Written by: Han Chan Lyung

It has been about 3 weeks since the 2022 Singapore budget speech, delivered by Minister of Finance Lawrence Wong on the 18th of February. The budget speech is not final and requires 2 weeks of debate in the parliament. There have been a number of topics brought forth and discussed. We picked out 3 topics that may be of concern for companies doing business in Singapore, as well as some recommendations on how you may navigate through these changes.

1) GST Increase
    The decision to stagger the increase of GST by 1 percentage point each year until 2024 or 9% comes with the consideration of the recovering economy, inflationary pressure, and the resource constraint some companies may face when adapting to a more rapid increase in GST. While the opposition has brought forth many ideas and rebuttals to how the GST increase could be avoided, the debates concluded with no changes being made to the initial proposal.

It has been 14 years since the last hike in the GST (5% to 7% in 2007) and institutional players may not have the documented know-how on how to navigate this change. Furthermore, the rise in GST will affect the bottom line of companies with higher tax, as well as a decrease in demand they may face with the rise in price that the customers will face.

With two years of the runway being given to adapt to this increase in GST, companies have varying options to maintain their bottom line and cushion the impact of this change, some of which we will discuss at the bottom of this article.

2) Change to the qualifying salaries
    We have experienced a 2 times rise in the minimum qualifying salary throughout the pandemic. There will be another increase of $500 across Employment pass and S Pass minimum qualifying salary ($5,000, and $3,000 respectively). The Tier 1 monthly levy for S Pass Holders will nearly double to $650 (from the current $330). Furthermore, the EP application may get stricter judging from Minister Wong’s quote of “[improve the] complementarity and diversity” of Singapore’s foreign workforce, and to increase certainty and transparency.”

Potential reasons for the increase aside, this will undoubtedly result in the need to shift both the hiring strategy and manpower constitution of the company; MNCs and companies with larger EP and S Pass holders in their payroll are more likely to need more adjustments to be made in the coming years; we can’t be sure that this change will be the last in a long while, more increases might be up ahead as the governing body of Singapore balances the need for a global workforce in Singapore’s economy, and maintaining a healthy job market for Singaporean talents.

It is too early to say how this will influence the manpower dynamic overall, and the way to navigate will vary based on industries and company traits. However, we foresee that there will be changes made in the near future, they might be announced as soon as the mayday rally of next year based on the quote “This is where we have Singaporeans doing the jobs, but we need to continually adjust our rules to ensure better complementarity between our foreign and local workforce.” The changes coming may not be quantitative but more qualitative. Adjusting the traits/entitlement of the applying company and employees.*

3) Grants for digital capability and productivity
    With the proposed changes above, it becomes necessary for companies to increase the Total factor productivity; the amount of value created after factoring in the capital investment and Labour cost. The mode that the Singapore government is promoting for this increase is by promoting digital capabilities of the workforce, making it possible to cut down waste and make work more efficient. Many forms of inertia to this change exist, one of which is the cost of implementing the equipment, software, and training needed to adopt digitalisation. 

With the pandemic and the current economic situation affecting the bottom line of many companies, it becomes difficult to make the decision to make this transformation easily, causing the productivity to stagnate, thus fall in profit, leading to lack of investment and being trapped in a vicious cycle of decreasing productivity. To mitigate this, $100 million has been set aside to provide grants to businesses with plans to digitise their operations and provide training for their workers. 

4) What to expect

During the debate, Mr. Ang Wei Neng, an MP for West Coast Group Representation Constituency (GRC) proposed a radical idea of implementing a 5-year time stamp on University degrees, which will expire unless the citizens constantly upskill themselves. It was deeply unpopular and even the author of this article finds his idea troubling. However, the heart was in the right place trying to emphasize the importance of continued learning and upskilling everyone needs to undertake, thus benefiting themselves and the nation as a whole. Singapore is a unique nation where the lack of resources other than Geographical and Human capital makes it difficult to live off of harvested natural resources to survive. Thus the contribution of each and every person living becomes important for the survival of the nation, thus the individual’s drive to make the best use of one’s skills to properly become aligned with the goal of the nation; much more so than other nations. Thus the increase in wealth tax and higher income tax brackets serves to help better facilitate the fulfillment of the individual’s social responsibility, creating value that can be used to better the lives and conditions of all in the nation. 

Thus many of the initiatives proposed in the budget work together to align the goal of companies, and employees alike to the goal of the nation in creating a vibrant state of Singapore. 

With such changes to the business and labor market landscape over the horizon, we have heard from many of our clients on advice on how to navigate through these times and as minister Wong puts it, “position ourselves now for the challenges and opportunities of the decade ahead.”, and the most important factor is with having the right people for the job. And what better way could there be to find the right people for the job openings. Be it those who have the right skills sets already ready for deployment, or those who you are open to giving a chance and train while waiting for the right time. 

Whichever your strategy, Reeracoen is here for you, to help you search for your candidates, and give you advice, tips, and information on navigating these challenging times.

Feel free to contact us, be it to your representative with us, at our inquiry page, or email our marketing at marketing@reeracoen.sg to connect you to our trusted advisors you can schedule a call with.

Thank you for reading this article, hope to see you back here again. Hope to hear from you soon!

*At the time of writing this article, the new COMPASS framework was not announced. The new framework will be covered more in-depth in a separate article in the near future