New restrictions on foreign worker visas will affect SMEs, many of whom rely on a mix of foreign and local staff. We explore different management strategies as well as how to employ various government grants, to deal with the labour crunch.
By the myBusiness techblog team
SMEs, like larger firms, have to carefully balance labour costs to stay productive while keeping an eye on profit. With many relying on a mix of foreign labour and locals, some new restrictions to foreign worker visas will undoubtedly throw the balance off for some employers.
Thankfully, there are plenty of schemes and grants such as the Wage Credit Scheme (WCS) from the government to help smaller firms cope with these changes, and shift the balance of labour back to Singaporeans.
First, to summarise, foreign workers in Singapore are tiered into different types of work passes.
- P1 holders need to earn a monthly salary of at least $8,000,
- P2s have to earn at least $4,500 (raised from $4,000) and
- Q1s have to clear the $3,000 mark (which used to be $2,800).
Workers in all three tiers need to have qualifications that the Ministry of Manpower (MOM) will assess before granting the passes.
S Pass and Employment Pass (EP) holders are typically mid-skilled workers, and they too will have their qualifications and work experience assessed. The number of S Pass employees that a company can hire is also capped at 20 percent of the total headcount.
Reports suggest that the tightening has worked: for the first time in a decade, the number of EP holders fell last year from 175,400 in 2011 to 173,800.
SMEs often rely on foreign labour within their headcount because some foreigners from emerging markets offer good work experience and skill sets, but may demand lower salaries compared with locals. While the new, tighter restrictions may force some SMEs to restructure their staff make-up, there are areas the government is keen to help with local hires, to tilt the balance back to Singaporeans while keeping SMEs in business.
Increasing compensation for local staff
One of the government’s grants, to impact employers directly, is the Wage Credit Scheme (WCS). It’s basically a way for employers to bump up salaries to locals to keep attracting Singaporeans, while alleviating the financial cost of that increase.
The government will co-fund 40 percent of an increase given to an employee between 2013 and 2015.
Employees eligible for this must be Singaporean, earn a gross monthly wage of less than $4,000, and has been on the payroll for at least three months in the year. Employers don’t need to submit applications to IRAS—you’re automatically covered if you’re registered in Singapore.
But it’s more than just compensation. Getting more out of staff isn’t just about dangling the biggest carrot. Taking your existing staff and giving them a boost to their skill sets can mean huge differences for productivity, and how much value you get out of them.
One source of relief to benefit employers directly in this area is the Workfare Training Support (WTS) Scheme. These encourage companies to send their workers for training, so as to build up their skills and bring more value to employers. The government will grant a massive 90 percent or 95 percent of eligible course fees (an eligible course is one pre-approved by the WDA), including the payroll of absent workers who are on course.
As a bonus, older workers can get up to $400 a year as an incentive to complete the requisite training, as well.
Another training programme called Max Talent, run by the WDA and ASME (Association of Small and Medium Enterprises) aims to put more professionals and higher-skilled executives into SMEs, by matching these workers with suitable openings in SMEs. The programme will train workers and provide placement support within SMEs up to six months after they’ve graduated, with an additional grant of $5,000 to be paid out to SMEs who hire professionals through the programme.
It’s clear that these grants are targeted at some of the more common pain points for SMEs, but companies should also consider a separate pillar of productivity—technology. The adoption of automation and new software could pay off in huge dividends for firms, because harmonising processes provides long-term benefit by “trimming the fat” from time and resource-wasting activities in the company.
Technology can also reduce the reliance on expensive manpower, especially those with hard-to-find skills. The government has a grant for that too. SMEs get to claim as much as 70 percent of their total IT costs, under the the iSPRINT programme, which was created two years ago in the hopes of encouraging startups to adopt automation.
Given the competitive economy, we know that SMEs feel the heat of balancing labour costs against margins more than bigger counterparts. Costs going up and down are felt more quickly in an SME, which has smaller resources than big firms. It’s perhaps time to consider technology to give your operations a boost, and give your staff new tools to help you stay in business.