Employing Older Workers in 2027: How CPF Changes and the Transition Offset Affect SME Payroll Costs

Singapore employers with older workers should prepare for another change to CPF contribution rates from 1 January 2027.

CPF contribution rates will increase for employees aged above 55 to 65, with both employers and employees contributing more.

For SMEs, the employer increase is relatively small when viewed as a percentage of salary. However, across several senior employees and an entire year, the additional payroll cost can become more noticeable.

The Government will provide a CPF Transition Offset in 2027 to cover half of the increase in employer CPF contribution rates. Employers may also qualify for the Senior Employment Credit when they employ eligible Singaporean senior workers.

Understanding how these measures interact can help SMEs prepare a more accurate manpower budget for 2027.

1. What CPF contribution rates are changing in 2027?

From 1 January 2027, CPF contribution rates will increase for employees aged above 55 to 60 and above 60 to 65.

For Singapore Citizens and Singapore Permanent Residents from their third year onwards earning monthly wages above S$750, the new rates are:

• Age 55 and below: total CPF remains at 37%, consisting of 17% from the employer and 20% from the employee.
• Above 55 to 60: total CPF increases from 34% to 35.5%. The employer contribution rises from 16% to 16.5%, while the employee contribution rises from 18% to 19%.
• Above 60 to 65: total CPF increases from 25% to 26%. The employer contribution rises from 12.5% to 13%, while the employee contribution rises from 12.5% to 13%.
• Above 65 to 70: total CPF remains at 16.5%, consisting of 9% from the employer and 7.5% from the employee.
• Above 70: total CPF remains at 12.5%, consisting of 7.5% from the employer and 5% from the employee.

The 2027 increase therefore affects workers aged above 55 to 65.

Contribution rates for workers aged 55 and below, above 65 to 70 and above 70 will not change in 2027.

2. How much will the employer contribution increase?

For both affected age groups, the employer CPF contribution rate increases by 0.5 percentage point from 1 January 2027.

This means:

• for employees aged above 55 to 60, the employer rate rises from 16% to 16.5%; and
• for employees aged above 60 to 65, the employer rate rises from 12.5% to 13%.

Although 0.5 percentage point may appear small, employers should calculate the effect across their entire senior workforce.

For example, an employee earning S$4,000 per month would create an additional employer CPF contribution of approximately S$20 per month before taking the CPF Transition Offset into account.

Across 12 months, that would be approximately S$240 in additional employer CPF contributions for one employee, assuming the same monthly wage throughout the year and ignoring any additional wages for simplicity.

For an SME with 10 affected employees at the same wage level, the increase would be approximately S$2,400 over the year before government support.

3. What is the CPF Transition Offset?

The CPF Transition Offset, or CTO, is designed to help employers manage the increase in business costs caused by higher CPF contribution rates for senior workers.

For 2027, the Government will offset 50% of the increase in employer CPF contribution rates for affected senior workers.

Since the employer contribution rate increases by 0.5 percentage point for workers aged above 55 to 60 and above 60 to 65, the 2027 CTO is equivalent to 0.25 percentage point of wages, subject to the applicable CPF salary ceiling.

The CTO applies to eligible Singapore Citizen and Permanent Resident workers in the affected age groups.

Employers do not need to submit a separate application for the offset. It is provided automatically based on CPF contribution information.

4. Example: employee earning S$4,000 per month

Consider an SME employing a Singaporean worker aged 58 who earns S$4,000 per month.

In 2026, the employer CPF contribution rate for this age group is 16%.

This means the employer contributes approximately S$640 per month.

From January 2027, the employer rate rises to 16.5%.

The employer contribution therefore rises to approximately S$660 per month.

The difference is S$20 per month.

The CPF Transition Offset covers half of this increase, equivalent to approximately S$10 per month in this simplified example.

The effective additional employer cost after the transition support is therefore approximately S$10 per month during 2027.

Over 12 months, the gross increase in employer CPF contributions would be approximately S$240, while the CTO would offset approximately S$120.

The employer would therefore bear an effective increase of approximately S$120 for the year, assuming a constant monthly wage and no other CPF-payable additional wages.

5. Example: employee earning S$8,000 per month

The CPF Ordinary Wage ceiling has been S$8,000 per month since 1 January 2026.

Consider an affected senior employee earning S$8,000 in Ordinary Wages each month.

A 0.5 percentage point increase in the employer contribution rate creates approximately S$40 in additional employer CPF contributions per month.

