Wage Credit Scheme for Employers

Know About Wage Credit Scheme

The Wage Credit Scheme (WCS) was introduced in the budget of 2013 and later was extended in the budget of 2015. This scheme is open only to employers.
Between 2013 and 2015, 40% of wage hikes were co-funded by the Singapore government. From 2016 to 2017, 20% of wage hikes were co-funded. These benefits were given to employees who are Singapore citizens who earn a gross monthly wage no more than S$4,000.

An announcement was made during the budget of 2018, stating the scheme would be extended for 3 more years (2018, 2019, and 2020). This was done to encourage firms making efforts to transform their business. This was also intended to encourage employees by sharing gains from productivity with them.
The government will co-fund 20% for 2018. This amount will reduce to 15% for 2019 and in 2020 the co-funding will further reduce to 10%. Otherwise the scheme remains unchanged.

Qualifying Criteria

Every employer who gives a wage hike to an employee who is a Singapore citizen qualifies (between 2013 and 2020). WCS will be given to the employer if their employees meet the following conditions:

  • They earn a gross monthly wage no more than S$4,000.
  • Their CPF contributions were made by one employer for a minimum of 3 months (does not have to be continuous). This should have been done in the year prior to the qualifying year.
  • They were on the payroll of the employer for a minimum of 3 months in a calendar year during the qualifying year. During this time the employer should have made at least 3 CPF contributions to the CPF account for the year.
  • The employer has provided a minimum gross wage increase of S$50.
  • The employer is not a business owner in the same firm, for instance, a partner, sole proprietor, or a director and shareholder of the company.

International firms, local government agencies, and companies not registered in Singapore won’t qualify for the scheme.

Additional Conditions to be Eligible

Employers won’t be eligible to receive payout if:

  • They don’t have significant trade or business as an entity.
  • From IRAS’ point of view, the firm provided incorrect or misleading details to IRAS to gain a payout or a larger payout.
  • From IRAS’ point of view, the employer, through fake, fraudulent, or contrived means, attempted to gain a payout or larger payout. This could have been done either by themselves or with the help of another.
  • During either the qualifying or preceding year, the employer was caught making contributions to CPF accounts of Singapore citizens who weren’t employed with the company at the time.

An employer won’t be eligible for a wage increase payout for a specific employee if:

  • The work they performed for the employer was not substantive.
  • As an employee, they have the power to make decisions for the business or they are involved in the management of the company.

Sometimes the wages an employer pays does not correspond with the nature or amount of activity by the employer during the set period. Then, according to IRAS, the employer should only receive a payout that corresponds to the nature or amount of activity performed.

If the wages paid by an employer to an employee are not commensurate to the work done by him/her, then the employer is eligible for an amount that the IRAS determines is equal to the increase in wages paid to the employee to make it commensurate to the nature or volume of work done.

IRAS may ask an employer to provide details for one or more than one worker to determine the employer’s eligibility for a WCS payout. If the employer fails to provide this information, they will not get a payout for the employees concerned.

When do Wages Become Eligible for Co-Funding?

When the scheme was first extended, between 2016 and 2017, the government agreed to co-fund 20% wage increases if they qualified. This is subject to a maximum monthly earning of S$4,000.

Gross monthly pay hikes of at least S$50 provided in 2015 and 2016 without a change in employer will still be co-funded at 20%, provided they are maintained in both 2016 and 2017.

For the second time the scheme was extended, the government agreed to co-fund increases in wages that qualify at a rate of:

  • 20% for 2018.
  • 15% for 2019.
  • And 10% for 2020.

Gross monthly wage increases of at least S$50 provided between 2017 and 2019 will still get co-funded (provided the employer does not change). They will be co-funded at their respective levels provided they are maintained from 2018 through 2020.

How is Wage Credit Calculated?

Wage Credits are only paid for qualifying employees. Use this formula to determine the payout amount due to an employee:

Percentage of co-funding x wage increase that qualifies x total contributions to CPF (in months) by an employer.

Getting Your Wage Credit as an Employer

You won’t have to apply for the scheme. IRAS will inform all qualifying employers if they are eligible by post. This notification will reach them by 31 March from 2014 through 2021.

When and How Will You Receive the Payout?

As an employer, you will receive your payout by 31 March. This will be for the years 2014 to 2021. These payments will be automatically credited by GIRO to the account you use for either income tax or GST. You may even receive a cheque.

