Speech by Minister for Manpower Dr Tan See Leng at Committee of Supply 2022
Dr Tan See Leng, Minister, Ministry of Manpower
A1. Mr Chairman, I thank the GPC MPs and the others who spoke in support of our workers and our businesses.
A2. Over the past two years of battling COVID, our manpower policies focused on shoring up local employment and keeping foreign workforce policies responsive.
(a) We supported businesses in hiring and investing in the skills of a wider pool of jobseekers, and helped many jobseekers moved into new opportunities.
(b) Through updated work pass requirements, we also ensured local-foreign complementarity and spurred business transformation.
A3. These efforts helped mitigate the impact of COVID and facilitated the recovery of our economy.
(a) Despite a slight dip in 2020, the median gross monthly income of residents has risen to above pre-COVID levels.
(b) Resident unemployment rate has come down from the high of 4.8% to 3.2% today. We are cautiously optimistic, given the Ukraine war it will fall back to pre-COVID levels in the months ahead.
A4. To capture the opportunities created by a recovering global economy, businesses are starting to increase their hiring.
(a) For the full year 2021, total employment saw an encouraging rebound of 40,800 , close to 41,000
A5. We want to provide the necessary support and incentive to restructure our workforce so that we emerge stronger.
A6. We want to build an inclusive and comprehensive labour market, where businesses can access the manpower needed for their growth. And where continued growth leads to a more equitable and progressive society.
A7. The recovering economy provides us a better and firmer footing to do so now.
A8. If we get this with surgical precision and the right timing (天时地利人和), Singapore will be a top global city brimming with opportunities for our businesses and our people.
A9. Against this backdrop, MOM’s priorities will focus on three UPs –UPGRADE, UPLIFT AND UPHOLD.
A10. The first focus is to upgrade the capabilities of locals and the complementarity of foreigners.
(a) We will strengthen support for locals so that they are equipped with skill sets to take on jobs of the future.
(b) Through our foreign workforce policies, we will ensure our businesses have access to the complementary manpower that they need.
A11. For our growth to be sustainable, we must ensure every Singaporean worker benefits from Singapore’s growth and no one is left behind.
A12. Hence, our second focus is to uplift our vulnerable workers and mature workers.
(a) We will implement the recommendations from the Tripartite Work Group on Lower-Wage Workers and double down on our efforts to uplift these workers. SMS Zaqy will elaborate more in his speech.
(b) SMS Koh will share our approach to uplifting self-employed persons and strengthening support for mature workers.
A13. Finally, every one of us desires a fair opportunity to contribute and to thrive at work.
A14. Which brings me to our third focus – to uphold inclusive and progressive practices at the workplace.
(a) We will continue to support our workforce to meet caregiving needs at home, to support their mental health and well-being. MOS Gan will elaborate in her speech.
(b) And we will continue with efforts to transform the migrant worker ecosystem. To improve their physical, social, and mental well-being. This will further be covered by SMS Koh in his speech.
A15. Let me start by sharing how we intend to upgrade the capabilities of locals and complementarity of foreigners.
(a) I will spend the bulk of the speech elaborating on this segment. As mentioned, SMS Koh, SMS Zaqy and MOS Gan will elaborate further on our other two focus areas.
B. “UPGRADE”: STRENGTHENING SUPPORT FOR LOCALS
B1. Structural shifts in the economy means new growth opportunities for our businesses and workers. As highlighted in cuts by Mr Desmond Choo, and Mr Dennis Tan, some of these shifts include the greening and digitalisation of our economy.
(a) The green economy is an area of growth that we are taking very seriously.
(b) As Minister Gan shared earlier, we have developed a whole-of-government green economy strategy which looks into the jobs and skills that will be transformed and created as a result of the green transition.
B2. It is thus important that our workers are equipped with the necessary skill sets to thrive in this fast-changing environment.
(a) The green economy is an area of growth that we are taking very seriously. As Minister Gan shared, we have developed a whole-of-Government Green Economy Strategy (GES) which looks into the jobs and skills that will be transformed and created as a result of the green transition.
(b) On digitalisation, technology such as artificial intelligence enables the automation of tasks, allowing workers to deliver higher value work to enhance productivity and improve performance.
B3. Helping our businesses to transform and preparing our workers for the future of work have been longstanding priorities for this Government.
(a) Since 2016, we have rolled out Industry Transformation Maps, or ITMs, for 23 sectors to chart their transformation journey. As Minister Gan shared, the government is working closely with industry stakeholders, unions, and academia to update our ITMs, to address emerging trends and opportunities.
(b) In 2021, we announced that Jobs Transformation Maps would be launched to map out the impact of technology and digitalisation on individual jobs over the medium term. These provide very detailed, job-level insights to help businesses and workers prepare for future jobs and skills.
B4. To support our scale-up of these programmes, I set up the Jobs Taskforce in September last year to derive strategies to increase the placements of local workers into our key sectors, such as ICT, Manufacturing, and Financial Services.
