Skills Development Levy: How Much Must Employers Pay?

The Skills Development Levy (SDL) is a mandatory contribution that employers in Singapore must pay for their employees. This levy is designed to support the development, promotion, and upgrading of skills within the workforce. Understanding the intricacies of SDL is crucial for employers to remain compliant with Singapore’s regulations and to leverage the benefits it offers. This article delves into the details of SDL, its purpose, who needs to pay it, how to calculate and pay it, and how employers can benefit from the Skills Development Fund (SDF). Related Read: Employee Professional Development: How Support Retains Staff

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What is the Skills Development Levy (SDL)?

The Skills Development Levy (SDL) is a mandatory fee that employers in Singapore are required to pay monthly for each of their employees. Governed by the Skills Development Levy Act, this levy is collected by the Central Provident Fund (CPF) Board on behalf of the SkillsFuture Singapore Agency (SSG). The primary purpose of SDL is to fund initiatives that enhance the skills and expertise of individuals in the workforce, including those who are re-entering the workforce or have been retrenched. The SDL is separate from other statutory contributions such as CPF contributions and the Foreign Worker Levy. It applies to all employees, including local citizens, permanent residents (PRs), and foreign workers, regardless of their employment type – be it full-time, part-time, temporary, or casual. This includes employees on various passes such as the EntrePass, Employment Pass, Training Employment Pass, S-Pass, and Personalised Employment Pass (PEP). Related Read: Tips and Tricks to Secure an Employment Pass in Singapore

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Purpose of the Skills Development Levy

The SDL serves several key purposes, as outlined in the Skills Development Levy Act (Chapter 306):

1. Development and Upgrading of Skills: The levy funds programs aimed at developing, promoting, and upgrading the skills of individuals entering the workforce, those already employed, and those re-entering the workforce after a hiatus.
2. Retraining of Retrenched Individuals: The levy also supports the retraining of individuals who have been retrenched, helping them acquire new skills and re-enter the workforce.
3. Financial Assistance: The SDL provides financial assistance through grants, loans, and other means to support the above objectives.

Employers are required to pay the SDL regardless of whether they apply for grants from the Skills Development Fund (SDF). This ensures that all employers contribute to the national effort of enhancing workforce skills.

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Who Has to Pay the Skills Development Levy?

All employers in Singapore, including private companies and statutory boards, are required to pay the SDL for their employees. This obligation extends to both local and foreign employees, irrespective of their employment status—whether they are full-time, part-time, temporary, or casual workers. However, there are certain exemptions to this rule. Employers do not need to pay the SDL for employees who fall into the following categories:

• Domestic Workers: Employees such as gardeners, chauffeurs, or domestic workers who provide personal services unrelated to the employer’s business or trade.
• Employees Not Working in Singapore: If an employee has not worked in Singapore for a specific month, the employer is not required to pay the SDL for that month.

For example, if an employee is undergoing training at a tertiary institution and does not render any services during a particular month, the employer is exempt from paying the SDL for that employee for that month.

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Understanding Employee Coverage

The Skills Development Levy applies to a broad range of employees in your organisation. As an employer, you are responsible for paying SDL for all full-time and part-time local citizens and permanent residents of Singapore. This requirement extends to employees working under various passes including EntrePass, Employment Pass, Training Employment Pass, S-Pass holders, and PEP. However, certain exemptions exist. You are not required to pay SDL for employees who work as gardeners, chauffeurs, or domestic workers providing personal services unrelated to your core business operations. Additionally, if an employee has not worked in Singapore for a particular month, they are exempt from SDL for that period.

SDL Contribution Rates

Since October 2008, the statutory SDL rate has been set at 0.25% of an employee’s monthly salary, with specific thresholds in place. For employees earning more than S$4,500 per month, the maximum levy is capped at S$11.25. At the lower end, employees earning less than S$800 per month have a minimum levy of S$2.

Payment Methods

You can submit SDL payments alongside monthly CPF contributions. For companies employing only foreign workers, direct payment to SkillsFuture Singapore is required. Three primary payment options are available:

CPF e-submit@web

This platform allows for simultaneous payment of SDL and monthly CPF contributions.

SDL Website E-Payment

Companies with exclusively foreign employees can utilise the E-Payment section on the SDL website.

Direct Payment to SkillsFuture Singapore

You may opt for direct bank transfer or issue a crossed cheque payable to ‘Skills Development Fund.’ Remember to complete the Skills Development Levy Return Form with essential details including company name, payment month, and contact information.

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Payment Timeline and Penalties

The SDL payment deadline is set at 14 days after the end of each month. Failing to meet this deadline results in a late payment penalty of 10% annually on the outstanding amount. Strict adherence to these timelines is crucial to avoid unnecessary penalties and maintain compliance with SDL regulations.

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How Can InCorp Help?

Remaining compliant while running a business in Singapore requires juggling operational efficiency, profitability, and growth, a challenging feat for any entrepreneur. Adding to this complexity are government regulations and tax payments, essential for smooth business operations. InCorp understands these challenges and can provide comprehensive support in adhering to statutory obligations. By partnering with us, you gain a dedicated team to manage compliance issues, including timely reminders of deadlines and accurate payment of taxes and levies like the SDL. This allows you to focus on strategic growth initiatives, knowing that your compliance needs are handled efficiently and accurately. InCorp streamlines the often tedious paperwork, freeing up your valuable time and resources. Simply engage us for your payroll tasks, and their experienced professionals will take care of the rest, ensuring your business remains compliant and thrives in Singapore’s regulatory environment.

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