SHG Fund (Singapore)
Mandatory monthly contributions deducted from Singapore employees' wages and remitted to community-based self-help groups (CDAC, MBMF, SINDA, or ECF) based on the employee's ethnic group, funding education, welfare, and community programs.
- What Is the SHG Fund in Singapore?
- SHG Contribution Rates by Fund and Wage Level
- Employer Responsibilities for SHG Deductions
- How SHG Funds Are Used
- Who Is Eligible for SHG Deductions
- Configuring SHG in Your Payroll System
- SHG vs Other Statutory Payroll Deductions in Singapore
- Tax Treatment of SHG Contributions
- Frequently Asked Questions About SHG Fund (Singapore)
What Is the SHG Fund in Singapore?
Key Takeaways
- ✓SHG (Self-Help Group) contributions are mandatory monthly deductions from Singapore employees' wages, collected alongside CPF contributions and remitted to ethnicity-based community organizations.
- ✓Four self-help groups receive contributions: CDAC (Chinese Development Assistance Council), MBMF (Majlis Ugama Islam Singapura / Mosque Building and Mendaki Fund), SINDA (Singapore Indian Development Association), and ECF (Eurasian Community Fund).
- ✓The contribution amount is based on the employee's monthly wage bracket, with different rate tables for each self-help group. Rates range from SGD 0.50 to SGD 26 per month.
- ✓Employers are responsible for deducting SHG from eligible employees' wages and remitting the amount to CPF Board, which distributes it to the respective self-help groups.
- ✓Employees can opt out by writing to their respective self-help group. However, opt-out rates are low because most employees don't realize they're contributing or support the purpose.
Singapore's self-help group system is unique globally. Instead of a single government welfare agency serving all communities, Singapore routes community support through four ethnicity-based organizations, each serving the specific needs of its community. The SHG Fund contribution is a small monthly deduction from eligible employees' wages. It's not a tax, and it's not optional by default. Unless an employee actively opts out, the deduction happens automatically through the CPF submission process. The system dates back to the 1980s when the government recognized that different ethnic communities in Singapore faced different socioeconomic challenges. Rather than applying a one-size-fits-all approach, the model allows each community to design programs that address its specific needs: education support, financial assistance, skills training, and social welfare. For payroll teams, SHG is a minor deduction in dollar terms but a significant compliance item. The ethnicity field in your employee records determines which fund receives the contribution. Getting this wrong means money goes to the wrong organization.
SHG Contribution Rates by Fund and Wage Level
Each self-help group has its own rate table. The contribution is based on the employee's total monthly wages, and it's a fixed amount (not a percentage) within each wage bracket.
Understanding MBMF structure
MBMF contributions are typically higher than other SHG funds because they include two components: a contribution to MENDAKI (education and social development) and a contribution to the Mosque Building Fund (construction and maintenance of mosques). Muslim employees contribute to both. The combined amount explains why the MBMF column shows higher figures than CDAC, SINDA, or ECF at every wage level.
| Monthly Wages | CDAC (Chinese) | MBMF (Malay/Muslim) | SINDA (Indian) | ECF (Eurasian) |
|---|---|---|---|---|
| Up to SGD 500 | Not applicable | SGD 1.00 - 3.50 | Not applicable | Not applicable |
| SGD 501 - 1,000 | SGD 0.50 | SGD 1.50 - 3.50 | SGD 1.00 | SGD 0.50 |
| SGD 1,001 - 1,500 | SGD 1.00 | SGD 1.50 - 4.50 | SGD 3.00 | SGD 0.50 |
| SGD 1,501 - 2,000 | SGD 1.50 | SGD 2.00 - 5.50 | SGD 5.00 | SGD 1.00 |
| SGD 2,001 - 3,500 | SGD 3.00 - 5.00 | SGD 3.50 - 15.00 | SGD 5.00 - 7.00 | SGD 1.00 - 2.00 |
| SGD 3,501 - 5,000 | SGD 7.00 - 9.00 | SGD 16.50 - 22.00 | SGD 9.00 | SGD 2.00 |
| Above SGD 5,000 | SGD 11.00 - 13.00 | SGD 24.00 - 26.00 | SGD 11.00 - 12.00 | SGD 2.00 |
Employer Responsibilities for SHG Deductions
SHG processing is straightforward but requires attention to data accuracy, particularly around employee ethnicity records.
Deduction and remittance
Employers deduct SHG contributions from eligible employees' monthly wages and remit them to the CPF Board as part of the regular CPF submission. The SHG amount is included in the total CPF contribution file. The CPF Board then distributes the funds to the respective self-help groups. The same deadline applies: the 14th of the following month. No separate submission or filing is required for SHG.
Determining which fund applies
The employee's ethnic group, as recorded on their NRIC (National Registration Identity Card), determines which SHG fund they contribute to. Chinese employees contribute to CDAC. Malay/Muslim employees contribute to MBMF. Indian employees contribute to SINDA. Eurasian employees contribute to ECF. Employees of other ethnic groups are not subject to SHG deductions. The employer should verify the ethnicity field during onboarding and ensure the payroll system is configured to apply the correct fund and rate table.
Handling opt-outs
Employees have the right to opt out of SHG contributions by contacting their respective self-help group directly. When an employee opts out, the self-help group notifies the CPF Board, which then updates the employer's records. The employer stops deducting from the next available payroll cycle. Employers should not stop deductions based solely on an employee's verbal request. The official opt-out process goes through the self-help group, not the employer.