(a) For example, our Career Conversion Programmes, or CCPs, support employers to reskill jobseekers and workers for in-demand job roles. They provide targeted support to workers whose job roles might be at greater risk of redundancy.
B5. One such individual is Mr Cheng Kim Ann, a 30-year-old who previously worked on aircraft maintenance.
(a) He had just completed his Degree in Mechanical Engineering and wanted to seek out opportunities in the aerospace sector when COVID hit.
(b) He re-evaluated his career options and came across a job opening for a manufacturing and equipment engineer with Micron Technology.
(c) To help Mr Cheng assimilate into his role, the company put him on the Career Conversion Programme for the Electronics Sector in November 2020.
(d) During the three-month programme, Mr Cheng was introduced to the processes in the semiconductor industry which he had to apply in his new job role.
(e) Coupled with the on-the-job training provided by the company, Mr Cheng quickly picked up the new skills required for the industry and moved on to learning more advanced skills.
B6. During the pandemic, the SGUnited Jobs and Skills Package and the Jobs Growth Incentive were introduced as extraordinary measures to preserve human capital and to expand local hiring.
(a) All these initiatives helped cushion the impact of COVID on the labour market and provided much needed relief for businesses to meet their manpower needs.
(b) More than 174,000 local jobseekers have been placed into jobs and skills opportunities as at end-December 2021.
(c) All in all, a total of $11 billion has been allocated to support these initiatives.
B7. As announced by the Minister for Finance, we will continue to provide support for businesses and worker segments such as mature workers.
(a) However, moving forward, we will be tailoring our support levels in line with the improved economic and labour market situation.
(b) And SMS Koh will elaborate in his speech.
B8. Ultimately, support for workers will require a whole-of-society effort. I urge all of our businesses and all of our employees to “help us to help you”.
(a) The Government will provide the necessary support for businesses.
(b) But businesses must be willing to set aside time to train up the local workforce.
(c) And employees must also be willing to reskill and upskill.
B9. The support for businesses under the ITMs is complemented by our foreign workforce policies. Foreign workforce policies are key levers to keep our labour market tight, and incentivise businesses to transform, to move up the value chain and maintain their competitive edge.
C. “UPGRADE”: STRENGTHENING COMPLEMENTARITY OF FOREIGN WORKFORCE
C1. Let me now move on to our foreign workforce policies.
C2. Last September, we debated extensively the issue of foreign manpower in this House. Parliament affirmed the need for Singapore to stay open and connected to the world and for the Government to continue updating its policy levers to secure the well-being and livelihoods of our people.
C3. MOM has been working steadily on a review of our foreign workforce policies. We remain committed to our goals of upgrading our workforce, comprising a strong Singaporean core, and a high-quality and diverse foreign workforce.
C4. After careful deliberation and extensive consultation with our tripartite partners, we are ready to make several important updates to our work pass framework.
C5. The updates aim to achieve the following:
(a) One, to bring in a higher quality foreign workforce with specialised skills, networks, and expertise to complement our local workforce.
(b) Two, to support employers that invest in reskilling their workers and transfer of capabilities to build a strong Singaporean core.
(c) Three, to ensure diversity in our foreign workforce – because a truly open and connected labour market must also draw the best from all around the world.
(d) And four, to drive productivity growth, while keeping our reliance on foreign labour at a sustainable level.
C6. Above all, these updates will ensure that Singapore can continue to remain open and connected to the world.
C7. As borders start to re-open and labour demand picks up, I want to lay out the roadmap for these changes, which will be phased in gradually. This is to give businesses the certainty they need to plan ahead as they gear up for growth.
Setting of EP Qualifying Salary Benchmark
C8. Let me start with the Employment Pass, or EP.
C9. At the EP level, we need to bring in highly-skilled foreign professionals, as part of a strong team of locals and foreigners, to grow our economy, and create more good jobs.
(a) Hence, we do not set quotas or levies on EPs.
(b) Instead, we focus on ensuring quality.
C10. As announced in the Budget Statement we will aim to ensure that EP holders are comparable in quality to the top one-third of our local PMET workforce.
(a) To do so, we will set a benchmark for the EP qualifying salary based on the top one-third, or the 65th percentile, of local PMET wages.
(b) And we will revise our EP qualifying salaries based on this benchmark.
C11. The EP minimum qualifying salary will be revised from $4,500 to $5,000 per month. For the Financial Services sector which has higher wage norms, this will be revised from $5,000 to $5,500.
C12. Given that local PMET wages rise with age, the qualifying salary will also rise with age, to reflect the years of work and experience.
C13. To give businesses sufficient time to adjust, these changes will apply to new EP applications from 1 September 2022, and to renewal applications from 1 September 2023.
C14. We know, and we empathise that the labour market for skilled workers is sufficiently tight. So the latest move is not intended as a tightening measure.
C15. Instead, it is part of MOM’s regular updates to ensure that our qualifying salary keeps pace with local wage growth, so that foreigners are not coming in just because they are cheaper than local PMETs.
