Sustainability of Government's Wage Credit Schemes

Assoc Prof Randolph Tan asked the Minister for Manpower (a) whether he can provide an update on the impact of the special employment credit and the wage credit schemes; (b) whether the frequency with which employment or wage credits are being used to incentivise employers to hire certain groups of workers is sustainable; and (c) whether there are any concerns that the application of such credits in non-recessionary periods can limit their subsequent availability for use against hiring weakness in an economic downturn.

The Special Employment Credit (SEC) provides support to employers to hire older workers. It was enhanced in 2012 to help employers cope with business costs arising from the increase in CPF contribution rates for older workers. The SEC will apply until 2016 to enable employers to plan ahead in hiring older workers. Today, employers receive an SEC of up to 8% of each eligible employee's monthly wage. It is targeted at Singaporean workers aged above 50, earning up to $4,000 per month. In 2013, SEC was paid to over 100,000 employers for employing 445,000 eligible employees.

The Wage Credit Scheme (WCS) was introduced as part of a 3-Year Transition Support Package in Budget 2013. The scheme helps businesses cope with rising wage costs as they restructure in a tight labour market. It is not meant to incentivise hiring of any particular group of workers. Under the WCS, the Government co-funds 40% of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000. Over 74,000 employers benefited from WCS in 2013.

The employment rates for older workers have been rising significantly. Seventy-one percent of residents aged 55 to 59 were employed in 2013, up from 64% in 2008; 39% of residents aged 65 to 69 were employed in 2013, up from 26% in 2008. These higher employment rates are due in part to the tight labour market conditions today as well as various Government schemes including the SEC. Aside from the SEC, employers can also receive various grants under the WorkPro scheme to support them in redesigning jobs and the work environment to adapt to the ageing workforce. Re-employment legislation was also introduced in 2012 which requires employers to offer re-employment to eligible resident employees who turn 62, up to 65 years old.

Assoc Prof Tan has asked if the frequency of use of wage credits as incentive for hiring is sustainable. Both the SEC and WCS are not intended to be permanent forms of support. The SEC and WCS were introduced in the context of rising cost pressures on businesses including the progressive tightening of our foreign worker policies since 2010 and changes in CPF contribution rates for older workers. Wage credit schemes, such as SEC and WCS, as well as various productivity grant schemes, are avenues through which the Government channels back the additional foreign worker levies collected as a result of the tightening, to

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help businesses upgrade and share gains with their workers.

However, the long-term solution for ensuring the employability of our workers, including our older workers, is through skills upgrading. We have various schemes and subsidies in place for older workers to upskill themselves and raise their productivity such as through the Skills Training for Excellence Programme (STEP) and Enterprise Training Support (ETS) schemes.

Whether wage credit schemes will be made available during an economic downturn and how effective they will be, will largely depend on the nature of the downturn and economic outlook at that point in time.