You will be able to explain how your gross salary turns into take-home pay and CPF savings.
Your offer letter says one number. Your first payslip says a smaller one, and the gap can be a surprise when it lands. Some of that gap went to CPF, and if you only look at what reaches your bank account, you miss part of what you are actually paid.
This lesson walks through a Singapore payslip from the top line to the bottom one, and shows where CPF sits in your income. It applies to Singapore citizens and permanent residents, who are the people who pay into CPF. If you work here on a work pass, you do not contribute, and your gross pay and take-home pay will be much closer.
Start with gross pay: your salary before anything is taken out. That is the figure in your contract.
Your employee CPF contribution comes out of that gross figure. It is deducted before your pay reaches you, and it is why take-home pay is smaller than salary.
Your employer then pays a separate share of its own, on top of your salary. It does not come out of your gross pay. It appears on your payslip as the employer contribution, and it goes straight into your CPF accounts without passing through your bank account at all.
Both shares are split between your CPF accounts, mainly the Ordinary Account, the Special Account and MediSave. Module 5 covers what each account is for.
How much goes in depends on your age and your wages. The rates are lower for older workers, and there is a ceiling on the wages that attract CPF each month. The CPF Board changes the rates and the ceiling from time to time, so do not rely on a figure a friend quotes or one you read a few years ago. Check the current rates on the CPF Board website, cpf.gov.sg, which also has a contribution calculator.
Here is a payslip with figures made up for the example. They are invented to show the arithmetic and are not the current CPF rates. Your own payslip has your real figures.
Nadia's gross pay is S$4,000 a month. Her employee CPF of S$750 is deducted, so her take-home pay is S$4,000 minus S$750, which is S$3,250. Her employer pays a further S$650 into her CPF.
So each month S$750 plus S$650, a total of S$1,400, goes into Nadia's CPF accounts. What her employer actually spends on her is her S$4,000 salary plus the S$650 employer share, which comes to S$4,650.
Two other lines may appear. Many payslips show a small deduction for a community or self-help group fund, which comes out of take-home pay along with CPF. And notice what is usually not there: income tax. Singapore does not take income tax from your salary each month. IRAS assesses it once a year after you file, and the bill arrives later, so your take-home pay is not the same as money that is free to spend. Put aside something for that bill if you earn enough to pay tax, and check how much on the IRAS website.
It is easy to treat CPF as a tax, money that leaves and is not really yours. It is yours. Both shares sit in accounts in your name, earn interest, and pay for things you would otherwise fund in cash: a home, hospital bills, your retirement.
In Nadia's case, the S$1,400 a month is more than a third of her take-home pay. Over a year that is S$1,400 x 12, which is S$16,800 of saving she did not have to think about. When she builds her net worth statement, as in lesson 1.3, it shows up as a large part of what she owns.
The catch is that she cannot spend it freely. CPF has rules about what it can pay for and when, and most of it is locked until set ages. That is why it gets its own line on the net worth sheet.
The practical rule is to use each kind of money for the jobs it can do.
Plan your monthly spending from take-home pay. That is the money that pays rent, food, transport, bills and the emergency fund, and none of those can be paid from CPF. Your cash flow statement from lesson 1.4 already works from take-home figures for this reason.
Plan housing and retirement with CPF in mind. The Ordinary Account can go towards a home, and CPF LIFE turns your savings into a monthly income later in life. Leaving CPF out of these plans would make you save cash for costs CPF is designed to cover. Counting on it for things it cannot pay for leaves you short in a different way.
Healthcare sits in between. MediSave pays hospital bills and some insurance premiums, but many outpatient costs still come out of your pocket.
Get your latest payslip now, or download it from your employer's payroll system. Have it open beside you, because the next step uses the real figures from it.
From your payslip, write down gross pay, your CPF, your employer's CPF and take-home pay, and add the two CPF shares to see your full monthly saving into CPF.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).