C16. As this is a regular updating of our policy, most EP holders will not be impacted by these changes, because they earn today well above the qualifying salary.
C17. There are some EP holders who do not meet our quality bar. They will be impacted – but this is how we constantly ensure that we maintain a high-quality EP stock, that complements our local workforce.
C18. More importantly, we have also set a clear benchmark for the qualifying salary, so that our businesses will have greater transparency, clarity, and predictability on how it will be adjusted in future.
(a) Businesses should expect regular updating of the qualifying salary to keep pace with local wage trends.
(b) We will of course consider prevailing economic conditions when making a decision to update the qualifying salary, and provide sufficient lead time before each change is effected.
Introduction of COMPASS
C19. While the qualifying salary is simple to understand and easy to administer, it is also a blunt tool. There are limits to relying solely on it to select complementary foreigners.
C20. Mr Liang Eng Hwa and Mr Yip Hon Weng would like to know whether other factors could be taken into account to more holistically assess a candidate’s complementarity.
C21. This is something that MOM has considered and studied carefully for quite some time.
C22. We are now ready to introduce a new Complementarity Assessment Framework, called COMPASS.
C23. COMPASS is a points-based system that considers both individual and firm-related attributes to holistically evaluate an EP applicant’s complementarity. It is designed to be a transparent system, so that businesses have clarity and predictability for manpower planning.
C24. The NTUC-SNEF PME Taskforce recommended a points system for EPs last year. Mr Patrick Tay also raised this earlier. I am glad that there is strong tripartite support for COMPASS.
C25. With the introduction of COMPASS, the future EP framework will comprise two stages:
(a) First, applicants must meet the EP qualifying salary.
(b) Second, they must also score sufficient points under COMPASS, in order to qualify for an EP.
C26. With your permission, Mr Chairman, may I ask the Clerks to distribute a copy of the handout on the COMPASS construct please. Members may also access these materials through the SG PARL MP mobile app.
C27. Let me briefly explain how COMPASS will work. Rest assured that all the details will come later.
C28. If I could ask members to refer to the first page of the handout, under the section “How COMPASS works”. Under COMPASS, EP applications will be assessed based on four foundational criteria:
(a) The candidate’s salary relative to local PMET wages in their respective sectors;
(b) The candidate’s qualifications;
(c) The firm’s nationality diversity and whether the candidate improves it; and
(d) And the firm’s support for local employment compared to their industry peers.
(e) These are termed Criterion 1 – 4, or C1 – C4.
C29. Beyond these four foundational criteria, we are mindful of two scenarios that warrant special attention.
(a) One, where the candidate possesses skills that our workforce has a shortage of, such as AI developers and cybersecurity specialists. Our locals may have such skills, but we do not have sufficient locals to fulfil the demand.
(b) Two, if the firm is undertaking ambitious innovation, hub, or internationalisation activities in partnership with Government, in line with our strategic economic priorities.
(c) In such cases, it would be in Singapore’s interest to allow the firm to bring in this candidate. So, we will accord bonus points for these two areas. These are termed C5 and C6.
(d) MOM will work closely with our tripartite partners – NTUC and SNEF – and economic agencies to assess industry needs, so that COMPASS is kept current and responsive.
C30. An EP application that “meets expectations” on the four foundational criteria, would pass COMPASS.
C31. On the other hand, if an application fares “below expectations” in certain foundational criteria, it needs to make up for it by “exceeding expectations” on other foundational criteria, or by scoring bonus points. All the criteria are tradeable; none is a veto factor.
C32. Let me give you an example.
C33. Consider a firm in the IT sector that scores “below expectations” on both support for local employment and diversity – it has a low PMET share relative to its industry peers, and is bringing in a candidate whose nationality is already over-represented in its firm.
(a) If the EP candidate only “meets expectations” on salary and qualifications, and is performing a generic job role, the application will not score enough points to pass.
(b) However, if the firm is a bringing in a candidate in an area where skills shortages exist, the application could make up for it with bonus points.
(c) Alternatively, the firm can hire a candidate from a nationality that improves its diversity, and “exceed expectations” on diversity. This will allow the candidate to pass.
C34. In this way, COMPASS incentivises firms with a weaker workforce profile to strengthen their local workforce and diversify, so as not to be disadvantaged. At the same time, it still allows them to access highly complementary EPs in areas where skills shortages exist.
C35. Let me be clear – COMPASS is not designed to make it harder for businesses to obtain an EP. A good majority of the applications today would not have issues. This is because this demonstrates that our businesses in general are progressive, and our policies thus far have brought in complementary EP holders.
C36. However, some firms would need to make adjustments under COMPASS. And they would know clearly which areas to improve on and how to respond accordingly, given the transparency, clarity, and predictability of COMPASS.
C37. SMEs may be concerned about what COMPASS means for them. Will they be disadvantaged relative to the bigger firms?
