Wage Credit Scheme (WCS)

In Budget 2013, the Wage Credit Scheme was introduced as a three-year Scheme under which the Government co-funded 40% of the wage increases given to Singapore Citizen employees earning a gross monthly wage of not more than $4,000 over the period 2013 to 2015.

In Budget 2015, the Scheme was extended for two more years, i.e. 2016 and 2017. Wage increases given to Singapore Citizen employees earning a gross monthly wage of not more than $4,000 in 2016 and 2017 were co-funded at 20% instead of 40%. In addition, gross monthly wage increases (at least $50) previously given in 2015 and 2016 by the same employer were co-funded at 20% if they were sustained in 2016 and 2017.

In Budget 2018, the WCS was further extended for three more years, i.e. 2018, 2019 and 2020, to support businesses embarking on transformation efforts and encourage sharing of productivity gains with workers. Government co-funding was maintained at 20% in 2018. Subsequently, the co-funding ratio stepped down to 15% in 2019 and 10% in 2020.

In addition, gross monthly wage increases (at least $50) given in 2017, 2018 and 2019 by the same employer would continue to be co-funded at their respective level of co-funding if they are sustained in 2018, 2019 and 2020.

In Budget 2020, the government co-funding ratios for wage increases in 2019 and 2020 were raised from the current 15% and 10%, to 20% and 15% respectively. The qualifying gross wage ceiling was also raised to $5,000 for both years, up from the current $4,000.

During this period of economic restructuring, businesses could face a tight labour market with rising wages. Through the Scheme, the Government provides businesses with co-funding support for wage increases made to their employees. This would allow businesses to free up resources to invest in productivity, and to share productivity gains with their employees. 

In Budget 2021, the WCS was further extended by one year for wage increases given in 2021. Gross monthly wage increases (at least $50) previously given in 2019 and 2020 by the same employer will continue to be co-funded at the respective levels of co-funding if they are sustained in 2020 and 2021.

Employers qualify for Wage Credits if they fulfil the following:

1. Gave at least a $50 increase in gross monthly wage to Singapore Citizen employees earning up to the Gross Monthly Wage ceiling*;
2. Made CPF contributions for these employees for at least three months** in the year of the wage increase ("qualifying year"); and
3. The employees who received the wage increase must have received CPF contributions for at least three months with one employer in the preceding year.

*As announced in Budget 2020, the qualifying gross wage ceiling was raised from $4,000 to $5,000 for 2019 and 2020.

**The three months minimum employment duration need not be continuous.

Please refer to Wage Credit Scheme website / Qualifying Conditions.

The WCS was extended to help firms cope with near-term cost pressures as they embark on transformation efforts, and to encourage employers to share productivity gains with workers.

Government co-funding was maintained at 20% in 2018. Subsequently, the co-funding ratio stepped down to 15% in 2019 and 10% in 2020. It was then raised to 20% and 15% for 2019 and 2020 respectively as announced in Budget 2020.

In addition, gross monthly wage increases (at least $50) given in 2017, 2018 and 2019 by the same employer would continue to be co-funded at their respective level of co-funding if they were sustained in 2018, 2019 and 2020.

In Budget 2021, the co-funding ratio was maintained at 15%, and the gross monthly wage increases (at least $50) previously given in 2019 and 2020 by the same employer will continue to be co-funded if they are sustained in 2020 and 2021.

The Wage Credit Scheme aims to provide transitional support to help businesses cope with near-term pressures as they embark on transformation efforts. It is not a permanent Scheme.

The wages are derived from the compulsory CPF contributions that the employer makes for the employee.

Where there are irregular or significant changes to the CPF contributions made, IRAS may carry out investigations before or after the payouts, to check on the authenticity and correctness of any employee and the wages. Any attempt by the employer to abuse the Scheme to receive Wage Credit payout or to obtain excessive payout will be dealt with seriously.

Wages are determined by the market. It is ultimately for the employers to decide how much pay increase, if any, to give, and to consider the sustainability of the increased wages in subsequent years.

