Overview
The Skills Development Levy (SDL) is a mandatory levy imposed on all employers in Singapore to fund workforce training and skills upgrading programs. The requirement is established under the Skills Development Levy Act and applies to every employer, whether in the private sector or public sector . In effect, it is a small amount that employers must pay for every employee they hire, and the money is channelled into the national Skills Development Fund (SDF). The SDF, administered by the statutory agency SkillsFuture Singapore (SSG), is used to support a wide range of training initiatives, subsidies, and grants that help Singapore’s workers upgrade their skills and improve their employability .
In short, SDL is part of Singapore’s push for continual skills improvement – it ensures employers contribute to a common pool that ultimately benefits companies and employees through training incentives.
Levy Rate and Calculation
The SDL is calculated as a small percentage of each employee’s monthly wage and has both a minimum and a maximum contribution:
• The current SDL contribution rate is 0.25% of the employee’s monthly total wages, up to a salary ceiling of $4,500 per month . This means if an employee earns more than $4,500 in a month, the employer’s SDL for that employee is capped at 0.25% of $4,500, which comes out to $11.25 maximum .
• There is a minimum SDL of $2 per employee per month . This minimum kicks in for employees with very low wages. Practically, any employee earning up to $800 a month will generate an SDL of $2 (since 0.25% of $800 is $2). Even if an employee earns for example $400, the employer still pays $2 (not $1) due to the minimum levy rule.
For example, if an employee’s gross monthly wage is $3,000, the employer must pay an SDL of $7.50 for that month (since 0.25% of $3,000 = $7.50). If another employee earns $5,000 a month, the employer pays $11.25 (capped at the $4,500 ceiling) . These computations are done monthly for each employee.
All employees are counted for SDL – this includes full-time, part-time, temporary, casual, and even foreign employees. Notably, this is different from CPF (which is not required for foreigners). SDL is required even if a company employs only foreign workers . If a company has no local employees and only foreign workers, it still must pay SDL for those foreigners (in such cases, since they won’t have CPF accounts, the company would pay the SDL via alternate means discussed below).
Payment and Administration
Employers typically pay SDL on a monthly basis at the same time they make CPF contributions. The Central Provident Fund Board collects SDL payments on behalf of SSG (this is facilitated through the CPF e-Submit system) . In practice:
• Companies using CPF e-submission will see SDL calculated automatically for each employee’s wages in the month, and the amount will be included in the monthly statement from CPF Board. Payment can be made via GIRO or other CPF payment methods, consolidating the process.
• Alternatively, companies with only foreign employees (and thus no CPF payments) can pay SDL directly via the SkillsFuture SDL e-payment portal or by cheque, using a prescribed form .
• The SDL payments are due within 14 days after the end of each month (aligning with CPF due dates). Late payment of SDL can incur a penalty of 10% per annum on the outstanding levy , so employers must ensure timely payment.
The collection goes into the Skills Development Fund, which is overseen by SSG (formerly the Singapore Workforce Development Agency). The government may adjust the SDL rate or ceiling from time to time, but it has been stable for many years (the 0.25% rate has been in place since 2008).
Purpose and Benefits
SDL exists to fund training grants and programs – essentially, it’s a way to pool resources from employers to finance the continual training of the workforce. The Skills Development Fund (SDF) subsidizes many initiatives, for example:
• SkillsFuture Courses: Employers who send their employees for approved training courses (be it vocational training, professional courses, IT skills, etc.) often receive subsidized rates funded by the SDF.
• Workfare Skills Support: Lower-wage workers can get additional training support and absentee payroll (wage reimbursements for training time) through Workfare initiatives financed by SDF.
• Industry Transformation Programs: Certain industry-specific training programs, competency frameworks, or place-and-train programs are funded by SDF to help re-skill workers into new roles (especially relevant in sectors undergoing transformation).
• Absentee Payroll and Course Fee Subsidies: SMEs (small and medium enterprises) often benefit from enhanced training subsidies and absentee payroll payouts from SDF when they upskill their staff.
In effect, although employers pay the SDL as a cost, they can recoup value by tapping on the heavily subsidized training opportunities for their employees. It creates a virtuous cycle: employers contribute to the fund, and then draw from the fund by training their workers, which in turn benefits the company through a more skilled workforce.
For HR departments, SDL is usually a minor line item in cost (due to the low rate) but plays a big role in enabling training budgets. Administratively, it’s relatively straightforward since it’s integrated with CPF payments. Nonetheless, HR needs to be aware of SDL obligations, especially if they have non-standard employees (like daily-rated workers or foreign staff) to ensure everyone is included.
In summary, the SDL is a small but significant component of Singapore’s manpower development landscape. It embodies the principle that employers have a stake in and responsibility for continually upskilling the national workforce. By collectively funding the Skills Development Fund, Singapore’s employers help maintain an ecosystem where training is accessible and affordable, thereby raising the overall quality and productivity of labor in the economy .