(a) We recognize that for smaller firms, their workforce ratios can change significantly drastically with only a few personnel changes.
(b) Hence, for this practical reason, firms with less than 25 PMETs will automatically be scored as “meeting expectations” on firm-related attributes.
C38. Some may notice that the firm-related attributes under COMPASS are considered as part of MOM’s Fair Consideration Framework, or FCF, Watchlist today.
(a) COMPASS builds on our current efforts under the FCF, by applying these considerations upstream, at the point of application. Businesses will have clarity on what these considerations are.
(b) Once COMPASS is fully rolled out, the FCF Watchlist will be re-purposed to focus on engaging businesses that score poorly on the firm-related attributes. We will walk with these firms, we will help them strengthen their workforce profile, and adjust to the new framework.
C39. Mr Patrick Tay will be reassured that even with the changes to the FCF Watchlist, MOM continues to take fair consideration seriously.
(a) The FCF Job Advertising requirement will continue to apply.
(b) Employers must practise fair consideration in their selection of candidates. MOM will not hesitate to take action against employers who are found to be discriminatory.
(c) We are also working on plans to enshrine existing fair employment guidelines into workplace fairness legislation.
C40. We recognise that the introduction of COMPASS is a significant change, and companies will need sufficient time to adjust to it.
(a) Hence, COMPASS will come into effect for new EP applications from 1 September 2023, and for renewal applications from 1 September 2024.
C41. Coming from the private sector myself, I fully appreciate the importance of transparency.
(a) Following this announcement, we will publish the COMPASS scoring rubric on MOM’s website.
(b) We will progressively roll out educational materials, and further details on specific criteria.
(c) When COMPASS is in place, employers can use the Pre-Assessment Tool to obtain a “balanced scorecard” of how each application fares prior to submission, so that they know what areas they must improve in.
C42. In summary, we have designed COMPASS to be balanced and reasonable:
(a) For employers, they will find that the system is responsive to industry’s needs, and easier to navigate with a transparent, predictable and clear framework. It also recognises their efforts to build up a strong local pipeline and to maintain a diverse foreign workforce.
(b) For our local workforce, they will have greater confidence that EP holders here are of a high calibre, and will better complement their teams. And that their employers will also take efforts to develop their local pipeline and maintain workforce diversity seriously.
(c) And lastly – for Singapore. COMPASS will allow us to remain open to complementary talent in short supply here so we can grow our frontier industries to bring us into the next stage of growth.
C43. Based on his cut, Mr Leong Mun Wai continues to assert that the government’s policy is poor, because its statistics are poor.
C44. As Minister for Finance said in his Round-Up Speech, we get the sense that the persistent requests coming from him for more information are red herrings – they are distractions from the key problem at hand.
(a) During the 6 July Ministerial Statement, I already shared that the majority of local PME growth over the last decade went to Singaporeans born in Singapore. I repeated this in Parliament in September, and stated that this is the same for PMETs.
(b) But Mr Leong persists in drawing these divisions. Asking for statistics, splitting between original citizens, new citizens, and permanent residents.
(c) I’ve also alluded at that particular point in time that as a society, we should not constantly be drawing such lines.
(d) Many of our new citizens and PRs share family ties with Singaporeans. Or they’ve studied, they’ve worked, they’ve contributed, and they’ve also lived here for some time.
(e) They contribute to our strengths, as a society and as an economy.
(f) Singapore is an immigrant nation and openness is one of our society’s core strengths that has defined who we are.
C45. I urge Mr Leong - have a care. Please don’t undermine the cohesiveness that we have painstakingly built over the years. And please ask people who share your point of view to also have a care for the rest of us.
(a) Let me emphasise once again, Singapore is and Singapore will always be committed to remaining open to foreigners who complement our local workforce, and who are able to add vibrancy to Singapore’s economy.
C46. For the framework, we think deeply and consult widely, because we know that whatever we implement will have a significant impact on businesses, on locals, on Singapore.
(a) And once we are confident that our proposals are sensible and implementable, we move.
C47. That is why we earlier rolled out schemes such as Tech@SG and Tech.Pass, to meet strong demand for skilled workers in the tech sector.
(a) COMPASS will buttress these schemes to facilitate access to complementary talent.
C48. We have also received feedback from employers who are concerned about bringing in young, high potential employees. These are big global firms who have international rotation programmes, where they send both foreign and local employees for overseas postings to gain exposure.
(a) We will make sure that our EP framework has the flexibility to allow for such rotations.
(b) Therefore, we are piloting the Global Rotation Scheme. This scheme will facilitate the entry of high-potential employees from abroad. But in return, these companies must also post our local Singaporeans abroad on the same leadership development programme.
(c) We are starting with a small group of firms, and will expand the scheme once we work out the full details.
Raising of S Pass Qualifying Salary and Levies
C49. At the S Pass level, foreign workers perform specialised, technical roles.
(a) These are skilled jobs with good opportunities, with many of our polytechnic and ITE graduates have an interest in.
