Skills Development Levy (SDL) in Singapore: A Comprehensive Guide for Employers

Introduction to the Skills Development Levy (SDL)

The Skills Development Levy (SDL) is a tax imposed on employers to encourage investment in worker talent. It is administered by the Singapore Workforce Development Agency (WDA) and funds subsidies for training programs that benefit employees.

Who needs to pay the SDL?

All Employers in Singapore: This includes companies, sole proprietors, partnerships, and non-profit organizations that employ at least one employee (Singaporean or foreigner) earning more than S$500 per month.

What are the key components of the SDL?

1. Levy Rate: The SDL is payable at 0.25% of an employee's monthly wages, up to a maximum levy of S$11.25 per employee. For employees earning S$4,500 or more per month, the maximum SDL payable is capped.
2. Payment Base: SDL is calculated based on the total remuneration paid to all employees, including wages, overtime, commission, bonuses, leave pay, and allowances.

What is the filing deadline for the SDL?

SDL payments are due by the 14th of the month following the relevant pay period. For example, the SDL for wages paid in March is due by April 14th.

What is the process for filing the SDL?

Step 1: Determine SDL Liability

Calculate the total remuneration paid to all employees to establish the amount of SDL payable.

Step 2: Calculate Monthly SDL

Calculate the total remuneration paid to all employees to establish the amount of SDL payable.

Step 3: Make Payment

Payments can be made via GIRO, electronic payment systems like Internet banking, or at any SingPost counter.

Step 4: Record Keeping

Maintain accurate records of remuneration and SDL payments for at least five years for audit purposes.

What are the legal/financial implications of SDL non-compliance?

Non-payment or late payment of SDL can result in penalties, including fines and interest. Employers must comply timely to avoid these penalties and to support the broader goal of workforce development.

How SDL Supports Workforce Development

The Skills Development Levy (SDL) is more than just a tax; it plays a crucial role in enhancing Singapore’s workforce. Funds collected through SDL contribute to the Skills Development Fund (SDF), which subsidizes training programs for employees.

These programs aim to improve the skills and productivity of Singapore’s workforce, keeping businesses competitive in a global market. Employers can tap into grants and funding from the SDF to upskill their employees, providing access to courses in areas like digital transformation, leadership, and industry-specific skills.

Exemptions and Reductions in SDL

While most employers are required to contribute to the SDL, there are specific exemptions and reductions available. Employers do not need to pay SDL for employees earning less than SGD 50 per month or for certain categories like students undergoing internships or apprenticeships.

Additionally, reductions in SDL may apply to employers who hire part-time employees or individuals under government-supported work programs. It's important to understand these exemptions to avoid overpaying the levy.

Common Mistakes in SDL Calculation

Errors in SDL calculation can lead to penalties or overpayment, which can strain business finances. Common mistakes include incorrect categorization of employees, miscalculating the monthly salaries for SDL purposes, or forgetting to include certain eligible employees. 

Another frequent issue is the failure to adjust SDL contributions when there are salary changes or new hires. Employers should double-check their payroll systems to ensure accurate calculation and avoid unnecessary financial burdens.

‍

Skills Development Levy FAQs:

What should I do if I realize that I have underpaid SDL?

If you discover an underpayment, you should immediately correct the payment for the past period(s) and inform the SDL Board. Payment should include any applicable late payment penalties.

Are there exemptions to paying the SDL?

All employers are required to pay the SDL for employees earning more than S$500 per month. There are no exemptions, regardless of the size, nature of the business, or whether the employee is in probationary or temporary employment.

Need help with Singapore compliance and bookkeeping assistance?

Book a free Singapore compliance consultation →