PAYROLL & CPF GUIDE · UPDATED OCTOBER 2026
CPF on a year-end bonus: 17% of what the salary leaves under S$102,000, not 17% of the bonus
A 14-person company pays its AWS and bonuses with the December 2026 payroll. Four of its employees share S$52,000. At the 17% employer rate that looks like S$8,840 of CPF. The company actually owes S$3,850, because CPF on a bonus is capped by a ceiling that the year’s salary has already mostly used. This guide shows how that ceiling is worked out, why it is only an estimate until December or an employee’s last month, what a resignation does to it, and which year each bonus belongs to for CPF, for the employee’s tax and for the company’s.
THE DECEMBER PAYROLL
S$52,000 of bonuses, S$3,850 of employer CPF.
The company’s contracts give one month’s salary as an AWS, pro-rated for part of a year, and the board adds a performance bonus each December. Nobody had additional wages earlier in 2026. All four are Singapore citizens on the full 2026 rates: 17% employer and 20% employee up to age 55, 16% and 18% above 55 to 60.
| 2026, S$ | Salary subject to CPF | Room left (AW ceiling) | AWS + bonus | Attracting CPF | Employer CPF | Employee CPF |
|---|---|---|---|---|---|---|
| Operations manager, 41S$9,500 a month · AWS S$9,500 + bonus S$15,000 | 96,000 | 6,000 | 24,500 | 6,000 | 1,020 | 1,200 |
| Senior engineer, 57S$8,500 a month · AWS S$8,500 + bonus S$8,000 | 96,000 | 6,000 | 16,500 | 6,000 | 960 | 1,080 |
| Accounts executive, 29S$4,200 a month · AWS S$4,200 + bonus S$2,800 | 50,400 | 51,600 | 7,000 | 7,000 | 1,190 | 1,400 |
| Sales executive, 33, joined 1 JulyS$5,000 a month · AWS S$2,500 + bonus S$1,500 | 30,000 | 72,000 | 4,000 | 4,000 | 680 | 800 |
| Total | 52,000 | 3,850 | 4,480 |
The two senior employees earn more than S$8,000 a month, so S$96,000 of salary counted and S$6,000 of room was left for the whole year’s bonuses. Above that, nothing: S$18,500 of the operations manager’s bonus and S$10,500 of the engineer’s carry no CPF at all. The accounts executive’s room is S$51,600, so her whole bonus attracts CPF. The sales executive joined in July: only six months of salary count, which leaves her S$72,000 of room, the most of anyone. The ceiling is per employer, so what she earned elsewhere before July does not reduce it.
Last year’s bonus may have used this year’s room.
The ceiling belongs to the year a bonus is paid, not the year it rewards. A company that paid its 2025 bonuses in March 2026 has already spent 2026’s room for its senior staff. If the operations manager had received S$6,000 or more in March, his December AWS and bonus would carry no CPF at all. The same rule works forward: a 2026 bonus paid in February 2027 takes its room from 2027.
AN ESTIMATE UNTIL IT IS NOT
A resignation reopens the ceiling.
A bonus paid during the year is contributed on an estimate: the ceiling assumes a full year’s salary. CPF Board’s rule is to recalculate it on the salary actually paid in December, or in the employee’s last month if that comes first. For someone who leaves part-way through, fewer months of salary count, the room grows, and CPF becomes due on part of a bonus that was free of it in March.
Take a designer, under 55, on S$10,000 a month. Her 2025 bonus of S$20,000 was paid in March 2026, and CPF was paid on the S$6,000 the estimated ceiling allowed. Then she resigns.
Stays to December
S$0
Ceiling S$6,000; CPF due on another S$0
Last month November
S$2,960
Ceiling S$14,000; CPF due on another S$8,000: S$1,360 employer, S$1,600 employee
Last month June
S$5,180
Ceiling S$54,000; CPF due on another S$14,000: S$2,380 employer, S$2,800 employee
The shortfall is paid with the last month’s contributions, and it includes the employee’s share, so it has to be worked out before the final payslip is run, not after. A bonus paid after someone has left is tested against the same recalculated ceiling. The movement runs both ways during the year, too. A pay cut raises the ceiling: in one of CPF Board’s own examples, a salary that fell from S$8,000 to S$5,000 in July lifted it from S$6,000 to S$24,000, and the employer owed CPF on another S$18,000 of bonuses already paid. A pay rise lowers it, and what was contributed above the new ceiling is refunded on application.
