Singapore Finance Minister Lawrence Wong delivered the 2022 Budget Statement on February 18, 2022. This update provides key employment highlights.
Support for low-wage workers
Extension of the Progressive Wage Model (PWM)
The PWM currently prescribes minimum wages related to worker responsibilities and training, for Singaporean citizen and permanent resident workers in the cleaning and security sectors, as well as for landscape companies listed on the NParks Landscape Company Register. .
The PWM is regulated by the respective main industry agencies. For example, for the cleaning industry, sections 80F(1)(a)(ii) and 80G(5) of the Environmental Public Health Act provide that an applicant for a cleaning business license issued by the National Environment Agency must submit, among other things, a progressive salary plan. The plan shall specify a base salary for Singaporean citizen and permanent resident cleaners which is on an increasing scale based on seniority, responsibilities, cleaning work experience and training received and which shall not is not less than the amount specified by the order of the Commissioner of Labor.
PWM will now be extended to the retail, restaurant and waste management sectors, as well as housekeepers, security guards, landscapers, administrators and drivers across all sectors.
Local Eligible Salary Requirements (LQS)
From September 1, 2022, employers who employ foreign employees are required to pay at least the LQS, which is currently set at S$1,400 per month, to all Singapore citizen and permanent resident employees. The LQS is typically used to determine an employer’s work permit and S-pass quota.
The requirement will apply even if the employer has excess quota or if the PWM does not apply to the employer.
Additionally, from March 2023, the Singapore government will require all of its eligible suppliers to be accredited with the new progressive salary mark (meaning they must comply with PWM and LQS requirements) when accepting government contracts. .
Progressive Wage Credit Scheme (PWCS)
Under the PWCS, the Singapore government will co-fund wage increases and provide transitional wage support to employers for:
- raise wages to accommodate upcoming mandatory wage increases for low-wage workers covered by PWM and LQS requirements; and
- voluntarily raise the wages of the lowest paid workers.
Employers must make an average gross monthly salary increase of at least S$100 per year to qualify for the aid for that year.
Payments will be credited automatically by the Inland Revenue Authority of Singapore in the first quarter of the year following salary increases.
Enhancement of the Workfare Income Supplement (WIS)
The WIS provides cash and Central Provident Fund payments to low-wage older workers and working disabled people. The WIS will be enriched, among other things:
- raising the qualifying income ceiling from the current S$2,300 to S$2,500 per month to allow more workers to benefit from the WIS;
- extending the WIS to young workers aged 30 to 34 (previously only workers aged 35 or over were qualified); and
- increase payment amounts.
Changes to work pass requirements
Job pass holders
Minimum qualifying wages will be increased as follows:
Minimum qualifying salaries for EP applicants in their mid-40s will also be increased to up to S$10,500 for non-financial services sectors and up to S$11,500 for financial services sectors.
The Singapore government will also refine PE application processes to improve the complementarity and diversity of the overseas workforce and increase certainty and transparency for businesses.
S pass holders
Minimum qualifying wages will be increased as follows:
* To be announced closer to the implementation date based on Associate Professional and Local Technician salaries prevailing at that time.
Minimum eligible salaries for S Pass applicants in their 40s will also be increased to up to S$4,500 for non-financial services sectors and up to S$5,500 for financial services sectors this year.
The Tier 1 S Pass Foreign Worker Levy rate will gradually increase from S$330 to S$650 by 2025.
Work permit holders
Singapore will adjust work permit policies in the construction and processing sectors:
- the cap on the dependency ratio (DRC) will be reduced from the current 1:7 to 1:5; and
- the current Man-Year Entitlement (MYE) 1 framework will be replaced with a new levy framework that will encourage employers to support more off-site work and employ more, more qualified work permit holders.
These changes will come into effect on January 1, 2024.
Contributions to the Central Provident Fund (CPF)
CPF contribution rates for employees aged 55 to 70 will increase. The first increase in contribution rates was implemented this year (see our update); in the next two years, the rates will continue to increase by 3 to 4%.
To mitigate rising business costs due to the increased CPF contribution, the Singapore government will provide employers with a transitional wage compensation equivalent to 50% of the increase in employers’ CPF contribution rates in 2022.
Additionally, with rising living standards, the CPF Basic Retirement Sum (which is the minimum amount a CPF member must set aside in their retirement account when they reach age 55 years in order to be able to receive a monthly payment during his retirement) will be increased by 3.5%. per year for the next five cohorts turning 55 from 2023 to 2027 to provide for higher monthly CPF payments.
Key points to remember
Providing greater support for low-wage local workers appears to be a key theme in this year’s budget statement. Employers whose workforce is made up of a large proportion of low-wage local workers must ensure that they remain compliant.
In addition, the employment of foreign labor will continue to be in the spotlight, given the increase in minimum wage requirements for Pass Emploi and Pass S holders, as well as the tightening of the DRC. for the construction and process sectors.