End of Wage Credit Scheme could have ‘serious impact’: SME owners

January 28, 201610:44 am294 views

Plans to lower the level of co-funding of the Wage Credit Scheme (WCS) and a slowing economy could result in employers being unable to raise salaries like in the past, small and medium enterprise (SME) owners told Channel NewsAsia.

Since its inception in 2013, the WCS has helped many firms defray higher manpower costs, allowing them to invest in training and equipment. Since then, the number of participants has also grown: Last year, more than 85,000 employers received approximately S$1.4 billion in payouts. SME owners said the grants have helped firms retain and train staff.

According to the latest statistics, employees covered by the scheme received a median wage increase of 8 per cent when it was first introduced in 2013.

However, over the next two years from 2016 to 2017, the level of co-funding by the Government will be reduced to 20 per cent from the original 40 per cent. The scheme will no longer be available after 2017.

SME owners cited concerns over the ability of firms to sustain wage increases, especially if bigger businesses are affected by the economy.

Council Member of Association of Small & Medium Enterprises, Mr Thomas Fernandez, said: “We’ve been hearing from big banks and MNCs on the retrenchment and downsizing of the business. This could be a serious impact on the SMEs who are supplying services to the MNCs.”

Mr Fernandez, who is also the Chairman and CEO of PestBusters, added: “We’ve already committed this wage to our people. Companies that have trained the staff to have better productivity are able to sustain the business. If companies just use this money to give them the wages to retain them, there will be some challenges.”


One company that has benefitted from the WCS is Orchid Laundry. It said the Government has helped finance 40 per cent of wage increases for Singaporean employees who earn less than S$4,000 dollars each month.

Five years ago, Orchid Laundry paid the average worker S$1,000 a month. It has raised the wages of its workers by about 40 per cent in the last four years, and now pays around S$1,500 dollars a month.

The company said it is coping with the increase, adding that it is able to sustain such increases not just through additional Government support, but through the use of automation. Manpower makes up at least 40 per cent of overall business costs, said Orchid Laundry.

Nonetheless, Government grants had freed funds for training and equipment, helping Orchid Laundry to more than double productivity.

Director of Orchid Laundry, Harry Toh, said: “In the past few years, we tried to channel whatever proceeds we get from the Government through the schemes to make ourselves more productive.

“For us to reward our staff, they have to be more productive. We don’t increase based on what’s going to be provided because it’s very risky. We send our leads for them to attend courses so it’s easier for them to implement or communicate some of the changes we have in mind to them.”

news source & image credits: channelnewsasia.com

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