Published 10 March 2011
The Business Times
By Chuang Peck Ming
Higher salary thresholds may nudge employers to be more selective in hiring foreign talent
The foreign worker levy isn’t the only screw that the government is applying to tighten the inflow of foreign workers. It has also turned its attention to foreigners doing white-collar jobs and raised the bar for them.
Manpower Minister Gan Kim Yong yesterday unveiled in parliament higher monthly salary thresholds for Employment Pass (EP) holders, who are typically foreign professionals, and S Pass holders, who are mid-skilled foreign workers.
The salary floor has also been raised for locals to be deemed full-time workers – a status that allows employers easier access to foreign labour.
The move to raise the salary thresholds underscored how serious the government is on easing Singapore’s dependence on foreign workers – and pushing for higher productivity – not only at the bottom of the job ladder, but also at the top.
The qualifying pay thresholds for Q1, P2 and P1 EPs will go up from $2,500 to $2,800, $3,500 to $4,000 and $7,000 to $8,000 respectively.
For the S pass, which caters to mid-skilled foreigners, the salary threshold is raised from $1,800 to $2,000.
The changes will take effect from July 1 this year.
Employers of existing EP and S Pass holders will be given a one-time renewal of up to two years to meet the salary thresholds. Existing pass holders who cannot meet the new salary criteria may also apply for lower pass types for which they are eligible.
‘Given the tight market for PMETs (professionals, managers, executives and technicians), it is not surprising that salaries of local PMETs have moved up in recent years,’ Mr Gan said during the budget debate on his ministry.
‘We need to raise the qualifying salary thresholds for EP and S Pass applicants accordingly to keep pace with the local PMETs and to encourage companies to be more selective in hiring foreign talent who can contribute to our economy.’
Agreeing, Member of Parliament Ho Geok Choo, who is also chief executive officer of Human Capital Singapore and president of the Singapore Human Resources Institute, said that it was a logical move.
‘Political motives may be involved but the bigger picture is local salary levels have gone up,’ she told BT. ‘If you don’t do it, it will be cheaper to hire only foreign talent.’
By levelling the pay of local and foreign employees, Madam Ho said that Singapore would be open to only the best and brightest of foreign talent – or those that can be upskilled.
Coming on top of the higher foreign worker levies – the S Pass levy will rise by between $190 and $300, for example – the increase in the salary thresholds will be a double whammy for employers dependent on foreign workers.
‘The government makes no apology about it,’ Madam Ho said. ‘They think it’s the right move and at the right time.’
Adds David Leong, managing director of recruitment firm PeopleWorldwide Consulting: ‘The increases are targeted to equalise wage differentials between the local and foreign workforce. This change is a real structural change that has huge impact on hiring and changes the decision-making process.’
David Ang, executive director of the Singapore Human Resources Institute fears that there will be short-term pains for employers. ‘It takes time to train employees and to increase productivity,’ he said.
Also painful is the increase in the salary threshold for part-time employees, which will go up from $650 to $850.
This salary threshold is to ensure that local workers are employed meaningfully, and not hired on token pay just to allow the employer to have access to foreign workers. Workers who fall below the threshold salary are deemed to be part-timers – and employers will need two part-timers to be counted as one full-time worker in meeting the foreign worker dependency ratio caps.
But Madam Ho noted that while the higher levies and salary thresholds may, on the one hand, tighten the inflow of foreign workers, the beefed-up productivity and innovation fund, on the other hand, allows employers to upgrade their foreign workers – and prolong their stay in Singapore.
Mr Gan pointed out that the levy increases would be spaced out until 2013 – and raise labour cost by only about 1.7 per cent.
‘If businesses tap on the funding from the various government schemes to embark on productivity improvements and save on foreign manpower, the cost impact will be significantly lower,’ he said.