Some firms won't pass on wage subsidy

Some employers are unlikely to pass government-supported wage subsidies unveiled in the Budget on to workers and will keep any savings to defray higher business costs, a new survey has showed.

The survey of around 50 firms conducted by the Singapore Business Federation (SBF) found that 75 per cent will give staff the same pay increments as last year.

So most are not looking to pass on savings from the new Wage Credit Scheme (WCS) to workers, said SBF chief executive Ho Meng Kit. "The savings from the scheme will go towards coping with higher costs instead."

Just 21 per cent are likely to give a larger wage increment because of the scheme, he added.

Also, 46 per cent said the scheme would help with easing manpower costs but 23 per cent saw no direct benefit, he said.

The poll was conducted the day after the Budget, when the scheme was announced.

Under the scheme, the Government co-pays 40 per cent of the wage rises of Singaporean workers for the next three years.

This applies to workers earning up to a gross monthly pay of $4,000.

The scheme may change the way bosses give increments given how it is constructed, said Ernst and Young Solutions human capital partner Grahame Wright.

Gross monthly salaries include bonuses and commissions, for instance.

If a firm lifts basic monthly pay but cuts back on bonuses and gross monthly pay does not go up, it will not get the wage credit. "Firms may end up paying more in bonuses because it is a one-off payment," he said.

The scheme would also encourage firms to be more transparent about their performance as workers will know about the wage subsidy and expect higher pay, said Mr Josh Goh, GMP's assistant director for corporate services.

"So companies will have to manage this. One way is to link pay with productivity and show how the company is doing."

Some firms may take advantage of the scheme to poach staff as they can claim the wage credit by hiring a worker from another firm if they pay at least $50 more.

The only condition is that the worker needs to have worked at least three months with the firm this year and three months last year, whether with the same employer or a different one, said a Finance Ministry spokesman.

"For fresh graduates, the employer will not be eligible for WCS in the year of the new hire, but can qualify in subsequent years if it raises the wages of these employees," she said. "In a tight labour market, we expect fresh graduates to be able to find jobs."

NTUC deputy secretary-general Heng Chee How said whether this will lead to firms paying above market rates to "poach workers from other companies just so they can get a 40 per cent reimbursement on the increased pay enjoyed by such workers who switch jobs, time will tell".

Some firms are still planning hefty pay rises. KH Security Agency's senior business development manager Gary Haris said his firm was already expecting to give wage rises of 25 per cent to 30 per cent this year.

"We expect to move the average pay of a security officer from $1,600 to $2,000, partly because guards are becoming better trained and also to retain workers," he said. "So the wage credit will help. We just hope it will be extended for longer than three years because adapting to the higher wages, for both businesses and clients, will take a long time."

aaronl@sph.com.sg