Singapore Update: Employment – Budget February 2022

On 18 February 2022, the Finance Minister delivered his Budget 2022 speech. The speech identified, amongst other things, challenges and opportunities faced by the Singapore workforce in the current climate, in particular, the need to support businesses and workers amid COVID-19, and in particular, groups such as lower-wage and senior workers. Against this backdrop, the Government will introduce several changes such as to the foreign work policy – which will be tightened – to better protect locals’ interests, as well as to extend the Progressive Wage Model to other sectors and specific roles in all sectors. These are important developments. We summarise details on these below.

Increase in Minimum Qualifying Salaries for Employment Pass (“EP”) and S-Pass holders

The minimum qualifying salaries for EP and SP-Pass holders will be raised as follows:

EP. This will be increased from the current $4,500 to $5,000. For the financial services sector specifically, this will be increased from the current $5,000 to $5,500; and

S Pass. This will be increased from the current $2,500 to $3,000. For the financial services sector specifically, this will be increased from the current $3,000 to $3,500.

The changes apply to new EP and S Pass applicants only from 1 September 2022 onwards, and to renewal applications from 1 September 2023 onwards. Note that further increases to S Pass Holders’ minimum qualifying salaries will take place in September 2023 and September 2025, with the exact figures to be announced at a later time.

Changes to Foreign Worker Levy (“FWL”) for S-Pass Holders and Work Permit Holders

In respect of S Pass holders, the Tier 1 FWL will be raised from the current $330 to $450 from 1 September 2022. The Tier 1 FWL will be raised progressively to $650 by 2025. No changes to the Tier 2 FWL have been announced.

In respect of Work Permit holders, the FWL for the Construction and Process sectors will be adjusted from 1 January 2024. There will be a decrease in FWL rates for certain categories of workers, as well as a removal of the ‘Man-Year Entitlement (MYW)’ framework for both sectors.

Changes to Dependency Ratio Ceilings (“DRC”) for Work Permit Holders

In respect of Work Permit Holders in the Construction and Process Sectors, the DRC will be reduced from the current 1:7 to 1:5 from 1 January 2024. The Government has indicated that when the DRC cut is implemented, businesses that exceed the revised DRC will not be able to renew existing work permits or hire new foreign workers; but can retain such workers above the DRC until their work permits expire, to avoid disrupting existing operations.

Expansion of Progressive Wage Model

The Government will introduce new measures and enhance existing ones to uplift low wage workers’ wages, as follows:

First, the Progressive Wage Model (“PWM”), which is a set of requirements aimed at increasing wages of low wage workers, will be expanded. Currently, the PWM covers employees in only the cleaning, security landscape sectors. Over the next two years, the PWM will be extended to the retail, food services and waste management sectors. The PWM will also be extended to specific roles in ALL sectors, namely, in-house cleaners, security officers, landscape workers, administrators and drivers.

Second, companies that employ foreign workers will be required to pay ALL their local employees at least the Local Qualifying Salary (“LQS”) (currently $1,400 a month). There is currently no such stipulation to pay at least the LQS. This is expected to take effect from September 2022.

Third, from March 2023, the Government will require their suppliers to be accredited with a Progressive Wage Mark (“PW Mark”). To be accredited, businesses must pay progressive wages and the LQS. Affected businesses must hence stay updated on PWM requirements and ensure they are met.

The Government will introduce the Progressive Wage Scheme to help employers transit to the above measures. We touch on this at Para 8(c) below.

Support for employers

In addition to the above, the Budget included various measures to support employers. These include, without limitation:

Extension of Jobs Growth Incentive (“JGI”). The JGI, which provides salary support to employers to expand local hiring, will be extended by six months to September 2022. Currently, the JGI supports employers of up to 50% of the first $6,000 salary for up to 12 months, for hiring local workers under certain prescribed criteria. This extension will only cover employers hiring local workers aged 40 and above who have not been employed for six months or more, persons with disabilities, and ex-offenders.

Provision of CPF Transition Offsets. In 2019, it was announced that CPF contribution rates for Singapore citizens and PRs aged 55 to 70 years old will be increased in stages. The first increase took effect from 1 January 2022 and the second increase is scheduled for 1 January 2023. The Government will provide businesses with a one-year CPF Transition Offset for each increase. The offset will cover half of the said increase in employer CPF contribution rates.

Introduction of Progressive Wage Scheme (“PWCS”). To help businesses transition to the progressive wage measures (see Section D above), the Government will co-fund employee wage increases with employers under the PWCS. This co-funding will be available for eligible employees earning a gross monthly wage of up to $2,500 and eligible employees earning a gross monthly wage of above $2,500 and up to $3,000. Between these two categories of employees, the PWCS will run for different durations from 2022, and have different co-funding rates.

As a whole, the Government is pushing hard for the interests of locals, especially the more vulnerable employees, such as the older and low wage workers. In 2021, there were already signs of a tightening foreign worker policy, and Budget 2022 is clearly building on that momentum. Moving forward, businesses will face more restrictions and cost in hiring foreign workers. We are of the view that the changes will also have knock on effect on termination of employees, and caution will need to be exercised.

Please ensure that you plan ahead to comply with the changes, in particular the ones brought on by the Progressive Wage Model, since the LQS for local workers employed by companies with foreign workers will affect many businesses.

On the horizon, we also anticipate that legislation as regards discrimination in the workplace will be rolled out soon. We expect that this will be a game-changer and urge businesses to keep themselves updated on the developments.

By Kala Anandarajah, RAJAH & TANN LLP, Singapore, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact singapore@transatlanticlaw.com

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