This article was first published on 2 September 2020 and has been updated.
From 1 September 2020, the qualifying wage criteria for Employment Pass (EP) was raised to $5,000 for financial services sector and to $4,500 for all other industries. The qualifying wage criteria for S Pass was raised to $2,500 with effect from 1 October 2020. Renewals for EPs and S Passes will also be subject to these changes from 1 May 2021.
With the growing focus on local employment during the COVID-19 recession, it is unsurprising that the government has tightened the requirements for work passes for foreign employees. However, many companies may have been caught wrong-footed with the short lead-time and sudden announcement of these changes announced by MOM on 27 August 2020.
In this article, we look at the 4 types of companies we expect to be most affected by the latest increase in wage criteria for Employment Pass and S Pass.
#1 Local Companies Requiring Specialised Or Niche Skills
The increase in qualifying wage criteria may unfairly penalise companies that already find it difficult to hire the necessary talents who have the required specialist skills. Job in advanced research and development and jobs requiring niche or specialised skills are often hard to fill because of the intensive training and expertise required. Often, these skills are hard to find in the local talent pool and thus, companies have little choice but to turn to hiring foreigners. For example, a surgeon specialising in pediatrics and a subspecialty in ICU would be hard to find locally.
While companies may wish to hire locals and may even provide training, these skillsets take time to develop before there are sufficient people in the local talent pool to fill these jobs. In the meantime, these companies have to bear the increased cost of hiring foreigners even if they would prefer to hire someone local.
#2 Companies In Industries That Locals Don’t Find Attractive
Companies in industries, such as construction, cleaning, F&B, manufacturing and logistics, are doubly hit with both a mismatch in jobs and skills and the fact that locals tend not to find these industries attractive. For example, specialist engineering is an in-demand skill that few Singaporeans possess and even fewer aspire to be an specialist engineer in construction, compared to a career in technology.
Niche jobs that in industries that few locals find attractive may also include specialist crane operators, precision machine technicians or F&B managers. Given that fewer locals are willing and able to take on these jobs, companies in industries that locals don’t find attractive may have little choice but to continue to hire foreigners and bear the higher manpower costs.
#3 Foreign Companies That Have A Base In Singapore
Many international companies have set up a base in Singapore, including Dyson, Proctor & Gamble and Novartis. Foreign companies who have headquartered in Singapore or set up regional or branch offices in Singapore may find the new measures restrictive as they may have significant number of staff that they would like to bring over to Singapore.
Additionally, these companies may find it difficult to hire Singaporeans because of interactions with their foreign offices which may require more in-depth cultural knowledge or language proficiencies. For example, a Japanese company based in Singapore may still hire a foreigner because they cannot find a local with sufficient Japanese proficiency and cultural knowledge to interact with their Japanese office.
#4 Companies In The Financial Services Sector
The financial services sector, which includes companies under Singapore Standard Industrial Classification (SSIC) 64, 65, 66, is one of the most obviously affected.
While the median wage in the financial services sector is generally higher than that of other industries, smaller players in the sector may find it difficult to meet the mandatory wage increase. These may cause issues for small fintech startups who need to hire or retain their foreign employees who possess specialist skills or proprietary knowledge while maintaining lean operations.
Build Local Capability While Staying Globally Relevant
In tandem with Jobs Support Scheme and Jobs Growth Incentive, the tightening of work pass requirement is intended to be part of the measures to boost local employment. While companies may find it difficult to hire locals in the near-term and still rely on foreigners for their needed talents, it is also a good time to consider building up the talent capability locally through SGUnited Traineeships.
Onboarding digital technologies to alleviate reliance on manpower may also work for certain job functions. The government’s Start Digital Pack also incentivises SMEs build digital capabilities. For example, SMEs can tap on cloud HR and accounting tools such as Talenox and Xero. Other eligible digital tools include for cybersecurity, digital transactions and digital marketing.
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