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Raising minimum qualifying salary of Singapore work pass holders may not be long-term solution, say companies
SINGAPORE, Aug 29 — While higher manpower costs would be inevitable with the latest changes to salary requirements for work pass holders, companies contacted by TODAY said that the impact on costs is not something they are too concerned about.
Instead, they, along with some industry observers, questioned whether these policy directions will achieve the desired effect — of getting companies to hire more Singaporeans — given the difficulties in finding residents to fill some job positions. Some also wonder whether the effect could be sustained.
On Thursday (August 27), the Ministry of Manpower (MOM) raised the minimum salary requirements for Employment Pass and S Pass holders.
To encourage more companies to hire more Singaporeans in this weak economic climate, the minimum qualifying salary for Employment Pass holders has been raised by S$600 (RM1,840) to S$4,500, while it would be raised by S$100 to S$2,500 for S Pass applicants.
For the first time, there will also be a separate salary criterion for Employment Pass holders working in financial services: The minimum qualifying monthly salary for these workers will be further raised to S$5,000 later in the year.
While businesses said that they may be able to find Singaporeans willing to take up some roles given that many are out of a job due to the Covid-19 pandemic, this may not be a long-term solution.
“In today’s job market, it’s much easier to find a Singaporean,” Toby Koh, managing director of Ademco Security, said.
“But it may be a temporary thing. Eighteen months down the line, when the economy recovers and we are back to square one, finding locals may be more difficult then.”
Impact on business costs
They also said that the increase does not affect the manpower costs for their employees on Employment Passes since they are already paying these foreigners wages that are higher than the minimum qualifying salary.
Jeremy Fong, chief executive officer of Fong’s Engineering, said that he is already paying one of his Japanese staff members close to a five-digit salary. The employee is able to work on the research and development, as well as the industrial design of high-value medical devices.
His company manufactures these medical devices and sells them to global pharmaceutical companies.
The increase for the minimum salary requirement of S Pass holders would eat into his bottomline more. Even then, it would not be much since it is just S$100.
Alessandro Perrotta, chief executive officer of manufacturing firm Interplex Holdings, also said that the impact on his company would be minimal because an engineer with the necessary expertise and experience would already be paid above S$4,500.
“Today, I don’t think you can find any talent (in the technical field) at this (minimum) salary,” he said.
As for Koh of Ademco Security, he said that he would be willing to pay the extra S$100 for his S Pass employees when it is time for their passes to be renewed. The foreign workforce in his security company are mostly S Pass workers.
“To me, it’s a non-issue. If I have to pay then I have to pay. We have good workers. It’s costlier for me to retrain somebody and reintegrate a new person,” he said.
The greater concern for him is whether MOM would renew his company’s S Pass applications when they expire.
Selena Ling, head of treasury research and strategy at OCBC bank, said that the new salary requirements would probably affect labour-intensive sectors. Sectors with higher-paid workers would likely remain unaffected.
MOM said that the financial services sector pays generally higher salaries than others, is still hiring, and has been attracting strong interest from Singaporean applicants with good qualifications.
In response to TODAY’s queries, OCBC said that 90 per cent of its 7,000-strong workforce here are Singaporeans.
Jason Ho, the bank’s head of human resources, said: “We adhere closely to the Fair Consideration Framework (FCF) that sets out the requirements for employers to consider the workforce in Singapore fairly for job opportunities. Our mantra of ‘We See You’ when hiring candidates emphasises that we look at an applicant’s skills, experience and values, rather than their age, gender, nationality or race.”
A DBS bank spokesperson said that MOM’s move would have minimal impact on its operations, since more than 90 per cent of its 12,000-strong workforce here are Singaporeans.
“DBS is supportive of MOM’s efforts to develop a strong pipeline of local talent in the finance sector, and we remain committed to hiring and developing a Singaporean core in our workforce,” the spokesperson said.
Fong of Fong’s Engineering said that he has embarked on a new hiring strategy of tying up with educational institutions here for attachments and internships even before Thursday’s changes.
The Covid-19 pandemic made him realise that having a workforce with a high percentage of foreigners could potentially create a lot of issues. Many of his Malaysian staff memebrs were stuck on either side of the Causeway when the country went into lockdown in March, for example.
Firms have to ‘think harder about hiring locals’
Commenting on the changes, senior economist Irvin Seah from DBS said that the salary adjustments are not exorbitant, but it will still eat into companies’ manpower costs.
“In such a difficult economic climate, the last thing companies want is to increase operating costs. This will force them to think harder about hiring locals,” he said.
Raising the minimum qualifying salary effectively raises the bar to ensure that companies bring in capable talents from overseas.
Instead of it being a minimum wage for foreigners, Seah said that it is more a mechanism to ensure that those being hired are of a certain calibre.
Beyond the salary adjustments, he said that the focus should be on the totality of changes that MOM announced, including expanding FCF advertising requirements to S Pass-equivalent jobs as well as lengthening the duration that jobs needs to be advertised on the MyCareersFuture job portal from 14 to 28 days.
While there are other policy levers in place, such as tightening of the quota or increasing of levies, the quotas have already been tightened for S Pass workers in sectors such as construction.
Seah said that quotas cannot be imposed on Employment Pass holders due to obligations that Singapore has to fulfil in the free trade agreements it has signed with other countries.
More importantly, he added, the changes send a clear message to both foreign and domestic companies of the Government’s objective: To foster a Singaporean core workforce.
“The policy adjustments will have a big influence in terms of hiring practices going forward that will ultimately benefit Singaporeans The effect is going to play out over the next few years,” Seah said.
However, Dr Chua Hak Bin, an economist with MayBank Kim Eng, said that raising the minimum qualifying salary may not deliver the intended objective of increasing employment of Singaporeans over the longer term.
Some firms may be encouraged to do so but the higher wage costs and smaller talent pool may also discourage others from investing and expanding in Singapore, which will eventually reduce job opportunities for Singaporeans.
“A successful global financial centre stays on top of the game by being able to draw and hire from a global talent pool,” he said.
Kurt Wee, the president of the Association of Small- and Medium-sized Enterprises, agreed. He said that wages have been going up over the last few years without a corresponding increase in productivity, so businesses have been absorbing higher costs all these time.
Singapore companies may respond to the Government’s call and put in more effort to hire from the resident workforce, but it may inadvertently lead Singaporean workers to be less resilient and competitive, he added.
Singaporeans also need to take on some responsibility and recognise the foreign workforce as a complementary manpower resource in the way they supplement knowledge or skills that is lacking among themselves, Wee said.
“You can’t have a meaningful debate without recognising this.
“It’s easy for anybody to create rhetoric and political pressure and say we must hire Singaporeans first, but we are already doing that.
“Are there unfair or discriminatory practices in some companies? I’m sure there are. But this is an issue with every country,” Wee added. ― TODAY
Source: https://www.malaymail.com/news/singapore/2020/08/29/raising-minimum-qualifying-salary-of-singapore-work-pass-holders-may-not-be/1898253