3 Ways Budget 2024 Measures Will Raise Costs For Business

Announced in February each year, the Singapore Budget announcement has far-reaching implications on both individuals and businesses in Singapore. 

For businesses and their workers, it should never be seen as a zero-sum game. If workers benefit more from policy changes during the Budget announcement, it does not mean that businesses lose out. Similarly, if businesses benefit more, it does not mean that workers are paying the price.

During DPM Lawrence Wong’s Singapore Budget 2024 speech, he announced a slew of measures that will impact businesses – and here are 5 ways it may cost more to run a business in Singapore.

Read Also: 10 Things Businesses Need To Know About Singapore’s Budget 2024

#1 Local Qualifying Salary (LQS) Will be Raised To $1,600

From 1 July 2024, the LQS will be raised to $1,600 from $1,400 – representing a close to 15% pay raise for such employees. 

The LQS is the minimum wage that businesses need to pay their local employees to be eligible to hire foreign workers. 

This will serve to uplift lower-wage workers, in line with broad wage growth, and maintain foreign workforce controls.

Based on the new LQS, for every local worker earning at least $1,600, businesses can hire 1 foreign worker. For every local worker earning between $800 to $1,600, businesses only get a 0.5 foreign worker count.

Read Also: Local Qualifying Salary: 5 Things You Need To Know About LQS (And Whether It Is A Minimum Wage For Singapore Workers)

#2 Increase Senior Workers CPF Contribution Rate

Since 2022, the Government has been raising the CPF contribution rate for senior workers – aged 55 to 70 – with a target rate by about 2030. 

This is to help older workers set aside more for their retirement adequacy. The next round of increase will come in 2025, when senior workers aged 55 to 65 will have to contribute 1.5%-points more to their CPF accounts.

Both the senior workers and businesses have to contribute towards this CPF contribution increment. Employees will bear 1%-point of the increment, while business will bear 0.5%-points. 

In the interim, the Government has extended the CPF Offset transition Scheme to reimburse businesses for half of the additional amount they pay (i.e. 0.25%-points).

Read Also: Senior Worker CPF Contribution Rates And CPF Transition Offset Scheme: What Businesses Need To Know

#3 SkillsFuture Level-Up Programme 

The SkillsFuture Level-Up Programme gives workers above 40 a $4,000 one-time SkillsFuture Credit top-up in May 2024 to offset the costs of enrolling into selected diploma, post-diploma and undergrad programs, as well as courses for Progressive Wage Model sectors.

This group of mid-career workers (i.e. those 40 and above) will also become eligible for a second subsidised full-time diploma programme at Polytechnics, ITE, and Arts Institutions (i.e., Nanyang Academy of Fine Arts and LASALLE College of the Arts).

Those who undertake full-time long- form training will also be eligible for a SkillsFuture Mid-Career Training Allowance, worth up to 50% of their salary (capped at $3,000). This is to partially offset any income loss.

While this may not impact businesses directly, it will be prudent to note that employees will be heavily incentivised to leave work to pursue full-time courses to upgrade themselves, especially if they are not paid sufficiently or progressing in their career.

For businesses, they may lose employees more frequently. The cost to search for and train the worker in the role will also be a burden for employers.

In the initial years, it is also not unexpected that many people utilise this programme – potentially squeezing the labour market.

Read Also: Singapore Budget 2024: 24 Things That Will Impact Singaporeans Financially

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