Everything you Need to Know about the Skills Development Levy (SDL)Download Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist
To encourage businesses and their workers to learn new skills and keep up with the rapid pace of change and innovation in the world, all Singaporean registered companies are eligible to receive a government grant to send their employees to training.
To qualify for this grant, however, employers are required to pay the Skills Development Levy (SDL) for each of their employees working in Singapore.
In this article, we’ll talk about everything you need to know about the SDL. We’ll explain what it is, how you pay it, how you calculate how much you need to pay, and much more.
What is the SDL?
The Skills Development Levy (SDL) is a monthly, mandatory levy that you have to pay for all your employees working in Singapore. This includes those that are employed on a permanent, part-time, casual, and temporary basis; foreign employees on work permits; and employment pass holders. The SDL is in addition to the CPF Contribution Levy and Foreign Worker Levy.
All SDL money goes to the Skills Development Fund (SDF). The SDF uses these funds to support workforce training programmes and disburse training grants to employers when they send their employees to the National Continuing Education Training system for additional training. The SDF and SSL are jointly administered by the SkillsFuture Singapore Agency (SSG).
The SDL is due by the 14th day of the following month for every month that the employee is hired. There is a late-payment penalty of 10% per annum on the outstanding amount, which means that you have to pay the amount you owe in addition to 10% of that amount if you don’t pay on time.
How do I Calculate how much SDL I Need to Pay?
At the time of writing, employers have to pay a rate of 0.25% of the first $4,500 of each of their employees’ monthly wages. The minimum payment is $2 for an employee whose monthly wages are $800 or less, and a maximum of $11.25 for one whose wages are $4,500 or more.
Here are a few examples to help you understand how to calculate the correct amount of SDL for your employees.
- Last month, one of your employees had a total monthly wage of $575. Since this is below the $800 threshold, the minimum payment of $2 applies. Hence, your SDL payable for this person is $2.
- Another employee had a total monthly wage of $2,640. Since it’s above the $800 threshold but below the $4,500 maximum, the rate of 0.25% is applicable. The SDL payable in this situation is $2,640 x 0.0025 = $6.60.
- In our final example, a different employee earned $7,800 last month. This is above the $4,500 threshold, so the maximum of $11.25 applies to this scenario. The SDL payable is $11.25.
How do you Pay the SDL when Processing Employees’ Payroll?
The Central Provident Fund (CPF) Board is the authorised collection agency for SDL. You can pay SDL through the following options:
- CPF e-Submit@web
- CPF e-Submit@AXS (for employers with 10 or fewer employees)
- Payment Advice (CPF Form 91)
Are there any Employees who are Exempt from SDL?
Yes! You do not have to pay SDL for the following categories of employees:
- "An employee who is a domestic servant, chauffeur, or gardener wholly and exclusively employed by an individual otherwise than in connection with that individual’s trade, business, profession or vocation.”
- An employee who does not perform any services in Singapore for that month. Please note that you do still have to pay SDL for employees who are on leave for that month from their employment in Singapore.
- Most tertiary education students are exempt from the SDL. For an exact list of which students this includes, please consult the Skills Development Levy (Exemption) Order of 2014.
If you have employees who are exempt from SDL, you have to login to the SDL system to submit a declaration of non-liability of SDL for these employees to the SSG. In this declaration, you have to explain in detail why these employees are exempt.
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Sprout offers professional corporate services to businesses just like yours with the help of our team of experts! We provide payroll services and can help manage your company’s SDL or CPF related matters. Feel free to contact us for more information or for any queries you may have, we’ll respond within 24 hours.