THREE CALENDARS
A 2026 bonus paid in February 2027 belongs to different years.
Many companies decide bonuses in December and pay them once the year’s accounts are drafted. CPF, the employee’s income tax and the company’s tax deduction each date that bonus differently, and the employee’s tax date turns on whether the bonus is contractual.
| Purpose | Contractual AWS for 2026, paid February 2027 | Discretionary bonus for 2026, paid February 2027 |
|---|---|---|
| CPF | The 2027 Additional Wage ceiling, worked out on 2027's salary. CPF follows the date the bonus is due and payable, not the year it rewards. | The same: the 2027 ceiling. |
| Employee's income tax | Year of Assessment 2027, as 2026 income. A contractual bonus is taxed in the year the employee is entitled to it, usually the year the work was done. | Year of Assessment 2028, as 2027 income. A bonus the employer could still withdraw is taxed when it is paid. |
| Employment income return | In the 2026 IR8A, due by 1 March 2027. | In the 2027 IR8A, due by 1 March 2028. |
| Company's tax deduction | The year ending 31 December 2026, if the amount is accrued in those accounts and paid within a year. | The same, if the amount was decided and accrued by 31 December. A vague provision is not deductible until it is paid. |
The company’s side is the one it controls. IRAS allows the deduction in the year the bonus is accrued when the amount is properly ascertained by the year end and the bonus is typically paid within a year. A board decision in December that fixes the pool, and an accrual in the 2026 accounts, does that. A line that says “bonus provision” with no decision behind it waits until it is paid.
OWED OR GIVEN
The AWS is whatever the contract says it is.
MOM is plain that neither the AWS nor a bonus is required by law. Each is owed only if the employment contract, the handbook or a collective agreement provides for it, and the same terms decide whether a new joiner’s AWS is pro-rated and whether someone who resigns before the payout date receives one. A contract that says “one month’s salary, pro-rated for incomplete service” and “payable only to employees in service on the payment date” answers both questions before they are asked. MOM also says an employer can negotiate a lower AWS if business results are exceptionally poor for the year.
For the size of the pool, the reference is the National Wages Council. Its 2026/2027 guidelines, accepted by the Government on 19 October 2026 and covering 1 December 2026 to 30 November 2027, call on employers to take a “positive-leaning posture” on wage increases and variable payments, calibrated to their own business performance and prospects.
IN ORDER
Six steps for the December bonus run.
Separate what is owed from what is decided
Read the contracts and the handbook before the board meets. An AWS written into a contract is owed, pro-rated or not as the contract says. A performance bonus is usually discretionary. The difference decides which year the employee is taxed and whether a leaver is entitled to anything.
Total each person's 2026 salary subject to CPF
Each month's ordinary wages up to S$8,000, for the months they worked for you, plus any bonus or other additional wages already paid this year. Last year's bonus paid in January or March has already used part of this year's room.
Work out the room left, then the CPF
S$102,000 less the year's ordinary wages subject to CPF, less additional wages already paid. CPF is due on the December bonus up to that room, at the rates for the employee's age in December, and on none of it above.
Recalculate for anyone whose pay changed
A pay rise during the year lowers the ceiling and a pay cut raises it. Earlier bonuses were contributed on an estimate; December is when it is settled. Pay any shortfall with December's contributions. Apply to CPF Board for a refund of anything paid above the ceiling.
Pay December's CPF by 14 January
Contributions for December are due on 31 December. CPF Board may take enforcement action if they are not paid by 14 January 2027, and charges late payment interest of 1.5% a month, at least S$5, from the day after the due date.
Accrue it, minute it, report it
A bonus decided in December and paid in the new year belongs in the 2026 accounts as an accrual, with a board minute fixing the amount. Then report it in the right year's IR8A: by 1 March 2027 for 2026 income.
Common questions.
How is CPF calculated on a bonus in Singapore?
A bonus is an Additional Wage. CPF is payable on it at the employee's normal age-band rates, but only up to the Additional Wage ceiling: S$102,000 less the ordinary wages subject to CPF for the year, less any additional wages already paid that year. Ordinary wages count only up to S$8,000 a month in 2026, so for anyone earning S$8,000 or more all year the ceiling is S$6,000 and CPF on a larger bonus stops there. Below that salary, most bonuses attract CPF in full.
What is the Additional Wage ceiling for 2026?
