Higher wage thresholds for foreign employees to impact business costs; important to requalify the inhabitants, say the observers

“DIRECT IMPACT” ON BUSINESS COSTS

Any increase in the qualifying minimum wage will “certainly have a direct impact on business costs”, noted Mr. Phua Boon Huat, Chairman of the Singapore Furniture Industries Council (SFIC).

Phua said about 29% of SFIC member companies fall under their contract manufacturing member group and their S Pass/EP ratio is about 4:1.

Within these SFIC companies, S Pass holders tend to occupy the roles of site supervisor, project coordinator, site installers and are responsible for a general scope of work which includes material handling and manual delivery of materials.

EP holders are typically hired to become draftsmen, 3D viewers, project managers, or manage business development roles.

“EP and S Pass holders are part of the global workforce that brings complementary skills alongside our local employees. In general, foreign workers are tasked with handling more manual jobs which they also excel at and which most Singaporeans avoid,” he said.

“The EP and S Pass allows businesses to fill skills gaps and labor shortages with overseas talent.”

But the EP and S Pass approval process “has not been smooth” for many member companies, adding to their existing problems, Phua added.

“Members of the contract manufacturing cluster face multiple challenges, including continued labor shortages and rising supply chain costs. Companies are facing margin erosion due to higher costs, making many projects unsustainable,” he said.

“At the same time, there is pressure from clients to speed up the delivery time of projects, as they race against time to take advantage of their rent-free period and are no longer as empathetic about the labor shortage issues.

For catering (F&B) businesses, adjusting labor costs would affect customers, suggested Cedric Tang, third-generation owner of Ka Soh & Swee Kee restaurants.

“Ultimately, the cost goes down for consumers. Yes we can hire Singaporeans, yes we can pay more for the tax (S Pass), but who is going to pay the bill? Companies are not going to absorb all of the increased costs,” he said.

“It’s not that business is bad; business is good. But you need to hire manpower to keep moving forward and recovering. We have faced two years of losses and now it is a period of recovery.

Mr Tang added that Singaporeans might not realize that the levy, in addition to raising minimum qualifying wages for S Pass holders, is also hurting F&B businesses.

“And that’s the cost that will ultimately be passed on to consumers. Everyone loses, but the consumer loses the most,” he said.

To better manage the flow of S Pass holders, the Tier 1 monthly levy will be gradually raised from the current S$330 to S$650 by 2025, according to budget announcements.

This will affect employers whose S Pass holders represent up to 10% of their total workforce. Those with a higher proportion of S Pass holders already pay a monthly fee of S$650.

Unless the qualifying minimum wage of EP and S Pass holders is adjusted, Mr. Tang is already facing labor issues. He doesn’t have any EP or S Pass holders on his team, but he’s willing to hire the latter if he can meet the quota.

“The government always says there are Singaporeans out there for hire, but what I feel like they don’t understand is that in the F&B or maybe the service industry, a lot of Singaporeans…are not suitable for F&B. Even if we were to hire them, sometimes they leave within six months,” he said.

“If we can hire an S Pass holder, if we have the quota to hire, we will hire. Because foreign workers…they want to earn money more. But for Singaporeans, at least in my experience so far, they want the leadership role or work in (the) backend. But for SMEs (small and medium enterprises), there are a limited number of office jobs that we can afford.

POTENTIAL DIFFICULTY IN RECRUITING AND RETAINING WORKERS

Other industries may also need time to adjust to the economic impact of the EP and S Pass qualifying minimum wage adjustments.

Raising eligible salaries for EP holders could also be ‘prohibitive’ and potentially ‘deter’ some companies from offshoring expatriate young professionals, the country analyst for Asia at the Economic Intelligence Unit has suggested. , Yu Liuqing.

“Probably for local companies or multinationals, if they want to start their graduate programs or hire a junior software engineer, that salary can be prohibitive for some,” he said.

“For (the adjustment) applied also to the financial services sector, such as relatively low-paying financial services sector companies, for example auditing, it could also be prohibitively expensive.”

In the financial services sector, where wages are higher, the minimum qualifying wage for new EP applicants will rise to S$5,500 from the current S$5,000, according to the budget announcement.

“It’s generally a market-driven approach, but again I would like to raise (the point) that in certain sectors there is already a severe shortage of domestic talent, then you raise the threshold salary for EP. It will only make business more difficult,” Yu added.

Similarly, managing director of recruitment agency Michael Page Singapore, Nilay Khandelwal, said CNA sectors that are more reliant on these work pass holders should “adapt to what’s to come.” “.

For example, if an existing EP holder needs to renew their pass, the company’s human resources department should assess whether these individuals could have their EP license renewed or be “downgraded” to an S Pass. -he declares.

Mr Khandelwal added that regardless of EP and S Pass salary adjustments, ESG (environmental, social and governance) related jobs are the “new trend”.

“It would be hard to say that companies would be able to do this without talent coming from overseas markets for some of these positions,” he said.

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