C50. We want to continue to ensure that our locals have a level playing field to take up these roles, and that S Pass holders are coming in to fill skills gaps, and not just because they are cheaper.
C51. We also want to spur transformation and job re-design efforts.
C52. This is why we have in place controls for the S Pass, namely qualifying salaries, levies, and quotas.
C53. As announced, we aim to ensure that S Pass holders are comparable in quality to the top one-third of local Associate Professionals and Technicians, or APT, workforce.
C54. How much a firm is willing to pay is a practical indicator of the quality of the S Pass holder.
(a) Thus, we will benchmark the cost of hiring an S Pass holder to the top one-third of local APT wages.
(b) We will raise both the S Pass qualifying salary and levies to reach this benchmark.
C55. This is a bigger change compared to the EP salary criteria – so we will move towards this goal over three steps, to moderate the impact to businesses.
C56. As a first step, we will raise the S Pass minimum qualifying salary from the current $2,500 to $3,000 and introduce a higher S Pass qualifying salary for the Financial Services sector at $3,500.
C57. These changes will be implemented for new applications from 1 September 2022, and for renewal applications from 1 September 2023.
C58. Similar to the EP, the qualifying salary for older S Pass holders will be higher.
C59. Thereafter, we will raise the S Pass minimum qualifying salary for new applications in September 2023, and in September 2025.
(a) Each increase will apply to renewals a year later.
(b) The exact salary values will be announced closer to implementation date, based on prevailing local APT wages.
C60. But just to give a rough sense, based on current local APT wage levels, companies should expect the economy-wide S Pass minimum qualifying salary to be at least $3150 in September 2023, to at least $3500 in September 2025. MOM will also progressively increase the S Pass Tier 1 levy rate from $330 to $650 over three steps, again in tandem with the S Pass qualifying salary increases.
(a) It will be raised to $450 in September 2022, and then to $550 in September 2023, and $650 in September 2025.
(b) The Tier 2 levy rate will be maintained at $650.
C61. As with the EP, the setting of a clear benchmark will give businesses clarity and predictability on how the S Pass qualifying salary and levies will continue to adjust over time.
Addressing concerns on the windfall effect
C62. Mr Chairman, there have been concerns about the increase in qualifying salaries.
C63. Locals have asked if their foreign colleagues will automatically get a pay raise, at their expense.
(a) The short answer is no. Please let me explain.
C64. Take a firm that hires 10 employees – 9 locals, 1 S Pass holder.
(a) These employees are all doing the same job, earning the same pay of $2,500.
C65. Will the foreigner immediately get a $500 pay increase, just because of the increase in the qualifying salary?
C66. First, the higher qualifying salary will only apply to EP and S Pass renewals in September 2023. That’s about a year and a half from now. I earlier mentioned that this could even stretch out to September 2026, depending on when the S Pass holder is due for renewal.
(a) That is 4.5 years away at the other end.
C67. The firm will have ample time to think about alternative options, for instance, finding or training up another local. This is especially so if the foreigner is not bringing enough value to justify the pay increase.
(a) Businesses are ultimately profit-driven, and they would not just blindly raise costs.
C68. Now, employers have said that it is difficult to find locals in a particularly tight labour market, given the low unemployment rate.
(a) But as I said a few days back, there is still significant untapped supply from both women and seniors outside the workforce. And with our population rapidly aging, we also would want to encourage people to work longer when they are able to, and should they choose to. My constant exhortation to everyone is to bring them back into the workforce – encourage them, give them the opportunity.
(b) If businesses can do more to re-design jobs to make them more flexible and inclusive, they could attract these segments of workers.
C69. Next, there are quotas at the S Pass level.
C70. If the firm insists on giving the S Pass holder a pay increase without fairly reviewing the pay of its locals, it could find itself in a difficult situation.
(a) If the locals leave because of the pay discrepancy, the firm may find that it doesn’t have enough quota to retain the S Pass holder at the next renewal.
(b) And let us not underestimate the negative impact on productivity of the company when employee morale is poor, or if the company finds itself shorthanded.
C71. Finally, what happens if employers still unfairly raise the foreigner’s pay, without fairly reviewing the pay of locals?
(a) We know that on the ground, there would be egregious cases such as these.
(b) In such situations, locals can take their grievances to TAFEP.
(c) TAFEP will engage the firm to conduct a proper salary review.
(d) Because unfair renumeration practices run counter to the Tripartite Guidelines for Fair Employment Practices.
C72. So you can see, there is a whole thought process that the firm will go through. If after all of these, the firm still chooses to retain the S Pass holder, it would be because the value that the S Pass holder brings to their operations more than justifies the higher salary.
C73. On the other hand, suppose we left the S Pass qualifying salary untouched at $2,500.
(a) Yes, the foreigner may not get the pay raise.
(b) But our locals’ wages will stagnate as well.
(c) The firm can continue to renew the S Pass holder on the lowest salary required, so long as he is willing to accept it.
