Hold off further increases in foreign worker levies

We thank Dr Edmund Lam for his feedback on our Budget 2015 recommendations ("Not feasible to reduce cost of hiring foreign labour"; last Saturday).

The SME Committee's (SMEC) rationale for the recommendations to defer further planned increases in foreign worker levies and to remove the foreign worker levy for S-Pass holders is to help businesses manage the cost of hiring foreign workers.

The overall cost of doing business has increased and wage cost is a contributing factor. In the Singapore Business Federation (SBF) 2014/2015 National Business Survey of about 1,000 members, 83 per cent said rising business cost was their main concern.

The foreign worker levy is one of three levers to control foreign worker access and protect local wages, the others being the dependency ratio ceiling (DRC) quota and the minimum qualifying salary.

The SMEC's view is that any further increase in foreign worker levies has to be managed to avert a situation where higher business costs outstrip any gains from productivity improvements.

The current level of foreign worker levies, coupled with DRC, has been effective in controlling foreign worker access, while the implementation of the progressive wage model as well as other government schemes have enhanced wages and the career prospects of locals, especially low-wage workers.

It has been reported that as of end-October last year, close to 270 companies have adopted the progressive wage model, benefiting more than 150,000 local workers.

In the SMEC's opinion, it is timely to review the use and quantum of foreign worker levies in controlling foreign worker access and protecting local wages. Any planned increases in foreign worker levies should also be deferred.

The SMEC also highlighted that S-Pass holders are subjected to the full brunt of foreign worker measures - foreign worker levy, DRC quota and minimum qualifying wage.

An employer of S-Pass holders, having satisfied the DRC and minimum salary requirements, would have met the objective of regulating the number of foreign workers while providing wage parity with local employees.

Thus, the levy for S-Pass holders is unnecessary and leads to higher cost of doing business.

We agree with Dr Lam that productivity can be raised through measures such as worker training. Indeed, many companies affected by economic restructuring are taking steps to invest in staff productivity.

The SBF is working with the business community and the Government to promote a high-skill, high-wage economy. However, this cannot be a short-term goal but one that requires the collective and sustained efforts of the Government, businesses and employees.

Ho Meng Kit

Chief Executive Officer

Singapore Business Federation

This article was first published on January 21, 2015.
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