Small and medium-sized enterprises (SMEs) are bracing themselves for a labour shortage as legal quotas set for foreign worker hires continue to be tightened.

With the labour crunch, SMEs, which are also struggling with higher labour costs and levies, will see their businesses affected significantly.

Those in the service and manufacturing sectors are expected to be the most badly affected, with many finding it difficult to hire local workers for jobs that are currently not machine-replaceable.

SMEs will face problems filling these jobs as younger Singaporeans are unwilling to take them up.

According to the Straits Times (ST), many manufacturers are planning to relocate to cut labour costs while some in the services industry are hiring more elderly workers.

Companies that ST spoke to said that the quotas have caused them to put a hold on expanding their businesses and some will even consider downsizing.

While owners of Royal Pets Paradise, a pet care service provider, have trouble finding talented and willing local pet groomers, Chinese medicine maker Hockhua Tonic is forced to consider relocating as there are no machines which can differentiate Chinese medicinal herbs the way human beings do.

Around 8,500 firms in the service sector and 500 in manufacturing will be affected by the quotas, the Ministry of Manpower (MOM) told the paper, adding that most firms will not be affected as they are not heavily reliant on foreign hires.

Difficulties in recruitment have nonetheless forced SMEs to think of ways to increase productivity, with some 31,000 SMEs receiving grants provided by the Inland Revenue Authority of Singapore's (IRAS) Productivity and Innovation Credit scheme last year, ST reported.

ljessica@sph.com.sg