A 40% co-funding for wage increases given from 2013 to 2015 was to provide significant help to employers, while ensuring that they bear a sufficiently large portion of the increase in the long term after the Scheme ended.

The co-funding was reduced to 20% from 2016 to 2019 and further tapered to 15% in 2020 and 2021 to phase out the wage support gradually.

Wage Credit is a cash grant to employers who meet the Scheme's qualifying criteria. It is not paid pursuant to any legislation or in connection with any legal obligation of the Government, and hence no employer has an absolute right to any cash payment under the Scheme.

Under the Scheme, the larger proportion of the wage increase is borne by the employer to ensure sustainability of the increased wage in subsequent years. We encourage businesses to take advantage of the suite of productivity measures offered by the Government to improve their productivity. The Wage Credit payouts help businesses upgrade and retain their workers before their productivity investments take off. This would help businesses ensure that the wage increases given to their employees are sustainable over the longer term.

Consistent with the flexible wage system, employers can choose whether to increase wages through the basic or variable components of salary, or both. Businesses, especially SMEs, welcome the flexibility as they practise diverse compensation approaches.

With the cap at a wage level of $5,000 the scheme benefits the majority of the lower and middle income group of Singapore Citizens.

Yes, provided the increase in the gross monthly wage from 2020 to 2021 was at least $50.

His gross monthly wage will be calculated from the total wages that you paid him in 2021 divided by 4, which is the number of calendar months in which his CPF contributions were made by you in 2021. If there is any increase, of at least $50, in the gross monthly wage over his gross monthly wage in 2020, you will receive Wage Credit for the qualifying year 2021 (to be paid in Mar 2022 based on 15% of his increase in gross monthly wage), for the 4 months.

No, your company will not qualify for Wage Credit in qualifying years 2020 and 2021 as the employee was employed by your company for less than three months in 2020 and less than three months in 2021.

The highest of the employee's previous gross monthly wages will be used to compute the Wage Credit, which in this case is $2,100 under employer B.

Wage Credit for QY2021:
Mar 2022 Payout = 15% of ($2,500 - $2,100) X 11 months = $660

The bonus will be reflected in the employee's gross monthly wage for 2021, i.e. the year in which the payment was made.

Wage Credit is computed based on the increase in the gross monthly wage. For hourly-rated employee, the gross monthly wage has to take into account the hourly wage and the actual number of hours worked. Hence even if the hourly wage might have increased, there might not be an increase in the gross monthly wage if the employee has chosen to work fewer hours each month. 

No, because the $300 gross monthly wage increase was given by a different employer. There was no sustained wage increase given by you.

Yes, all part-time, hourly rated, contract and full-time employees are covered by the Scheme, as long as they are paid CPF contributions by their employer.

No. The following individuals will not qualify as employees under the Wage Credit Scheme:

- Sole proprietors and partners of general partnerships/ limited liability partnerships/ limited partnerships.

- Employees who are both shareholders and directors (as defined in Section 4(1) of the Companies Act) of the company they are employed in, or employees who are both members and directors in the case of a company limited by guarantee.

- Self-employed individuals including but not limited to commission agents, taxi-drivers, owners of professional practices.

The Wage Credit Scheme aims to encourage employers to share productivity gains with their employees. As the individuals listed above are also owners/ members/ directors of the company or business, they are not considered employees for the purpose of the Wage Credit Scheme.

You will be a new hire with no previous employment to consider when computing the preceding year's gross monthly wage. Hence, no Wage Credit can be derived in your first year of employment with the firm.

Yes, you will be able to qualify for Wage Credit based on the increase in the gross monthly wage over his previous year's gross monthly wage, even though his previous employer was on the employer exclusion list.

The Government recognizes that there will be job switching during the qualifying years period. Employers hiring new employees will benefit from the Scheme in the year of hire as long as the employee had worked for at least three calendar months with the same employer (need not be you) in the previous year, and the new employer pays him a gross monthly wage of at least $50 more than his previous employer in the previous year. This wage increase will be computed automatically based on the employee's CPF contribution records, and Wage Credit will be paid out to the employer if all conditions of the Scheme are met.

