What is the SDL?
The Skills Development Levy (SDL) is a tax imposed on businesses in Singapore to upgrade the skills of the local workforce. The government of Singapore matches the contributions of each employer to the SDL fund.
The SDL Act (Chapter 306) outlines the purposes of the fund:
- The promotion, development and upgrading of skills and expertise of persons preparing to join the workforce, persons in the workforce and persons rejoining the workforce
- The retraining of retrenched persons
- The provision of financial assistance by grants, loans or otherwise for the purposes of the abovementioned objects
It is mandatory for employers in Singapore to pay the levy for every employee on their payroll. This isn’t only limited to Singaporean citizens or PR holders; employers must pay the levy for all permanent, casual, part-time, temporary, and foreign employees, too. For example, those workers on Employment Pass, EntrePass, PEP, Training Employment Pass or S-Pass are also taxed.
The SkillsFuture Singapore Agency (SSG) is the government body tasked with overseeing the SDL. However, the actual funds are collected by the CPF Board on behalf of the SSG. Employers are able to apply for grants under the National Continuing Education Training system, which is a scheme to encourage businesses to upgrade the skills of their employees. All grant applications are reviewed and approved by the SSG.
SDL payments are due monthly and are separate from other contributions to statutory boards in Singapore, such as the Central Provident Fund. Employers must make the payments, regardless of whether they plan on applying for SDF grants or not.
Employees Excluded From The SDL
There are a few circumstances where businesses can skip the monthly SDL payment for their employees. These are:
Singaporean businesses that hire workers outside the country and whose jobs require them to work overseas. For example, a Singaporean company that hires an employee in the U.S. for the purpose of increasing business in North America.
Singaporean companies that hire a worker in Singapore but proceeds to send them abroad to work in a satellite office. This could be, for example, a Singaporean resident transferred to the Indonesia or Thailand office.
Fees paid to directors does not require a Skills Development Levy contribution. However, if they are paid a monthly salary then the SDL will apply.
Self-employed individuals do not need to remit a monthly SDL for their earnings. However, if they hire employees or contractors then the SDL will apply.
Stipends paid to interns or students engaging in work during vacation are not applicable for SDL contributions.
- Employees hired by individuals such as those tasked to fulfill household duties do not qualify for SDL contributions. Examples of these are gardeners, chauffeurs, and maids.
How to Calculate SDL
Singaporean businesses required to pay SDL contributions must take into account the total monthly wage of each eligible employee. This includes the base salary, commission, bonuses, overtime pay, and any additional allowances. Cash payments to employees are included, too. Hence, the SDL contribution may vary month to month as it depends on how much the employee made.
The SDL calculation formula is as follows: The contribution percentage is 0.25% of the staff member’s monthly wage. The minimum SDL levy is $2 SGD while the maximum is $11.25 SGD.
- Wages up to $800 SGD / month have a $2 SGD levy
- Wages between $800 - $4,500 SGD have a salary x 0.25% levy
- Wages above $4,500 SGD pay a flat $11.25 SGD levy
For precise calculations, use SSG’s SDL calculator.
How to Pay the SDL
Businesses have the option to pay the SDL as an upfront annual payment at the beginning of the year, or monthly along with their CPF contributions.
Here are the three ways to pay SDL:
Firms employing only foreign workers are allowed to make payments via the E-payment service at the SDL website.
Direct payments to SSG are also allowed, either through a crossed cheque or bank transfer. The cheque must be payable to Skills Development Fund. Be sure to include details such as the company’s name, payment period, and contact information using the SDL Return Form.
Additional Information About The SDL
Before calculating the SDL payment or writing a cheque to the government, make sure you keep these things in mind:
- For monthly SDL payments, the due date is the 14th of each month for the monies owed in the previous month. For example, the October SDL payment will be due by November 14th.
- Late payments attract a 10% fine per annum on the total outstanding amount due.
- When making payments, make sure to include details such as the UEN, business name, address, and payment period.
- Even if you have employees for which the SDL doesn’t apply, you have to submit a declaration of non-liability.
How To Apply for SDL Grants
As we mentioned earlier, the purpose of the SDL is to help businesses access a pool of funds to upskill their workforce and encourage individual growth.
The Skills Connect website is the best place to start for more information about how to get access to the plethora of training grants and schemes. There’s up-to-date instruction and guidance for Singaporean businesses, as well as for individuals and training providers looking to get accredited.