Rise in EP qualifying pay could affect bottom lines, say observers

People at Robinson Road in the Central Business District (CBD) after office hours.
People at Robinson Road in the Central Business District (CBD) after office hours. PHOTO: ST FILE

Recruiters and companies said the move by the Ministry of Manpower (MOM) to raise the qualifying monthly salary for Employment Passes (EP) would likely place a strain on businesses' bottom lines, but it could help to draw Singaporeans back into industries where pay was depressed.

Foreign professionals will need to be paid at least $3,600 from next January if firms want to hire them on EPs, up from $3,300 now, the ministry announced last week.

There were 187,900 EP holders here as of last December. The MOM did not provide the number of workers on EPs now or the number currently earning between $3,300 and $3,599 who would be affected when their passes are up for renewal.

With the tight labour market and a limited supply of local workers to substitute for foreigners, observers said the move would likely add to business costs.

"Couple that with rentals and wages still being quite high. It could contribute negatively to companies' investment intentions and foreign direct investment," said Credit Suisse economist Michael Wan.

If firms have less to invest in business development, this could adversely affect productivity growth.

Bosses of some small and medium-sized enterprises in the information technology and engineering industries voiced concern the move would ultimately affect their bottom lines and competitiveness.

Mr Ang Yuit, chief executive and founder of digital consultancy The Adventus Consultants, said his firm had tried, and failed to hire a local software developer about three years ago. Now, his team of 11 still has no software developer, and he has to outsource the work to people overseas. He said: "There's a logic to the change but the impact will be on smaller firms which don't have so many processes or staff to deal with all these human resource changes.

"Maybe a more calibrated approach may be needed. We should look at which industries, which size of business and which job type we are really trying to deal with."

But others said the impact may not be a large one. Many EP holders already get paid more than the minimum as they are in higher-skilled jobs where there may not be such talent among local workers, said Mr David Leong, managing director of PeopleWorldwide Consulting.

Even if the applicant meets the minimum salary criteria, he may not be given an EP, as "besides remuneration, the candidate's education qualification, experience and job scope are also taken into consideration in any EP application", said Ms Linda Teo, country manager for ManpowerGroup Singapore.

Employers could hire foreigners on the next tier of work passes - S Passes, which have a qualifying salary of $2,200 - though this could mean having to adjust their headcount as there is a quota on the foreigner-to-local ratio for these passes, as well as a monthly levy.

Alternatively, they could expand the job scope of EP holders to justify the higher pay.

A positive outcome would be if firms facing rising labour costs take the plunge to invest in technology, said DBS economist Irvin Seah. An upward push on pay could also help raise wages in sectors where they were previously depressed, and entice local workers to join them.

At environmental engineering firm Netatech, human resource director Elinda Gan said she has had to rely on a few EP holders to fill engineering and procurement roles as she could not find local workers to do the jobs. But things appear to be changing. "We've started to be able to find local engineers and business analysts. I think the economy is softening," she said.

A version of this article appeared in the print edition of The Straits Times on August 01, 2016, with the headline 'Rise in EP qualifying pay could affect bottom lines, say observers'. Print Edition | Subscribe