If your terminated employee has received a Bonus before this year, and you are seeing extra CPF contributions in his resignation month. Then, the system has rebalanced the Maximum Additional Wage Limit. Please refer to the scenarios below:
Employee is below the age of 55 in the year 2025
Bonus received in January: S$50,000
Employee basic salary: S$8000
Employee resigned: May 2025
In January 2025, the employee has not resigned. The system assumes the employee will work for the whole year. The system caps the Additional Wage at S$13,200 in January. Below is the contribution breakdown:
Additional CPF contribution
Employee: 13,200 X 20% = 2640
Employer: 13,200 X 17% = 2244
When the employee resigns in May, the system performs a rebalancing as follows:
102,000 - ( 7400 X 5 months)
=65,000
Note: 7400 is the maximum Ordinary Wage capping for Ordinary CPF contribution for the year of 2025.
In summary, the Additional Wage capping increases when the employee resigns. In the termination month, the employee will need to contribute the short CPF contribution for January, which was capped at S$13,200 earlier.
CPF Additional Wage capping is necessary to prevent over-contribution of CPF for your employee when the employee works for the whole year. When the employee resigns, the system needs to perform a rebalancing to make out the correct CPF contributions in the employee's termination month.