S$102,000 minus the employee's total ordinary wages subject to CPF for 2026. It is applied per employee, per employer, per calendar year. An employee earning S$8,000 or more every month of 2026 has a ceiling of S$6,000. One earning S$4,200 a month has S$51,600. Someone who joined in July on S$5,000 has S$72,000, because only six months of salary count.
Is AWS (the 13th month bonus) compulsory in Singapore?
No. MOM says the Annual Wage Supplement is not required by law. It is owed only if the employment contract, the company handbook or a collective agreement provides for it, and whether it is pro-rated for part of a year, or paid to someone who leaves around the payout date, depends on those terms. MOM also notes an employer can negotiate a lower AWS if business results are exceptionally poor, and that an employer who paid no AWS before 26 August 1988 cannot pay an AWS of more than one month's salary.
Which year's ceiling applies to a bonus paid in January for last year?
The year it is paid. CPF Board's rule is that the ceiling follows the date the bonus is due and payable, so a 2026 bonus paid in February 2027 uses the 2027 ceiling, worked out on 2027's salary, and uses up part of 2027's room.
Do I pay more CPF on a bonus if the employee resigns?
Possibly. During the year the ceiling is an estimate based on a full year's salary. In the employee's last month you recalculate it on the salary actually paid, which is fewer months, so the ceiling rises and an earlier bonus that was mostly free of CPF may not be. The shortfall, both shares, is paid with the last month's contributions. A bonus paid after the employee has left is also tested against the recalculated ceiling.
When is my employee taxed on a year-end bonus?
It depends on whether the bonus is contractual. A contractual bonus, such as an AWS in the employment contract, is taxed in the year the employee is entitled to it, usually the year the work was done, even if it is paid the following February. A non-contractual bonus, which the employer could withdraw before payment, is generally taxed when it is paid. IRAS's own example: a discretionary 2024 bonus announced in December 2024 and paid on 1 February 2025 is taxed in Year of Assessment 2026.
Can the company deduct a bonus it pays after the year end?
Yes, in the year it is accrued, if the amount was properly ascertained by the year end and the bonus is paid within a year. IRAS does not allow a general provision whose amount is not fixed; that is deductible only when paid. The practical step is a board decision in December that fixes the pool or the individual amounts, and an accrual in that year's accounts.
Which CPF rates apply to a bonus when an employee changes age band?
The rates for the employee's age in the month the bonus is paid. If a recalculation later brings more of an earlier bonus into CPF, CPF Board's examples apply the rates of the month that bonus was paid, not the rates after the age change.
Official sources
The wage ceilings, the estimate-and-recalculate rule, the year a bonus’s ceiling belongs to and the leaver and pay-change mechanics as published by CPF Board, including its 2026 examples for computing the Additional Wage ceiling; the AWS rules from MOM; the tax timing of contractual and non-contractual bonuses and the deduction of accrued bonuses from IRAS. All checked on 21 October 2026. The company, its employees and every figure in its payroll are illustrative.
- CPF Board: What constitutes wages for CPF contributions (ordinary and additional wages, both ceilings)
- CPF Board: How to calculate the AW ceiling (with the 2026 worked examples, PDF)
- CPF Board: CPF on additional wages paid before the year end or the last month of employment
- CPF Board: Contribution rates from 1 January 2026 (PDF)
- MOM: Variable wage components (AWS, bonus, variable pay)
- MOM: Am I entitled to AWS and how is it calculated?
- IRAS: Employment income (salary, bonus, director's fee): contractual and non-contractual bonuses
- IRAS e-Tax Guide: Tax treatment of director's fees and bonuses from employment
- MOM: Government accepts the NWC Guidelines for 2026/2027
This guide provides general information, not accounting, tax, legal or employment advice. The company, its employees and their figures are illustrative. Whether a bonus is owed, how much of it attracts CPF and when it is taxed depend on the employment terms and each employee’s own facts; CPF, MOM and IRAS rules are as published on the date shown and change from time to time.
WRITTEN BY
Jacqueline May
Principal Accountant · Chartered Accountant (Singapore), in practice since 2008
Jacqueline is a Chartered Accountant (Singapore) and the Principal Accountant at Synergy Accounting, in practice since 2008. She works on corporate tax, GST and ACRA compliance for small and medium businesses — the filings, deadlines and judgement calls most owners would rather hand over. These guides are written from what she sees in practice.