CENTRAL PROVIDENT FUND (Penalty interest for late payment)

Dr Ang Kok Peng asked the Minister for Communications and Minister for Labour whether he will consider crediting the penalty interest collected from an employer, on account of late or non-payment of contributions to the Central Provident Fund, to the affected subscribing member's account and, if not, why not; and how such member can be adequately compensated for loss of interest on money that has legally been his.

The Minister for Communications and Minister for Labour (Mr Ong Teng Cheong): Sir, the penalty interest for late payment of contributions is similar in nature to the 'fine' imposed by the court of law for other offences under the Central Provident Fund Act. Both the penalty interest and the fine are pecuniary punishments to deter employers from committing offences under the Act. As in the case of the fine, the penalty interest is not credited into the member's account.

Interest is only payable in respect of contributions paid. A member whose contribution is paid late by his employer cannot therefore be compensated for the interest lost as a result of the late payment. However, the Member may wish to know that the CPF Board is regularly taking enforcement action to ensure that employers pay the CPF contributions in time.

Mr Jeyaretnam: Sir, will the Minister concede that the person who loses by this is the employee, i.e. the employee who is affected by the employer paying his contributions late? Is it not equitable then that at least some of this penalty that is paid by the employer should be credited to the employee?

Mr Ong Teng Cheong: Sir, it costs the CPF Board a certain amount of expenditure to take an employer to court. Who covers this cost? I wonder whether the Member for Anson could enlighten this House on how to work out the sum. In cases where the employer paid his CPF contributions late, no doubt the employees will suffer a certain loss in terms of interest. But as I mentioned earlier, this penalty interest should be regarded as a penalty on the employer. It is a penalty fine. It is not an interest which the employee is entitled to.