Higher foreign employee salaries to impact business costs

[ASEAN NOW News]

SINGAPORE: The increase in minimum qualifying salaries for new Employment Pass (EP) and S Pass applicants could make it harder for businesses to recover from the existing economic loss brought about by the pandemic, according to businesses and industry analysts. 

 

Expats file photo

 

According to CNA, companies should continue to build a strong local workforce by reskilling their local employees to mitigate this. 

 

The minimum qualifying salaries for new Employment Pass (EP) and S Pass applicants will rise by S$500 from September, Finance Minister Lawrence Wong said in his Budget speech on Friday (Feb 18).

 

The minimum qualifying salary for new EP applicants will go up to S$5,000 from the current S$4,500.

 

The qualifying salaries for older EP applicants, which increase progressively with age, will also be raised in tandem.

 

For renewal applications, these changes will apply from September next year to give businesses sufficient time to adjust.

 

At the same time, the minimum qualifying salary for new S Pass applicants will go up to S$3,000 from the current S$2,500. Thereafter, the minimum qualifying salary for new S Pass applicants will be raised in September next year, and again in September 2025.

 

Direct impact on costs

 

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

 

Mr Phua shared that about 29 per cent of SFIC member companies fall under their contract manufacturing membership cluster, and their S Pass to EP ratio is about 4:1. 

 

Under these SFIC companies, S Pass holders tend to hold the roles of site supervisor, project coordinator, onsite installers and are tasked with a general work scope that includes manual material handling and delivery. 

 

EP holders are usually hired to become draftsmen, 3D visualisers, project managers or handle business development roles.

 

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

 

The raise in qualifying salaries for EP holders could also be “prohibitive,” and potentially “deter” some companies from relocating expatriate junior professionals, suggested country analyst for Asia under the Economic Intelligence Unit, Yu Liuqing.

 

“Probably for local companies or multinational companies, if they want to commence their graduate programmes or hire a junior software engineer, this salary can be prohibitive to some,” he said. 

 

“For the (adjustment) applied to the financial service sector as well, such as comparatively lowly paid financial services sector businesses, say auditing, which might be prohibitive too.” 

 

In the financial services sector, where the salaries are higher, the minimum qualifying salary for new EP applicants will go up to S$5,500 from the current S$5,000, according to the Budget announcement.

 

“It’s generally a market-oriented approach, but again, I'd like to raise (the point) that in some sectors there is already an acute domestic talent shortage, and then you raise the threshold wage for EP. That will only make business harder,” added Mr Yu. 

 

Similarly, managing director of recruitment agency Michael Page Singapore, Nilay Khandelwal, told CNA sectors that rely more heavily on these work pass holders would have to “adjust to what comes next.” 

 

For instance, if an existing EP holder is up for pass renewal, the company’s human resources department would need to assess whether these individuals would be able to have their EP permit renewed or be “downgraded” to an S Pass, he said. 

 

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

 

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