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)

  • Monthly Salary

  • Overtime (OT) Pay

    • OT pay might constitute AW in some scenarios. Refer to the example below of John.

  • Monthly Commissions

  • Allowances

  • Annual Bonus

  • Leave

  • Non-Monthly Commissions

  • Incentives

  • Long Service Awards

  • Leave encashment

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 30th February

10th March

OW for February

14th March

1st to 30th 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:
AW for April

OT work done for 1st April to 24th April:
OW for Apr

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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