28 April, 2016
Singapore's Budget 2016, presented to Parliament on 24 March 2016, contains several items of interest to employers and employees:
- Special Employment Credit modified and extended from 1 January 2017 – 31 December 2019;
- Workfare Schemes enhanced from 1 January 2017 onwards;
- Foreign worker levy changes for Services and Construction Work Permit holders, and for all S Pass holders;
- Tax deductions for Business and IPC Partnership Scheme from 1 July 2016 – 31 December 2018;
- 'Adapt and Grow' support for job-seekers; and
- TechSkills Accelerator for new ICT skills.
1. Special Employment Credit modified and extended from 1 January 2017 – 31 December 2019
The Government will pay employers a Special Employment Credit ("SEC") twice a year to offset the wages of older Singaporean employees and Singaporean employees with disabilities, whose wages do not exceed S$4,000 per month. "Monthly wage" is gross salary as computed from the CPF contributions, and includes components such as overtime, bonus and leave pay.
| Employees | Currently | After 1 January 2017 |
|---|---|---|
| Aged 50 to 54 | Up to 8% of monthly wage | No SEC |
| Aged 55 to 59 | Up to 8% of monthly wage | Up to 3% of monthly wage |
| Aged 60 to 64 | Up to 8% of monthly wage | Up to 5% of monthly wage |
| Aged 65 and above | Up to 8% of monthly wage (*In addition to the existing wage offset of 3% for re-employment of employees aged 65 and above until the re-employment age is raised by legislation in 2017) |
Up to 8% of monthly wage (*In addition to the existing wage offset of 3% for re-employment of employees aged 65 and above until the re-employment age is raised by legislation in 2017) |
| With disabilities | No SEC, unless aged above 50 years | Up to 16% of monthly wage (capped at S$240) |
The SEC wage offset is in addition to the Wage Credit Scheme ("WCS") that is being phased out in 2017. The WCS, first announced in Budget 2013, allows employers to receive co-funding from the Government of 40% of qualifying wage increases given to Singaporean employees earning up to S$4,000 per month. In Budget 2015, it was announced that WCS would be extended until 31 December 2017, but at a lower rate of co-funding (20%).
With the SEC, employers are encouraged to hire and retain older workers and workers with disabilities. Employers are also encouraged to re-employ workers who wish to continue working past their retirement age. When considering wage increases in 2016, employers will be able to factor in the twice-yearly Government co-funding through SEC (to offset total wages) and annual Government co-funding through WCS (to offset wage increases) for qualifying Singaporean employees earning up to S$4,000 per month.
2. Workfare Schemes enhanced from 1 January 2017 onwards
The Government will enhance the Workfare Income Supplement ("WIS") Scheme and the Workfare Training Support ("WTS") Scheme to benefit more workers.
The WIS was introduced in 2007 to provide a short-term cash payout and long-term CPF supplement to reward the work of older lower-wage Singaporeans, and to encourage them to stay employed. It also provides these workers with funding support through subsidies for training to upgrade their skills.
The WTS complements WIS by providing a 95% course fee subsidy and 95% absentee payroll funding for employers who send eligible workers for training. It also provides a Training Commitment Award of up to S$400 a year for WIS recipients who have completed the required training modules.
