Incidence of Late Payment of Employer CPF Contributions
Ministry of ManpowerSpeakers
Summary
This question concerns the 69% increase in CPF late payments from 2014 to 2016, with Assoc Prof Daniel Goh Pei Siong inquiring about underlying causes and the adequacy of existing penalties and educational measures. Minister for Manpower Lim Swee Say attributed the rise to cash flow issues and errors, but noted that 2014 policy changes introduced higher fines, interest charges, and potential jail terms to deter non-compliance. These deterrents are complemented by the Workright initiative, which significantly increased proactive inspections to over 5,000 annually while providing educational resources and heartland mobile clinics to thousands of employers. In 2016, enforcement resulted in 3,233 convictions, yet overall recovery improved as the percentage of employers failing to settle arrears within a month of the grace period dropped to 1.6%. The Minister emphasized that the government will continue balancing strict enforcement with proactive outreach to ensure that all employees receive their rightful CPF contributions in a timely manner.
Transcript
53 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.
Mr Lim Swee Say: 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.