The 2027 CPF Transition Offset would cover approximately half of that increase, or S$20 per month.

Over 12 months, the additional employer CPF contribution would be approximately S$480 before the offset.

The CTO would offset approximately S$240, leaving an effective additional cost of approximately S$240 for the year in this simplified example.

This demonstrates why the cost impact becomes more noticeable when an SME employs several senior workers earning salaries closer to the CPF Ordinary Wage ceiling.

6. Employee CPF contributions are also changing

The 2027 changes do not affect employers alone.

Employees aged above 55 to 60 will see their CPF contribution rate rise from 18% to 19%, an increase of 1 percentage point.

Employees aged above 60 to 65 will see their contribution rate rise from 12.5% to 13%, an increase of 0.5 percentage point.

This means the employee’s take-home pay may decrease if the employee’s gross wage remains unchanged.

For example, a worker aged 58 earning S$4,000 per month would contribute approximately S$40 more to CPF each month as a result of the 1 percentage point increase.

Employers should therefore communicate the change clearly to affected employees so that the difference in net salary does not come as a surprise when January payroll is processed.

7. Where will the higher CPF contributions go?

The increase in CPF contributions for employees aged above 55 to 65 will be fully allocated to the employee’s Retirement Account, up to the applicable Full Retirement Sum.

If the employee has already set aside the Full Retirement Sum in the Retirement Account, the additional contributions will be channelled to the Ordinary Account instead.

The purpose of the higher contribution rates is therefore to strengthen retirement adequacy for older workers who continue to remain in employment.

8. The CPF Transition Offset is temporary

SMEs should remember that the CPF Transition Offset is transitional support rather than a permanent reduction in CPF costs.

The 2027 offset helps employers absorb half of the employer contribution rate increase during the year.

However, an employer preparing a longer-term manpower forecast should not assume that the same offset will continue indefinitely.

For example, if an employee’s additional employer CPF contribution is S$20 per month and the CTO reduces the effective increase to approximately S$10 during 2027, the SME should still recognise that the underlying employer CPF rate has permanently increased.

When preparing budgets beyond 2027, businesses should use the prevailing statutory CPF contribution rates rather than relying on temporary transition support.

9. What is the Senior Employment Credit?

The CPF Transition Offset is not the only support available to employers of older workers.

The Senior Employment Credit, or SEC, has been extended until December 2027.

The SEC provides wage offsets to employers that employ eligible Singaporean workers aged 60 and above who earn below S$4,000 per month.

Higher support is available for older age groups.

For wages paid in 2026 and 2027, employers may receive wage support of up to:

• 2% for eligible Singaporean workers aged 60 to below 65;
• 4% for eligible Singaporean workers aged 65 to below 69; and
• 7% for eligible Singaporean workers aged 69 and above.

The maximum percentage applies to employees earning up to S$3,000 per month. Support is progressively reduced for employees earning more than S$3,000 but below S$4,000.

This means an SME employing eligible senior Singaporean workers may receive the Senior Employment Credit in addition to benefiting from the CPF Transition Offset where the relevant conditions are met.

10. Do not confuse the SEC with the CPF Transition Offset

The two schemes support employers for different reasons.

The CPF Transition Offset specifically helps employers manage the 2027 increase in employer CPF contribution rates for affected senior workers.

The Senior Employment Credit is a broader wage support scheme intended to encourage the employment of older Singaporean workers.

There are also differences in eligibility.

• The 2027 CTO relates to the increase in employer CPF contributions for eligible Singapore Citizen and Permanent Resident workers aged above 55 to 65.
• The SEC is for eligible Singaporean employees aged 60 and above earning below S$4,000 per month.

Employers should therefore assess each support measure separately rather than assuming that every senior employee qualifies for both.

11. Singapore’s retirement and re-employment ages have also increased

The higher CPF contribution rates form part of a wider shift towards supporting longer working lives in Singapore.

From 1 July 2026, Singapore’s minimum retirement age increased to 64, while the re-employment age increased to 69.

Employers must offer re-employment to eligible employees who reach the minimum retirement age, up to the re-employment age, subject to the requirements under the Retirement and Re-employment Act.

For SMEs, this makes longer-term workforce planning increasingly important.

Experienced employees may remain in the workforce for longer, allowing businesses to retain valuable knowledge and skills. At the same time, employers need to understand how salary, CPF contributions, job design and re-employment obligations change as employees move through different age bands.

