Impact of Reduction of Foreign Workers on SMEs

Mr Christopher de Souza asked the Acting Minister for Manpower (a) how is the Government gathering feedback from SMEs on the impact of the reduction of foreign workers on their businesses; and (b) how will the Government seek to mitigate against such possible negative impact on SMEs' businesses while attempting to also achieve the important goal of an increasing level of national productivity.

MOM engages SMEs regularly, and on multiple levels, to understand concerns over their business and the operating environment, and gather feedback on the manpower measures. These engagement sessions include meetings with industry associations, such as the Association of Small and Medium Enterprises (ASMEs), discussions with representatives from various sectors, such as F&B and retail; and meetings with individual companies themselves. Through these sessions, MOM has obtained a good understanding of the issues that SMEs face, and taken actions to address the concerns raised. One recent example is the extension of the Period of Employment (POE) for work permit holders.

Before 1 July 2012, every unskilled work permit holders was subjected to a POE of six years, which is the maximum period of time the work permit worker can work in Singapore. MOM had received requests from companies to extend the POE of their unskilled workers. These companies highlighted that these workers were valuable to companies as they were experienced and had gained tacit knowledge of the companies they work for. After conducting a review, MOM decided to extend the POE from six years to 10 years, with effect from 1 July 2012. This was to accord companies with greater flexibility to retain good and experienced work permit holders, and reduce the need for them to recruit and train new workers to replace work permit holders who reached their maximum POE. This flexibility in retaining workers enabled companies to save cost and increase their productivity.

The engagement sessions provided opportunities for MOM to explain the measures on foreign manpower. Companies realised the need to reduce the overall reliance on foreign workers and restructure their operations towards raising productivity. In this regard, MOM is aware that restructuring and readjustment are a gradual process. As such, the changes in manpower policies were taken in steps, with companies granted up to two years to transition and adjust to the new changes. For example, for the changes in the Dependency Ratio Ceiling (DRC) that have taken effect on 1 July 2012, companies have up till 30 June 2014 to adjust to the new requirement.

The Government has also provided various schemes to assist SMEs. On 23 August 2012, Minister of State for Trade and Industry, Mr Teo Ser Luck, has further announced a review on the current schemes. The objectives are to simplify the process through which SMEs can apply for existing schemes, and to intensify assistance to SMEs in innovation, branding and overseas expansion. Companies are also now able to apply for Innovation and Capability voucher online, instead of having to submit hardcopy documents.

In conclusion, the Government is committed to help SMEs grow and thrive, not just in Singapore, but in the region and internationally. The Government will continue to engage SMEs actively, work together to enhance current programmes and develop new schemes to ensure that SMEs continue to be a vibrant and important part of our economy.