(d) And the firm will then have little reason to raise the pay for the other 9 locals who are doing the same job.
C74. As Minister for Finance said in his Round Up Speech, keeping the cost of employing foreign workers low ultimately ends up depressing the wages of local workers.
C75. Some locals tell me that they appreciate the need to raise the cost of hiring S Pass holders – but ask why we could not load it all on levies instead.
(a) That way, the foreigner will not get a pay increase, and the government will get more revenue.
(b) Just to be clear – we are already increasing S Pass levies. But this asks us to increase it even more.
(c) This sounds like a simple solution that we can adopt, so why didn’t we do it?
C76. Suppose we load all the cost increase onto levies.
C77. The levy will have to be much higher than $650.
C78. And these levies will be applied equally to all S Pass holders.
(a) More productive firms that hire high-quality S Pass holders well above the qualifying salary, will face the same cost increase as less productive firms who are paying just the bare minimum.
(b) Both groups are equally affected. Raising levies makes no distinction or differentiation between them.
C79. And if all firms have to pay more to the government, they will have less to pay to their workers – will they still have the ability to incentivise their employees to take up new and bigger job roles, as they transform?
C80. Members of the house, there are no perfect solutions. But we must not let perfect be the enemy of good.
C81. That is why, after weighing our options considerably and carefully, we moved – raising both the qualifying salary and the levies to safeguard good employment outcomes for our locals.
C82. We know that the changes to the S Pass framework are not trivial.
C83. But we must do what is difficult now, to build a stronger, more inclusive, economy for all.
C84. With the S Pass moves, businesses that are reliant on low-cost S Pass holders will have to adapt. They will have to re-design their operations to become more productive. They will have to improve the pay and working conditions for these jobs. And because of this, they will be in a stronger position to attract locals.
C85. I understand that SMEs are more constrained in terms of financial resources, and many are worried about these moves.
C86. I have previously spoken about how we will support SMEs through this transition.
(a) They can tap on schemes such as the Support for Job Redesign under the Productivity Solutions Grant (PSG-JR).
(b) To reskill existing employees and new hires to take on redesigned job roles, they can also tap on programmes such as the Career Conversion Programmes.
(c) These are many of such schemes out there.
C87. SMEs will not have to undertake this transformation journey alone. We will walk with them.
Supporting Transformation in the Construction and Process Sectors
C88. Let me now move on to the Work Permit changes.
C89. At the Work Permit level, migrant workers take on important roles which locals are less keen on doing.
C90. Yet COVID has shown us that it is not sustainable to continue to rely heavily on foreign manpower, especially at the semi-skilled level. Excessive reliance will leave businesses vulnerable to various disruptions.
C91. In order for our businesses to survive and thrive, they need to transform, increase their productivity, and ultimately reduce their reliance on Work Permit holders.
C92. To support these transformation efforts, we will make further changes to foreign workforce policies for the Construction and Process sectors from 2024.
(a) First, we will reduce the Dependency Ratio Ceilings, or DRCs, for the Construction and Process sectors from 1:7 to 1:5, to nudge the sectors towards reducing reliance on migrant workers and improving the productivity of workers. That is a reduction from 87.5%, to 83.3%.
(b) Second, we will dismantle the Man-Year Entitlement (MYE) framework, to reduce allocation inefficiencies.
(c) Third, we will revise the levy structure for both sectors. To incentivise businesses to adopt more productive technologies such as Design for Manufacturing and Assembly (DfMA) and employ more productive workers, levies will be lowered for off-site construction and higher-skilled (or “R1”) workers.
(d) The Minister for National Development will share more in his COS speech.
C93. The changes will help support the sectors’ transformation and automation.
C94. To help defray costs to adopt automation, businesses can tap on grants such as the Enterprise Development Grant and the Productivity Innovation Project.
Supporting Businesses’ Foreign Manpower Needs
C95. The changes to our foreign workforce policies aim to strengthen the complementarity between the local and foreign workforce at the EP and S Pass level, and spur industry transformation at the Work Permit level.
C96. I understand that Mr Cheng Hsing Yao and Ms Janet Ang suggested calibrating our foreign workforce policies further, to address persistent shortages in certain sectors. We already do so today – sectors such as Construction and Process have higher foreign worker quotas, as we recognise that fewer locals join these sectors. We also exercise flexibilities to support essential services like healthcare and the cleaning of public housing estates. Going forward, we will adopt a more targeted approach by providing flexibilities to businesses that contribute to our economic priorities, and in job roles where there are more pressing manpower needs but fewer locals.
C97. To support the growth of businesses that contribute to Singapore’s strategic economic priorities, MOM is supporting MTI and participating economic agencies to launch the Manpower for Strategic Economic Priorities (M-SEP) scheme.
(a) The scheme will provide such firms some flexibility to hire S Pass and Work Permit Holders beyond the prevailing DRCs for a limited period of time.
