SINGAPORE - The planned hikes in qualifying salaries for Employment Pass (EP) and S Pass holders will not automatically give foreign workers a pay rise at the expense of locals, said Manpower Minister Tan See Leng on Friday (March 4).

He was addressing concerns on a "windfall effect", after higher EP and S Pass salary cut-offs were announced by Finance Minister Lawrence Wong in his Budget statement last month.

The latest revisions will see the qualifying salaries for new EP and S Pass applicants go up by $500 to $5,000 and $3,000 respectively from September.

In the financial service sector - which has higher salary norms - the bar will be raised from $5,000 to $5,500 for new EP applicants. A salary threshold of $3,500 will be introduced for incoming S Pass holders in the sector.

For older EP and S Pass applicants, their higher salary benchmarks will be raised in tandem.

Dr Tan gave an example of a company that hires 10 employees - nine locals and one S Pass holder - doing the same job and earning the same pay of $2,500.

"Will the foreigner immediately get a $500 pay increase, just because of the increase in the qualifying salary? No," he stated.

For EP and S Pass renewals, the tweaks will only apply a year later - from September 2023.

This could even stretch out to September 2026, depending on when the S Pass holder is due for renewal, Dr Tan said. "That is about 4½ years away."

The company will then have enough time to think about alternative options, such as finding or training another local worker, he added.

“This is especially so if the foreigner is not bringing in enough value to justify the pay increase. Businesses are ultimately profit-driven, and they would not just blindly raise costs.”

Addressing concerns that employers find it tough to hire locals in a tight labour market, Dr Tan said there is "still significant untapped supply from both women and seniors outside the workforce".

“If businesses can do more to redesign jobs to make the jobs more flexible and more inclusive, I think they can attract more of these segments of workers,” he added. 

Further, there are quotas at the S Pass level.

Going back to his example, Dr Tan said the company could find itself in a difficult situation if it insists on giving the S Pass holder a pay rise without fairly reviewing the pay of its local staff.

"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," he added.

On the other hand, if the salary cut-off is left untouched at $2,500, the firm might continue to renew the S Pass holder at the lowest salary required, he said. "And the firm will then have little reason to raise the pay for the other nine locals who are doing the same job."

Local workers who have come across unfair remuneration practices can report them to the Tripartite Alliance for Fair and Progressive Employment Practices (Tafep), which will get the firm to conduct a proper salary review, said Dr Tan.

"If, after all of this, the firm still chooses to retain the S Pass holder, it would be because the value that the S Pass holder brings to its operations more than justifies the higher salary."

On suggestions to instead raise S Pass levies even more, Dr Tan said these levies would be applied equally to all S Pass holders.

"The 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," he said. "Both groups are equally affected. Raising levies makes no distinction or differentiation between them."

Adding that there are no perfect solutions, he said: “ I hope that we do not let perfect be the enemy of the good.”