How SHG Funds Are Used
Each self-help group uses its contributions to fund community-specific programs. Understanding the impact helps HR teams explain the deduction to employees who ask about it.
CDAC (Chinese Development Assistance Council)
CDAC focuses on lower-income Chinese families. Programs include education bursaries, tuition fee subsidies, skills training for adults, family service centers, and financial assistance. CDAC served over 60,000 beneficiaries in 2023. Key programs: CDAC-SFCCA Bursary, Worker's Skills Upgrading Programme, and Ready-To-Work Programme for mature workers re-entering the workforce.
MBMF (Mosque Building and Mendaki Fund)
The MENDAKI component funds tertiary education tuition grants, tuition programs for students, professional development for adults, and social support services for the Malay/Muslim community. The Mosque Building Fund component finances the construction and upgrading of mosques across Singapore. MENDAKI's Tertiary Tuition Fee Subsidy has helped over 10,000 students annually access polytechnic and university education.
SINDA (Singapore Indian Development Association)
SINDA runs education programs (STEP tuition, career guidance), family support services, financial assistance schemes, and youth mentoring programs. The organization focuses on closing academic achievement gaps and providing crisis support for families. SINDA's STEP program provides subsidized tuition to over 5,000 students per year.
ECF (Eurasian Community Fund)
ECF supports the Eurasian community through education bursaries, skills development grants, eldercare programs, and community events. Given the smaller size of the Eurasian community, ECF's programs are more targeted and individual-focused. The lower contribution rates reflect the community's size and program scale.
Who Is Eligible for SHG Deductions
Not every employee on your payroll is subject to SHG contributions. Understanding the eligibility criteria prevents over-deduction or under-deduction.
Eligible employees
Singapore citizens and permanent residents who earn wages are subject to SHG deductions based on their ethnic group. This includes full-time, part-time, and contract workers. Both private sector and public sector employees are covered. Self-employed persons can make voluntary contributions to their respective SHG.
Exempt categories
Foreign workers (those on Work Permits, S Passes, or Employment Passes who are not Singapore citizens or permanent residents) are exempt from SHG contributions. Employees who have opted out through the official process with their respective self-help group are also exempt. Employees of ethnic groups not covered by any of the four SHG organizations (for example, those classified as 'Others' on their NRIC) don't have SHG deductions.
Configuring SHG in Your Payroll System
Proper payroll setup ensures correct SHG deductions from day one. Most Singapore payroll software handles this automatically, but configuration errors still occur.
- Capture the employee's ethnicity during onboarding based on their NRIC. Don't assume or guess. The NRIC explicitly states the race/ethnic group.
- Map each ethnic group to the correct SHG fund in your payroll system: Chinese to CDAC, Malay/Muslim to MBMF, Indian to SINDA, Eurasian to ECF.
- Load the current rate table for each SHG fund. Rates are updated periodically, so verify against the CPF Board website at the start of each year.
- Ensure the wage bracket calculation uses the correct wage definition. SHG is based on total monthly wages, which aligns with the CPF contribution wage base.
- Test opt-out processing by verifying that your system can flag individual employees as SHG-exempt when notified by the CPF Board.
- Include SHG deductions on the employee's payslip. Even though the amounts are small, the Employment Act requires all deductions to be itemized.
SHG vs Other Statutory Payroll Deductions in Singapore
SHG is one of several mandatory deductions that employers must process alongside CPF. Here's how they compare.
| Deduction | Paid By | Basis | Opt-Out Possible? | Applies to Foreign Workers? |
|---|---|---|---|---|
| CPF (Employee Share) | Employee (deducted from wages) | Percentage of wages (up to 20%) | No | No |
| CPF (Employer Share) | Employer | Percentage of wages (up to 17%) | No | No |
| SDL | Employer | 0.25% of wages (min SGD 2) | No | Yes |
| SHG (CDAC/MBMF/SINDA/ECF) | Employee (deducted from wages) | Fixed amount per wage bracket | Yes (through SHG group) | No |
| Foreign Worker Levy | Employer | Fixed amount per worker per month | No | Yes (WP/S Pass only) |
Tax Treatment of SHG Contributions
SHG contributions have favorable tax treatment that employees should be aware of. HR teams can communicate this as part of total rewards messaging.
Tax deductibility
SHG contributions are tax-deductible for the employee. The amount deducted during the year can be claimed as a deduction against taxable income in the employee's personal tax return. For employees filing under the Auto-Inclusion Scheme, the SHG deduction is automatically reflected in their pre-filled tax return. No manual claim is needed.
250% tax deduction for donations
Beyond the mandatory SHG contribution, employees (and employers) can make additional voluntary donations to self-help groups. These donations qualify for the 250% tax deduction available for approved charitable donations in Singapore. This makes voluntary SHG donations one of the most tax-efficient giving options for Singapore taxpayers.
Frequently Asked Questions
Can an employee choose which SHG fund to contribute to?
What happens if I record the wrong ethnicity in my payroll system?
Do employers contribute to SHG on top of the employee deduction?
Are SHG contributions refundable if an employee leaves Singapore?
How do I handle SHG for an employee with dual ethnicity or mixed heritage?
Written by Adithyan RK