(b) For a start, MTI and participating Economic Agencies will support firms that meet their criteria of undertaking ambitious investment, innovation, or internationalisation activities. This would include firms that participate in existing schemes such as ESG’s Scale-Up SG, and EDB’s Research and Innovation Scheme for Companies.
(c) In addition to supporting our strategic economic priorities, we will require these businesses to commit to developing our local workforce.
(d) The details are being worked out, and we aim to introduce the scheme later this year.
C98. In addition, we recognise that some businesses hire Rank-and-File workers on S Passes due to the source restrictions for Work Permit holders.
C99. With the moves to increase the benchmark for S Pass quality, MOM will allow businesses in the Services and Manufacturing sectors to hire some of these S Pass holders on Work Permits. We will introduce a Non-Traditional Source (NTS) Occupation List, which is a tight list of Rank-and-File occupations where employers will be allowed to hire NTS foreign workers on Work Permits.
(a) This List will be introduced on 1 September 2023.
(b) The List will include occupations such as welders, food processing workers and specialty chefs.
(c) I know many enjoy a variety of multicultural cuisines in Singapore. I hope that this will reinforce our position as a food paradise supporting the cultural heritage of Singapore.
(d) The List will be subject to a quota, amongst other controls.
(e) We will study carefully if more occupations should be added to the List.
C100. However, I would like to make it clear that this does not signal a broader liberalisation of Work Permit sources across the board.
(a) The Tripartite partners have a clear consensus on the importance of uplifting our local lower-wage workers, whom the Work Permit holders directly compete with.
(b) Hence, we will continue to keep the Work Permit sources tight to support the efforts to uplift lower-wage workers, and the ongoing moves to be more manpower-lean.
C101. Taken together, the two new schemes – M-SEP and the NTS Occupation List – will complement the changes we are making to our work pass framework, by supporting the growth of businesses that contribute to Singapore’s strategic priorities, and ultimately creating good job opportunities for locals.
MANAGING BUSINESS CONCERNS
D1. I have spoken at length about our upcoming moves, and explained why they are necessary to restructure our workforce to prepare for the opportunities ahead, and move towards a more equitable society.
D2. Many business leaders, both local and foreign, whom I speak to generally understand this.
(a) They have been very supportive, and also want to be good, progressive employers.
D3. However, they also share two challenges – one, difficulties in finding workers, and two, increase in business costs. We take this feedback very seriously.
D4. On the difficulty in finding workers, I earlier touched on the schemes we have to address this. The calibrated re-opening of our borders should ease some pressure. And as mentioned earlier, there is still untapped supply of various segments of our population, and businesses can do more to re-design jobs to attract these segments of workers.
D5. On rising business costs, MOM has put in place measures to support our businesses. MOM’s support measures will provide up to $6.8 billion to businesses in FY2022.
(a) This includes the provision of the Jobs Growth Incentive.
(b) We also roll out transitional offsets for the increases to senior worker CPF contribution rates, and transitional support for the moves to uplift lower wage workers.
D6. The moves are also timed carefully and implemented gradually, to moderate the cost and manpower impact on businesses.
E. MANDARIN SPEECH
E1. Mr Chairman, let me say a few words in Mandarin.
(a) 譬如，目前，某些企业因为工作准证的限制， 无法聘请所需的外籍员工，我们将允许服务和制造企业聘请来自非传统来源国家的外籍劳工，从事某一些本地员工所稀缺的职位，像精密工程、食品制造等等。
(b) 与此同时，人力部也将支持贸工部推出的计划，为某些对我国经济发展做出重点贡献的企业提供额外的S 准证和工作准证配额。
F. STRENGTHENING RETIREMENT ADEQUACY
F1. Mr Chairman, before I close, allow me to share one aspect of uplifting our workers, which is to strengthen their retirement adequacy.
F2. As announced in the Budget Statement, we will do so in three ways.
(a) First, we will adjust the Basic Retirement Sum to provide members with higher monthly payouts to keep pace with long-term inflation and rising standard of living.
i. We expect more members to receive at least the Basic Retirement Sum payout, with about eight in ten active CPF members turning age 55 in 2027 being able to do so, up from 67% for the cohort that turned 55 in 2021.
(b) Second, we will implement the next step of the CPF contribution rate increase for senior workers.
(c) Finally, the enhanced Workfare Income Supplement Scheme will top up the income of half a million lower-income workers, with payouts amounting to over $1 billion in CPF and in cash, from 2023.
F3. Mr Patrick Tay asked in his cut about raising the wage ceiling for CPF contributions. Mr Heng Chee How also raised this at Budget Debate.
(a) We are encouraged by the union’s support for the CPF system.
(b) The CPF wage ceiling has been periodically updated since 2003 to keep pace with wages of resident workers.
(c) The most recent update was in 2016.
(d) We will review the CPF wage ceiling and engage employers and employees ahead of any changes.
F4. These efforts are aimed at helping Singaporeans save more and boost their retirement income. These will however be meaningless if we do not continue to safeguard the savings that Singaporeans set aside for old age. This is why we must carefully assess any calls for more liberal use of members’ CPF monies.
