Written Answer by Mr Tan Chuan-Jin, Acting Minister for Manpower & Senior Minister of State, National Development, to Parliamentary Question on the Impact of Restrictions on Hiring of Foreign Workers

Mr Inderjit Singh: To ask the Acting Minister for Manpower what has been the impact of the restrictions on the hiring of foreign workers on SMEs and what assistance are available to companies who are unable to hire enough workers to run their business.

Mr Tan Chuan-Jin:

I meet with the various organisations and businessmen regularly. I also receive many emails, some more polite than others. Clearly, our tighter foreign manpower policies are beginning to have an impact. Some companies are affected more than others. Others embrace the realities, adjust, change and move on. The feedback has been frank and forthright - our policies are hindering expansion, driving up costs, and that they cannot find Singaporean workers. It can be emotive for some as they struggle with their businesses. I need to know this and feel it, even as we consider our policies. There is a real cost on the ground.

I try my best to explain our broader concerns as to why we need to tighten our foreign manpower policies further, as we have tried in the past few years. With the economy doing well, our businesses grew. Good employment was created for Singaporeans, wages moved up in real terms. But there was a cost. The voracious appetite for foreign workers had begun to cause a strain on our infrastructure and had an impact on how society viewed this development. It cannot go on at this pace. We need to restructure the economy so that productivity becomes the key driver for inclusive and sustainable growth. We cannot just depend on factor inputs, especially labour, because there will be limits on the numbers we can take in. No one disputes the need to be open and diverse, in fact it is critical for us. But we need to slow down manpower growth, and only by slowing down can we force ourselves to become more productive.

I empathise with our employers, because taken individually, all their pleas mostly make intuitive sense. But we also have a responsibility to watch our overall state of affairs and to guide us to the next phase where we will have to rely more on productivity and less on numbers coming in. Our purpose is not to make life difficult for SMEs. SMEs remain critical because not only are they the rice bowls for the Singaporeans running them, they are also providing employment to large numbers of Singaporeans. We need to remember this even as some quarters continue to clamour for deeper cuts. It would be reckless to go that way as it will end up hurting our very own Singaporeans.

I have emphasised this during Budget 2012. Let me state it plainly again. We will help SMEs adjust to the changes, hire more locals and restructure their businesses and processes to be more productive and efficient in their use of manpower. The Government will provide ample assistance.

First, to help SMEs hire more locals. We have a significant untapped pool of economically inactive residents, including older persons and women who had dropped out of the labour force for various reasons, but would now welcome the opportunity to return to work. By having more flexible working arrangements and redesigning traditional job scopes, SMEs can tap on this pool of latent manpower. The Flexi-Works! scheme administered by our tripartite partners NTUC and SNEF offers a grant of up to $100,000 to help companies implement part-time or flexible work arrangements and hire economically inactive residents. SMEs can also tap on the ADVANTAGE! Scheme, which offers a financial grant of up to $400,000 to help companies recruit, retain and re-employ older workers by defraying some of the costs involved in redesigning jobs to better suit older workers’ capabilities and needs. We will also look at better job matching via initiatives such as Max Talent which helps to place Singaporean professionals and workers into SMEs.

To further encourage SMEs to hire older Singaporeans, the Special Employment Credit (SEC) scheme was also enhanced in this year’s Budget. For each Singaporean employee aged above 50 who earns up to $4,000 monthly, employers will receive an SEC of up to 8% of the employee’s monthly wages. These schemes help our SMEs tap on local manpower to meet their business needs. Nonetheless, SMEs must also do their part to ensure that wages are competitive and that there are good career progression opportunities in order to attract locals.

Second, to help companies become more productive in their use of manpower, we have enhanced broad-based initiatives to help raise productivity across sectors. The Productivity and Innovation Credit (PIC) scheme, which offers a 400 per cent tax deduction on up to $400,000 of productivity and innovation related expenditure, was enhanced in this year’s Budget. The cash payout option has been increased to 60% of up to $100,000 of expenditure.

I would like to share a simple example of how an SME has used the PIC to support its investments in improving productivity. A restaurant operator expanded his restaurant from one to two floors. His staff then needed to walk up and down the stairs to take orders and serve food. Service took longer and as the staff became more tired, food gets spilled.

Instead of looking for more foreign workers to manage the load, the operator decided to invest in an automated lift delivery system that delivered food automatically from the kitchen on the first floor, to the second floor. Now the waiter just needs to take orders, transmit it and collect the food from the ‘dumb waiter’ system once it is ready. The expenses incurred in the purchase and installation of the ‘dumb waiter’ system was partially offset by the cash payout in the PIC. If labour remained cheap and accessible, I think few companies would have the financial incentive to invest in productivity improvements or technology. My message is to learn from such examples, both here and abroad, and to please use the PIC fund.

We have also enhanced funding support for employee training. SMEs who upgrade their workers through courses certified by WDA and Academic CET programmes will get a 90% course fee subsidy. This means that with the enhanced cash payout under the PIC (from a maximum of $30,000 to a maximum of $60,000), almost all of the training costs for SME-sponsored employees will be subsidised. The cap for absentee payroll has also been increased from $4.50 per hour to $7.50 per hour. I would like to encourage SMEs to tap on these funding schemes to upgrade their workers and enhance productivity.

We will help and support our SMEs as we transform. We must change the way we do business because we cannot depend on a steady stream of ‘cheap’ labour. I am glad that a number of companies, even though they are affected, even acknowledge that for all our longer term good, this is a necessary pain we need to bear. Many of them have re-looked at their approach and have begun to hire more locals, redesign existing work processes and invest in increasing overall productivity. Many of them are transiting well and would be well placed for the future. Our Government is fully committed to playing an active role in supporting our SMEs in this endeavour.

Factsheet on assistance schemes for SMEs