12. Example: budgeting for several senior employees

Consider an SME with the following five employees aged between 56 and 64:

• Employee A earns S$3,000 per month;
• Employee B earns S$3,500 per month;
• Employee C earns S$4,000 per month;
• Employee D earns S$5,000 per month; and
• Employee E earns S$6,000 per month.

The combined monthly wages are S$21,500.

A 0.5 percentage point increase in employer CPF contributions would result in approximately S$107.50 of additional employer CPF contributions per month.

Over 12 months, that would amount to approximately S$1,290 before the CPF Transition Offset.

If the full 2027 CTO applies to these wages, approximately half of that increase would be offset during the year.

The effective additional cost would therefore be approximately S$645 for 2027 in this simplified example.

The actual CPF calculation may differ depending on factors such as employee age, citizenship or Permanent Resident status, wage levels, Additional Wages and the applicable CPF ceilings.

However, this simple exercise shows why SMEs should calculate the increase across the entire workforce rather than looking at the change for only one employee.

13. What should SMEs include in their 2027 payroll forecast?

When preparing a manpower budget for 2027, employers with older workers can review each affected employee individually.

The forecast should consider:

• the employee’s age in 2027;
• monthly Ordinary Wages;
• expected bonuses or other Additional Wages;
• the applicable employer CPF contribution rate;
• the employee CPF contribution rate;
• the potential CPF Transition Offset;
• whether the employee may qualify for the Senior Employment Credit;
• planned salary adjustments;
• changes to working hours or responsibilities; and
• re-employment arrangements where relevant.

A simple employee-by-employee review can help management identify the difference between the 2026 payroll cost and the expected 2027 cost.

14. Why the increase should be viewed as a recurring cost

The immediate increase in employer CPF contributions may be modest for many SMEs, particularly after the CPF Transition Offset is taken into account.

However, CPF contributions form part of recurring payroll expenditure.

A recurring S$20 monthly increase may appear insignificant in isolation. Across 20 employees, it becomes S$400 per month. Across a full year, it becomes S$4,800 before offsets.

This is why small percentage changes should still be included in annual budgeting.

An SME that overlooks several small recurring increases can eventually find that its actual payroll is materially higher than expected.

15. Retaining an experienced employee can still make financial sense

Higher CPF contributions should not automatically be viewed as a reason to avoid employing older workers.

Experienced employees may bring established customer relationships, operational knowledge, technical expertise and familiarity with internal processes.

Replacing an experienced employee may also create other costs, including recruitment fees, onboarding time, training, productivity loss and the risk that a new hire does not remain with the business.

Employers should therefore compare the employee’s total employment cost with the value of retaining their experience rather than focusing on CPF rates alone.

For some roles, retaining and redesigning the job for an experienced senior employee may be more economical than recruiting and training a replacement.

16. What should SMEs do before January 2027?

SMEs do not need to make major changes simply because CPF rates are increasing, but a few checks before January can make the transition easier.

• Identify affected employees. Check which employees will fall within the above 55 to 60 and above 60 to 65 age groups.
• Update payroll settings. Ensure the correct CPF rates are applied to wages earned from January 2027.
• Recalculate employer costs. Include the additional 0.5 percentage point employer contribution in the 2027 manpower budget.
• Account for the CTO separately. Recognise the support, but do not mistake a temporary offset for a permanent reduction in payroll costs.
• Review SEC eligibility. Employers with Singaporean workers aged 60 and above earning below S$4,000 may qualify for additional wage support.
• Communicate with employees. Affected workers may notice a change in take-home pay because their employee CPF contribution rates are also increasing.
• Plan beyond 2027. Build future payroll forecasts using the statutory CPF rates rather than assuming that temporary transition support will continue.

Final thoughts

From 1 January 2027, CPF contribution rates will rise for employees aged above 55 to 65 as Singapore continues to strengthen retirement adequacy for senior workers.

Employers will contribute an additional 0.5 percentage point for workers in both affected age groups.

The CPF Transition Offset will cushion the impact in 2027 by covering half of the increase in employer CPF contribution rates, while the Senior Employment Credit can provide additional wage support to employers of eligible Singaporean senior workers.

For individual employees, the additional employer cost may appear relatively small. Across several workers and multiple years, however, these amounts become part of the SME’s recurring manpower expenditure.

The practical approach is to identify affected employees early, update payroll forecasts, account for available government support and plan for the full recurring cost beyond the transition period.

With proper budgeting, SMEs can manage the higher CPF contributions while continuing to benefit from the skills and experience that older employees bring to the business.