F5. In her cut, Ms Sylvia Lim suggested allowing members with CPF balances beyond the required retirement sum to make lumpsum withdrawals from their CPF savings before age 55, highlighting those who face income disruption.
(a) The Government already provides direct and targeted support to these members.
(b) For example, to help those who face financial hardship during this difficult period, we introduced an entire suite of support measures, including the COVID-19 recovery grant.
(c) Singaporeans also receive support from existing broad-based permanent schemes such as Workfare and ComCare.
(d) Importantly, all of these do not draw down on Singaporeans’ CPF savings, and as Mr Desmond Choo wisely highlighted, will not come at the expense of retirement income.
F6. In his cut, Mr Gerald Giam requested for additional flexibility for seniors to use CPF to purchase two-room flexi flats and to pay for the resale levy.
(a) Before members turn 55, they can request for their Ordinary Account savings not to be transferred to their Retirement Account if they intend to use it for housing.
(b) After they turn 55, members committed to a housing purchase may also use their CPF balances in excess of the Basic Retirement Sum to finance the housing purchase.
(c) I would like to reassure Mr Giam that the CPF Board already exercises some flexibility for seniors facing financial hardship seeking to use CPF to purchase a two-room flexi flat.
(d) To pay for any resale levy, home buyers can use the proceeds from the sale of their first subsidised flat.
(e) Members who still face difficulties affording a property, including two-room flexi flats, can approach the Housing and Development Board for assistance.
(f) The Housing and Development Board will also work with relevant agencies like the CPF Board, to provide help to members based on their specific needs
F7. Next, in his cut, Mr Louis Chua suggested having members seek higher investment returns on their CPF monies by expanding the range of financial instruments available under the CPF Investment Scheme, or allowing members to invest alongside government investment vehicles.
(a) We have said this before, and Mr Chua, coming from his finance background, should be familiar that there is no silver bullet to achieving higher returns. Higher returns come with higher risks, and a greater potential for losses. And this is true of any investment fund, and government investment entities are not immune to this. As Mr Desmond Choo pointed out, there is volatility and uncertainty in the investment climate.
(b) Today, CPF members can already invest in a diverse range of products including exchange-traded funds, shares and gold products. The CPF board welcomes more ETFs to join the CPF investment scheme, however ETF providers’ decisions to apply for inclusion are ultimately based on their own commercial assessment. To safeguard members’ interests, the CPF Board carefully considers factors such as investment-related fees, and track records of the products before approving any such applications. And only products listed under the Singapore Exchange or registered with local authorities are included under the CPF Investment Scheme, as foreign products are subject to changing regulations and jurisdictions, over which we have no oversight, and no control. As Mr Louis Chua mentioned, 75% of CPF Investment Scheme members made profits or broke even in the reporting period of FY2020. This means that 25% of members made cumulative total losses.
(c) So more product offerings do not necessarily equate to higher returns.
(d) To ensure that the list continues to remain relevant, the CPF Board will continue to review it on an ongoing basis. This strikes a balance between allowing CPF Investment Scheme participants the flexibility to diversify their investment portfolios to enhance their retirement nest eggs, while safeguarding members’ interests.
(e) This is why we must be very careful when striking this balance, especially when it involves CPF monies, which should be safeguarded for retirement. We are also studying if a Lifetime Retirement Investment Scheme can be introduced for members. It is meant for members with the risk appetite and sufficient investment horizon, but who may not wish to actively manage their investments. We will provide further information and updates when ready.
(f) Meanwhile, members who prefer not to take any risks with their retirement savings already enjoy interest rates of up to 6% per annum on their CPF savings, where investment risk is entirely borne by the Government.
F8. We will continue to look at how we can strengthen retirement adequacy for all of our members, so that they can enjoy financial security in their later years.
G. CONCLUSION – THE WAY FORWARD
G1. Let me conclude.
G2. We are making many moves to upgrade the capabilities of locals and complementarity of foreigners, uplift vulnerable workers and mature workers, and uphold inclusive and progressive workplaces.
G3. But we acknowledge that there will always be more work to be done. We will continue relentlessly to put in the hard work of supporting our workers and businesses.
G4. Charting new waters is never easy. I am sure members are familiar with the teach-a-man-to-fish analogy to equip ourselves for the lifelong journey ahead.
G5. Well, the essence of what we have laid out today reinforces this – but it also acknowledges that the waters are choppier, the fishes are harder to come by catch, and if we just stay put and do not shift our anchor, we will soon run out of time and opportunity to fish!
G6. So, we will have courses to teach you how to catch the harder-to-catch fish, and we will equip you with upgraded equipment to fish. Including the new COMPASS, to guide you to bountiful sources of fish, notwithstanding choppier waters.
G7. With workers, unions, businesses and Government on the same ship together, I have no doubt that Singapore will continue her voyage into an even brighter future!