The distinction between your final pay components matters in Singapore, because CPF and tax treatment differ between them.
Salary in lieu of notice
Taxable — it represents earnings you would have received for working
Does not attract CPF contributions from the employer
Retrenchment benefits
Generally not taxable
CPF is generally not required on retrenchment benefit payments
Wages up to your last day
CPF contributions are still payable on wages paid up to your last official day of employment.
Unused annual leave
Accrued but unused annual leave encashed at termination is taxable as employment income.
Pro-rated bonus and AWS
Any pro-rated bonus or Annual Wage Supplement paid as part of the final settlement is also taxable.
Why the distinction matters
It affects your take-home. Two settlement structures with the same headline figure can differ materially depending on how the components are labelled.
Worth checking the breakdown rather than only the total.
Garden leave
A common practice during retrenchment in Singapore. The benefits are similar to payment in lieu of notice, except that you remain tied to your employment contract until your last official day.
That distinction can matter for things like non-compete obligations and continuing benefits.
What the notice pay covers
The amount paid as salary in lieu of notice would encompass your unused annual leave and balance work days, excluding the retrenchment package itself, which is calculated separately on your years of service.
What to check
That the breakdown separates notice pay, leave encashment and retrenchment benefit
That CPF was paid on wages to your last day
That any pro-rated AWS or bonus is included
Whether you are on garden leave or paid in lieu
Frequently asked questions
Is salary in lieu of notice taxable?
Yes, it is taxable because it represents earnings you would have received for working. But it does not attract CPF contributions from the employer.
Are retrenchment benefits taxable?
Generally not, and CPF is generally not required on them either.
Is CPF payable on my final wages?
Yes. CPF contributions are still payable on wages paid up to your last official day of employment.
Is unused leave taxable?
Yes. Accrued but unused annual leave encashed at termination is taxable as employment income, as is any pro-rated bonus or AWS.
What is garden leave?
A common practice where the benefits resemble payment in lieu of notice, except you remain tied to your employment contract until your last official day.