The late payment interest serves to deter employers from paying CPF contributions late for their employees and to defray the cost of recovery actions by the Board. The outstanding late payment interest amounts can be paid together with the monthly CPF contributions.
Late payment interest is calculated daily at 1.5% per month, starting from the first day of the following month after the CPF contributions are due. The 14 days grace period would not be taken into consideration for late payments (e.g. interest for January contributions will be calculated from 1 February). The minimum interest payable is $5 per month.
XYZ Company made a CPF contribution of $3,000 for the month of October 2012 on 20 November 2012. This payment is late by 19 days.
Therefore, the amount of late payment interest will be
= CPF contribution x 1.5% x (no. of days the payment is late) / (no. of days in the month)
= $3,000 x 1.5% x 19/30*
*Number of days the payment is late / number of days in the month of payment. The cents should be dropped for the interest. Hence, the late payment interest payable will be $28.