a planning guide only and confirm actual amounts with the CPF Board contribution calculator.
Employer Payroll Costs by Employee Type
The charges an employer pays depend on who the employee is. This summary shows which costs apply to each common category.
| Employee type | Employer CPF | SDL | Foreign Worker Levy |
|---|---|---|---|
| Singapore Citizen or third-year PR, aged 55 and below | Yes, 17% within ceilings | Yes | No |
| Singapore Citizen or PR above 55 | Yes, at lower age-band rates | Yes | No |
| First or second-year PR | Yes, at graduated rates unless full rates are chosen | Yes | No |
| Employment Pass holder | No | Yes | No |
| S Pass holder | No | Yes | Yes |
| Work Permit holder | No | Yes | Yes |
This is why two employees on the same salary can cost the company quite different amounts. Check the current age-band and graduated rates on the CPF Board website, and levy rates on MOM’s website, before you finalise an offer.
When Do Employers Deal With Income Tax on Salaries?
Employers handle income tax in three situations, even though they do not withhold it monthly from residents.
1. Annual reporting. Employers report every employee’s income through the Auto-Inclusion Scheme (AIS) or Form IR8A by 1 March each year. See IR8A Form: What Singapore Employers Need to Know.
2. Departing foreign employees. Employers file Form IR21 for foreign and Permanent Resident employees who stop working in Singapore or leave for an extended period, and withhold final payments until IRAS gives tax clearance.
3. Non-resident directors. Director’s fees paid to non-resident directors attract withholding tax.
If you pay yourself as a director, the choice between salary and dividends changes your CPF and tax position; we compare both in Salary vs Dividends: How Singapore Directors Pay Themselves.
Are Payroll Taxes Tax-Deductible for the Company?
Yes, in most cases. Salaries, statutory employer CPF contributions, SDL and the Foreign Worker Levy are business expenses that reduce your company’s chargeable income for corporate tax. The main exception is employer CPF paid above the amount the CPF Act requires, such as voluntary top-ups beyond statutory limits, which the company generally cannot deduct in full.
This matters at year end. A complete payroll record lets your accountant claim every deductible employment cost in the tax computation, and it protects those claims if IRAS asks questions. We explain how deductions feed your tax bill in Singapore Corporate Tax Rate 2026.
How to Budget Payroll Costs for 2027
1. Start from gross salary. List each role, salary and expected start date.
2. Add employer CPF by age band. Apply 17% for employees aged 55 and below, lower rates above, within the S$8,000 ceiling.
3. Add SDL for everyone. Budget up to S$11.25 per employee per month.
4. Add levies for S Pass and Work Permit holders. Use MOM’s current rates and your quota tier.
5. Add benefits and bonuses. Include medical, insurance and bonuses, remembering the Additional Wage ceiling.
6. Review rate changes. CPF rates for senior workers change again on 1 January 2027; see CPF Contribution Changes 2027: What Employers Must Do.
What Businesses Get Wrong About Payroll Taxes
Using last year’s CPF ceiling. Payroll systems still capping Ordinary Wages at S$7,400 underpay CPF for higher earners.
Missing age band changes. Employees who cross 55, 60, 65 or 70 move to new rates from the month after their birthday month.
Forgetting SDL on foreigners. SDL applies to all employees, not only CPF members.
Ignoring the Additional Wage ceiling. Large bonuses can exceed it, and CPF on the excess is not payable.
Budgeting on salary alone. Hiring plans that ignore CPF, SDL and levies understate the cost of a CPF-eligible hire by up to about 17%.
In practice, what we see with most SMEs is that payroll cost errors come from outdated settings rather than wrong arithmetic. Many of the same issues appear in Payroll Errors That Trigger IRAS or MOM Penalties in Singapore.
Which Payroll Reports Should You Keep?
A good payroll report pack lets you prove every payroll tax payment and reconcile it to your accounts. Keep these each month and each year:
- Monthly payroll summary. Gross pay, employee CPF deductions, net pay and employer costs for every employee.
- CPF and SDL submission summary. The amounts submitted to CPF Board and the payment confirmation.
- Foreign Worker Levy statements. MOM’s monthly levy bills for S Pass and Work Permit holders.
- Payroll-to-ledger reconciliation. A short schedule agreeing payroll totals to the salary, CPF and levy accounts in your books.
- Annual employee income summary. The figures behind your AIS or Form IR8A submission, plus any IR21 filings.
IRAS expects you to keep records supporting your tax filings for five years, so store these reports where they stay retrievable after staff changes.
How to Choose a Payroll Vendor or Payroll Tax Service
If you outsource, or buy payroll software, judge payroll vendors on what reduces your compliance risk, not only on price:
1. Singapore rate updates. The vendor should update CPF ceilings, age bands and SDL rules before each change takes effect.
2. Direct submissions. Check that it submits CPF and SDL and produces AIS files without manual re-keying.
3. Reconciliation support. Payroll should reconcile to your accounting system every month.
4. Data protection. Access controls and secure payslip delivery protect employee data under the Personal Data Protection Act 2012.
5. A person to call. When a CPF query or IR21 case comes up, you need someone who understands Singapore payroll.
We compare the main options in Payroll Outsourcing Singapore: In-House vs Outsourced.
How Grof helps you manage payroll taxes without the hassle
Payroll tax compliance is a settings question before it is a calculation question. Most errors come from an outdated wage ceiling, a missed age band change or a levy nobody budgeted. Grof runs payroll with rate tables updated before each change takes effect, so every pay run is right the first time.
In practice, that looks like:
- Calculating CPF and SDL correctly every month. Age bands, PR graduated rates and wage ceilings apply automatically.
- Submitting on time. CPF and SDL reach CPF Board by the 14th, avoiding late payment interest.
- Budgeting new hires accurately. We show you the full employer cost of a role before you make an offer.
- Handling year-end reporting. AIS and IR21 filings run from the same payroll data.
- Keeping you ahead of changes. The January 2027 CPF changes go into your payroll before the first 2027 pay run.
Prefer to hand payroll off entirely? Grof’s payroll outsourcing service takes the whole cycle off your desk: monthly payroll processing, itemised payslips, CPF and SDL submissions, Foreign Worker Levy tracking, and year-end AIS and IR21 filings. A Singapore payroll team runs it and reconciles it to your accounts every month, so you get accurate payroll taxes without hiring in-house payroll staff or maintaining payroll software yourself.
If you want payroll taxes calculated, paid and filed properly every month, explore Grof’s payroll outsourcing service.
