Incidence of Late Payment of Employer CPF Contributions

Assoc Prof Daniel Goh Pei Siong asked the Minister for Manpower (a) what is the reason for the 69% increase in CPF arrears due to late payment from 2014 to 2016; (b) what penalties have been imposed on employers for late payment of CPF contributions; and (c) whether the education and deterrence components of CPF Board's approach to ensure timely payment of CPF contributions need to be enhanced.

The amount of Central Provident Fund (CPF) contributions recovered for employees due to late payment increased from $364.2 million in 2014 to $615.4 million in 2016. Over the same period, total CPF contributions also increased from $29.7 billion in 2014 to $35.9 billion in 2016. Therefore, as a percentage of total CPF contributions, late payments were 1.23% in 2014, and 1.72% in 2016. Reasons cited by employers for late payment include cash flow issues due to a difficult business environment and delays in collecting payments from customers, as well as errors made by the employers.

While there has been an increase in the number of late payments in recent years, CPF Board takes timely enforcement actions and imposes deterrent penalties to ensure speedy recovery of late payments. The percentage of employers who have not made good their late payments within one month after the expiry of the grace period for paying CPF contributions2 fell from 3% in 2014 to 1.6% in 2016.

Employers who make late payments have to make good the CPF contribution owing to employees, including a late payment interest charge of 18% per annum. Employers are also given composition fines provided they pay up before their Court hearing. Those who fail to pay up by the Court hearing will be convicted and subject to higher Court fines. In 2016, 3233 employers were convicted for late payment of CPF contributions.

With effect from 2014, CPF Board has increased general penalties to enhance the deterrent effect on employers of not complying with CPF obligations. This includes penalties for late payment of CPF contributions. For first-time offenders, the maximum fine was doubled to $5,000. A jail term of up to six months and 12 months was introduced, as well as a minimum fine of $1,000 and $2,000 for the first offence and subsequent offences respectively. For employers who made good their CPF arrears before their Court hearing, the maximum composition amount was doubled to $1,000.

The Ministry of Manpower and CPF Board have a proactive educational effort to complement the deterrent effect of its enforcement actions. We run the Workright initiative to raise awareness among employers and employees about their obligations under the CPF Act and Employment Act. WorkRight mobile clinics were deployed across 24 heartland locations last year, and WorkRight guidebooks and toolkits for self-rectification were distributed to employers. WorkRight also increased its proactive inspections 10-fold between 2012 and 2016 to more than 5,000 annually. Through its outreach, WorkRight has helped over 21,000 employers better understand their obligations.

We will continue our efforts to increase awareness among employers of their responsibility to meet their CPF obligations so as to ensure timely payment of CPF contributions for employees.