Hi there! We understand that sometimes it can be confusing to comprehend what constitutes Ordinary Wages and Additional Wages. As such, we created this article to help you better understand the difference between OW and AW and what encompasses each of them.
Ordinary Wages (OW)
These are wages that the employer gives to an employee for their employment for that month. Employers must pay these wages within seven days after the end of the salary period and before the due date for payment of CPF contributions for the month.
Additional Wages (AW)
These are wages that are not granted to an employee wholly and exclusively for the month.
Examples of OW and AW:
Ordinary Wages (OW) | Additional Wages (AW) |
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Why is it important to understand the difference?
OW and AW each have a different celling that would attract CPF contributions.
Therefore, correctly classifying OW and AW would be crucial for the correct payment of salary and CPF contributions to be made.
CPF Contributions ceilings for each wage:
Ordinary Wages | Additional Wages* |
$6,000 per month
All OW CPF contributions must be paid by the 14th of the following month. Past this, it will be considered as AW | $102,000 - Total OW that attracts CPF for each year
*Refer here for a deeper understanding of the AWC |
Example for the difference in OW and AW:
If John were to do OT work in a month and his OT pay is paid the following month, this would be considered AW. However, it will be OW if they are paid by the 14th of the following month.
Example 1:
OT work done | Date paid for OT | OW/AW | When is CPF payable |
1st to 28th February | 10th March | OW for February | 14th March |
1st to 28th February | 30th March | AW for March | 14th April |
Example 2:
OT work done | Date paid for OT | OW/AW | When is CPF payable |
25th March to 24th April | 30th April | OT work done for 25th March to 30th: | 14th May |
CPF Annual Limit
About the ceilings discussed above, employers would have to note that there is a CPF Annual Limit of $37,740. This is the maximum amount that can be contributed to a CPF account in a year. (Both voluntary and mandatory contributions)
In Summary...
Type of ceilings | Definition | Cap Limit |
Ordinary Wage Ceiling | Cap on monthly wages | $6,000 |
Annual Wage Ceiling | Cap on non-monthly wages | $102,000 - Total OW that attracts CPF per year |
CPF Annual Limit | The total amount of voluntary and mandatory contributions | $37,740 |
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Related Reads: What Employer's CPF Contributions are Taxable
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