Are Taxes Paid on Wage Credit?

WCS is a payout that is used to co-fund an increase in wages, and as such, it is considered part of your revenue. Therefore, this is taxable.

Any payout you receive is taxed for a year of assessment depending on when you receive the payment. If there are any pending tax payments you need to make, these funds may be used to offset them.

As an individual, like a sole proprietor or a partnership firm, you won’t need to declare your WCS payment in your income tax return. This could be From P, Form B, or Form B1. IRAS will include it automatically when they do your tax assessment in the appropriate YA.

A company will still need to declare any WCS payments they receive when they file their income tax returns for the appropriate year of assessment. This would be either Form C or Form C-S.

What to do if You Misplace the Cheque or the Cheque Expired?

If you have misplaced your cheque or your payout cheque has expired you need to request for it online. You can request for your cheque to be reissued at: https://www.iras.gov.sg/irashome/web/pages/feedback/formWageCreditScheme.aspx.

Requesting a Breakdown of Wage Credit

Do you need to know how to split the Wage Credit payout among your employees? For the year of payout, you can request a breakdown from IRAS for the complete payout by employee.

How and When to Submit Your Request

If you need to request a breakdown, you can do so online on the myTax Portal. However, you need to make this request between the last week of March and 31 October. This will be for the years the payout is being made, i.e., 2014 to 2021.

What Are the Fees Involved and How to Pay Them?

If you are requesting more than 100 records for eligible employees, you will need to pay a certain amount in fees. For over 100 but lesser than 200 records, you need to pay S$100. If you need more than 200 records, you have to pay a fee of S$150.

Only cheque payments are accepted for this request. Your cheque needs to be payable to the “Commissioner of Inland Revenue”. You only have to make the payment when you collect the records from IRAS.

Receiving Employee Records

If you request not more than 100 records, they will be sent to you in no later than 7 working days. You will receive them by ordinary mail at your firm’s registered address.

If you have requested more than 100 records, you need to pick them up from IRAS. You will need to collect the records (CD-ROM) from IRAS in 10 business days.

What is the Information Provided in the Record?

You will be able to access Wage Credit information for existing employees. However, for new employees, you will only be able to see their names. If Wage Credit information for new employees is given, details of their earnings from their previous workplace will also be visible. Hence, this is not provided.

If, however, you require Wage Credit information for your new hires, they need to give you a signed Consent Form. And as a company, you will need to provide a Declaration Form, stating you have received consent from your employee. Both these forms need to be emailed to [email protected]

Requesting an Adjustment of Wage Credit

An employer can appeal a WCS payout during the payout year. Based on the specifics of the case, an appeal may be entertained in the case of:

  • Company mergers.
  • A business entity being converted or has its UEN changed.
  • Singapore employees based abroad who have not had CPF contributions made, yet still received a salary.

Making and Submitting an Appeal

If you feel you have reasonable grounds to appeal the Wage Credit payout, you need to send in an Appeal Form to IRAS. You need to send this form along with a few relevant documents.

For each payout year (2014 to 2021), appeals need to be submitted by 30 June.

If someone tries to misuse WCS, the Singapore government will view this as a serious offense. Strict action will be taken against anyone caught attempting such activity.

How Did Wage Credit Scheme Come About?

This scheme, introduced in 2013, provides a boost to employers offering raises to employees who fall under a certain pay bracket by co-funding their wage increases. Introduced in 2013, the scheme has been extended up to 2020, albeit with certain changes to the percentage of government contribution.

Scheme History

In the budget of 2013, WCS was initiated as part of a Transition Support Package. Later in 2015, the government decided to extend the scheme for an additional 2 years. This was done to help companies get used to higher salaries being offered.

In 2018, WCS was again extended another 3 years (up to 2020). This was done to support firms aiming to transform their businesses and also to share gains from productivity with employees.

With the help of Wage Credit payouts, companies were able to cope with the changes in the economy with support from the government. This would help them tackle the issue of higher wages.

The government, in doing this, made it easier for firms to free up funds to invest in productivity. They could also share the gains earned from said productivity with their workers.

Getting in Touch with IRAS

Need more details about the scheme? Contact IRAS at [email protected] Alternatively, you could also call them on 1800-3524727. Their working hours are 8:00 a.m. to 5:00 p.m., Monday through Friday.

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