Company director Angeline Tan tries to give her staff an annual pay rise of between $100 and $300, but it is unlikely that she will continue doing so next year.

Instead, the 49-year-old - whose company, Ezzi Living, sells and installs clothesline systems - intends to use that money to contribute more to her older workers' Central Provident Fund accounts, following Monday's announcement by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.

Starting from next January, bosses will have to pay an additional 1 percentage point into the Special Accounts of workers aged above 50 to 60 and an additional 0.5 percentage point to workers aged above 60 until they are 65.

The change will affect 10 of her staff. Currently, she has 14 employees. By next year, six will be between 50 and 60 and another four will be above 61.

Workers in the range get paid about $2,500 each month, so that will mean that Ms Tan has to pay an additional $2,400 every year. On top of basic salary, she pays her employees performance bonuses and overtime.

"It's a good move because the money is going into the retirement savings for the workers," she said.

"But workers told me they would prefer to have the cash on hand instead, especially the older ones who may need it for a sudden medical emergency."

Currently, wages are subsidised by the Temporary Employment Credit and Special Employment Credit. But once they lapse, Ms Tan says that the extra costs will mean that she has to look at cutting expenses elsewhere in her company.

She said: "The last option is to pass the costs on to consumers, and that may reduce our competitiveness."

AW CHENG WEI