Yes, you will qualify for Wage Credit in qualifying year 2021 based on the wage increase you gave the employee in 2021 over 2019. This is provided that the employee had worked with you for at least three calendar months in 2019 and 2021 and did not seek active employment while on no-pay leave.

The payout will be given to the employer who has made the CPF contribution for the said employee. The same applies to any other employment arrangements. The payout will only be given to the employer who has made the CPF contribution based on the CPFB's record.

So long as your company is not on the employer exclusion list, you may appeal for Wage Credit for your Singaporean employees who are posted to an overseas branch or seconded overseas, even though the company does not have to pay CPF contributions for these employees.

Yes, an employer may qualify for both SEC and WCS for an employee. The two Schemes serve different purposes. The SEC Scheme provides businesses with support to hire older Singaporean workers while the WCS supports businesses embarking on transformation efforts and encourage sharing of productivity gains with workers.

Yes, public companies limited by guarantee, societies and charities and institutions of a public character are eligible for the Scheme if they make CPF contributions for their employees.

Yes, if they are not listed in the exclusion list.

Yes, as long as the employer had made CPF contributions to the employee for the wages paid to the employee, and the rest of the eligibility criteria are satisfied, the employer will qualify for Wage Credit for this employee.

The gross monthly wage and the Wage Credit for the qualifying year 2021 can only be computed after the end of the year 2021, and the payout will only be disbursed to the registered business entity in Mar 2022. If your business entity had already been deregistered in Mar 2022, it will not receive the WCS payout.

The Wage Credit is paid to the employer registered with CPF Board, and is taxable.

If the third-party contractor is the registered employer, he will receive the WCS payout. Whether the Wage Credit is to be shared between you and the third-party contractor is a private arrangement between both parties.

If the contractor transfers part or all of the Wage Credit to you, the amount received by you would correspondingly reduce your manpower cost allowed for tax deduction.

No. The gross monthly wage is computed based on the CPF contributions you make for the employee.

As per CPF requirements, CPF contributions for each month are due at the end of each month. However, employers have a grace period of 14 days to pay CPF contributions after the end of the month. If the 14th day falls on a Saturday, Sunday or Public Holiday, the grace period will be extended to the next working day.

Employers should thus ensure that all CPF contributions on wages are paid by the 14th of the following month.

For each qualifying year, the deadline for late contributions/adjustments in relation to wages paid in the qualifying year is 14 Jan of the subsequent year. If 14 Jan falls on a Saturday, Sunday or Public Holiday, the deadline will be extended to the next working day. All late contributions/adjustments paid after this deadline will not be used in the computation of Wage Credit. The usual penalties apply to late CPF contributions.

For employers who have a GIRO bank account with IRAS (for Income Tax or GST), or have registered with PayNow Corporate [by linking the organisation’s UEN (without suffix) to the bank account], their Wage Credit will be credited directly into the account regardless of the amount.

The Wage Credit payout is a government grant that co-funds wage increases. Hence, it is considered a revenue that is taxable in the hands of the employers.

The payouts will be taxed in the relevant Year of Assessment corresponding to the year you received the payouts. Payouts may be used to offset any of your outstanding tax.

Individuals (including sole-proprietors) and partnerships are not required to declare the Wage Credit Scheme payout received in their income tax returns (Form B/B1 or Form P) as this will be automatically included by IRAS in their tax assessment for the relevant YA.

Companies are however, required to declare the Wage Credit Scheme payout received in their income tax return (Form C/Form C-S) for the relevant YA.

If the UEN of the business is unchanged, Wage Credit will automatically be paid out to the same UEN. If the UEN of the business changes, the business can appeal to IRAS to amalgamate the records of the old UEN with the new UEN. The employer may submit an appeal and it will be considered on a case-by-case basis, to establish if there is indeed a transfer of rights and obligations.