The changes to the Central Provident Fund system may make older workers costlier to hire but they are still likely to be able to find jobs and hold on to them.
This is because there are just not enough workers in a tight labour market to do the jobs, said firms.
A dozen employers told The Straits Times that they would not shy away from re-employing older workers because of the hikes, which were announced in this year's Budget.
According to data from the Manpower Ministry, the median gross monthly income of a full-time worker aged between 50 and 54 was $3,100 last year.
The figure does not include the employer's CPF contribution.
This means that employers will pay about $30 more each month to the CPF accounts of this group from next year, when contribution rates go up 1 percentage point. This works out to about $360 a year per worker.
Employer contribution rates for workers aged above 55 to 65 also rise by between 1 and 0.5 percentage point.
But while costs will rise, it still makes sense to retain good older workers rather than hire a fresh, untrained young worker, said Mr Darren Tan, director of Chua Chu Kang Marble.
"It is still cheaper than training new ones," he said.
Ms Karen Tan, director of frozen foods manufacturer CS Tay, said that her company will absorb the increase.
About 20 workers in her company are over 50 and earn an average of $3,000 monthly.
She said: "As long as they are fit to continue working, hard- working and diligent, I don't mind paying the difference."
The Government will ease the transition through two wage subsidies.
Firms can claim the Temporary Employment Credit, which pays 1 per cent of wages this year and next, and 0.5 per cent of wages in 2017.
The Special Employment Credit also covers an extra 3 per cent of wages when companies rehire staff who are 65 and above this year, on top of the 8.5 per cent of wages they can already claim when they hire workers aged above 50.
But for those who had been hoping for more help, the 3 per cent may not be sufficient. "I think somewhere in the region of 5 to 6 per cent would have been a level of co-help SMEs (small and medium-sized enterprises) would have appreciated," said Association of Small and Medium Enterprises president Kurt Wee.
Bosses said that they will have to use other means to keep their operating costs low when the incentive schemes end.
Some may reduce a worker's yearly increment, which can range between $100 and $300, while others said they have to take the increase from other aspects of their business such as logistics.
The final option is to pass the extra costs to consumers.
For some companies in labour- scarce industries such as food and beverage, the choice is between older workers and no workers.
"There is always a shortage of workers," said Kimly Food Holdings general manager Vincent Chia.
"More CPF contributions could put us in a better position to attract older people to come back to the workforce," he said.
