Get Live Quote Payroll case study: Reconciling historic CPF issues raised by CPF Board
Singapore
Challenge
CPF Board identified that the client was non-compliant on the way they calculated employer CPF on commission payments. The client was required to provide a reconciliation of historic payroll and to provide an updated correct payroll dating back 8 years.
The client had recently moved between a local payroll provider to the Big-4. A number of ex-employees raised a complaint on how their commission payments were treated for CPF purposes. After a number of discussions with the CPF Board, the CPF Board ruled in favour of the ex-employees. The client didn't know how to deal with this and required external assistance with the calculations. They required assistance with complicated CPF calculations and did not trust their payroll provider.
Solution
Grant Thornton reviewed the historic payroll for the ex-employees and calculated what the actual CPF payments should have been in each month. The commission payment communicated to the employees were gross of employer CPF when processed through payroll. However CPF Board ruled that it should have been net of employer CPF. Therefore there were cases where the client had underpaid CPF.
The solution involved:
- Where the employee had not reached the CPF cap in the month a gross up was required on commission payments.
- Where the employee had already reached the CPF cap no adjustment was required.
- There were also cases where negative adjustments were required. This arose where the employer had calculated CPF on commission payments in earlier months but not in later months as the CPF limit had not been reached. However as they underpaid CPF in the earlier months, they hit the CPF cap earlier and effectively did not underpay CPF overall, but paid it late, so additional CPF was due in earlier months and negative adjustments required in later months.
Grant Thornton's services included reviewing the payroll and running payroll calculations to reconcile the historic issues.
Results
The company was able to agree payments with the CPF Board and the ex-employees. They were also able to estimate a provision for their accounts as other employees could potentially come forward.
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