| Workfare Schemes | Currently | After 1 Jan 2017 |
|---|---|---|
| Qualifying income ceiling for WIS and WTS | S$1,900 per month | S$2,000 per month |
| Maximum amount of payouts under WIS | S$3,500 per year | S$3,600 per year |
| Assessment and making of payments under WIS | Quarterly basis | Monthly basis |
| Eligibility criteria for persons with disabilities under WTS | Aged 35 years and above | Aged 13 years and above |
| Eligibility criteria for Training Commitment Award under WTS (cash awards of up to S$400 per year) | WIS recipients who undergo sustained training under WTS | All Singaporean workers aged 35 years and above, and all persons with disabilities aged 13 years and above, who earn up to S$2,000 per month. |
3. Foreign worker levy changes for Services and Construction Work Permit holders, and for all S Pass holders
Foreign worker levies in the following categories and sectors will increase:
| Sector | Work Passes | Current Levy | Changes in Levy |
|---|---|---|---|
| Construction | Basic tier R2 work permits | S$550 |
S$650 (1 July 2016) |
| S$700 (1 July 2017) | |||
| Services | Basic tier R2 work permits | S$420 | S$450 (1 July 2016) |
| Tier 2 R2 work permits | S$550 | S$600 (1 July 2016) | |
| Tier 3 R2 work permits | S$700 | S$800 (1 July 2016) | |
| All sectors | Basic Tier S Passes | S$315 | S$330 (1 July 2016) |
| Tier 2 S Passes | S$550 | S$650 (1 July 2016) |
While there is no change in levy for man-year-entitlement ("MYE") waiver workers in the construction sector (currently S$600 and S$950 for R1 and R2 workers respectively), the minimum work experience requirement for a worker to qualify for the waiver will be raised from 2 years to 3 years from 1 July 2017. Levy increases for the marine and process sectors have been deferred for one year due to challenging business conditions in those sectors.
In light of the levy increases and MYE-waiver changes in the construction and services sectors, employers who rely on such foreign manpower will need to continue to assess how they can better make their businesses more 'manpower-lean' and productive.
4. Tax deductions for Business and IPC Partnership Scheme from 1 July 2016 – 31 December 2018
From 1 July 2016 until 31 December 2018, the Government will give a 250% tax deduction on costs incurred by a business in supporting its employees who want to volunteer and provide services to Institutions of a Public Character ("IPC"). This deduction is subject to a yearly cap of S$250,000 per business and S$50,000 per IPC.
Employers who wish to support corporate social responsibility engagement with IPCs will now have additional incentives to encourage their employees to do so. Employers may wish to have clear policies on flexible working arrangements to enable employees to volunteer time or be seconded to IPCs for this purpose.
5. 'Adapt and Grow' support for job-seekers (details to be announced)
The Ministry of Manpower will enhance employment support through the 'Adapt and Grow' initiative, to help job-seekers adapt to changing job demands and to grow their skills.
The initiative involves:
- Wage support schemes will be expanded to encourage hiring of job-seekers, including those affected by retrenchments or business restructuring; and
- Professional conversion programmes to retrain and upskill mid-career jobseekers, and enhanced efforts to match them in jobs with SMEs. In particular, new programmes will be launched in sectors such as Design and Infocomm Technology ("ICT").
Employers who wish to hire additional staff now can draw from a better qualified and skilled pool of human resources, as job-seekers can benefit from the 'Adapt and Grow' initiative to train and upskill themselves.
6. TechSkills Accelerator for new ICT skills (details to be announced)
A new TechSkills Accelerator will be set up as a skills development and job placement hub for the ICT sector. It will identify specific skills in demand and work with specialised training providers to meet these complex demands, develop industry-recognised skills standard and certification, and work with anchor employers to commit to hiring and paying based on certified skills proficiency rather than academic qualifications alone.
The TechSkills Accelerator is part of the broader effort to enable workers to quickly acquire expertise and skills in the ICT sector. Employers will benefit from being able to train and upskill their existing workforce, and to draw from a better qualified and skilled pool when making hiring decisions.
What this means for employers
The effect of Budget 2016 for employers is twofold:
- the Government will support companies to increase productivity while remaining manpower-lean, through technology improvements and better use of automation; and
- the Government will facilitate the creation of a talent pool of highly-skilled and trained workers who are adaptable to changing job conditions.
Employers are encouraged to take advantage of these Budget 2016 measures to make their organisations more productive
and resilient in any economic conditions.
For further information, please contact:act:
Susan de Silva, Partner, Bird & Bird
susan.desilva@twobirds.com
