Rates of Medisave contributions and Central Provident Fund (CPF) contributions for older employees by employers were increased in January 2015 by 1 to 2 percentage points. Also hiked was the salary ceiling related to mandatory CPF contributions. To allow businesses to cope with the increase in costs caused by these changes, the Singapore government announced that it will provide them with a wage offset or subsidy in the form of Temporary Employment Credit (TEC). TEC, like the Special Employment Credit (SEC), is a temporary respite for companies.
How Much TEC Is Paid?
Initially, the scheme was only introduced for 1 year – 2015 – and the rate of TEC was set at 0.5%. However, after reviewing the market conditions, the scheme was extended for a period of 3 years from 2015 to 2017, and the wage offset rates were also revised. TEC rates for the 3-year period are as given below:
|Year||TEC (% of monthly wages)||TEC annual limit for each eligible employee||CPF salary ceiling|
|2015||1%||S$850||S$5,000 per month|
|2016||1%||S$1,020||S$6,000 per month|
|2017||0.5%||S$510||S$6,000 per month|
Eligibility Criteria For TEC:
Companies that employ Singapore citizens and Singapore Permanent Resident (PR), and contribute towards their CPF every month, are eligible to get TEC. For employees with a salary of more than S$6,000 per month, the government will not provide the subsidy.
How Is TEC Paid?
As an employer, you do not have to apply for a TEC payout. The CPF Board, based on your CPF contributions, will determine whether you are eligible or not, and transfer the payments to you accordingly. The TEC payouts are taxable because it is considered as revenue. TEC is disbursed twice a year – in October and April. There is a 4-month lag in the payments. For example, TEC for salaries paid between January and June 2016 will be given out in October 2016, while the TEC for wages paid between July and December 2016 will be given out in April 2017.
The TEC subsidy will be deposited to the employer’s bank account/s that is registered with the CPF Board, if the company is equipped with GIRO payment. If GIRO arrangement is not available, the employer can either set up a new arrangement or accept cheque, which will be sent to the registered company address.
Temporary Employment Credit, as the name specifies, is a short-term scheme introduced to help companies offset higher costs in CPF contributions. Because of this, once the economy returns to good growth and companies can afford the higher costs on their own, the scheme will be withdrawn. As of now, the deadline for the TEC is December 31, 2017. The government has also introduced Wage Credit Scheme and Special Employment Credit schemes to help businesses cope with changes in the labour market.