Budget 2013: Handouts to SME

With the White Paper’s odour still in the air, the government, SME and public are in a 3-corner fight. The businesses want more foreigners as it is cheap and productive labour, the public wants fewer foreigners as public infrastructure and services are stressed with the increased population now, and the government is caught between 2 competing interests – the businesses that provide jobs to the public, and the public who are frustrated. Nonetheless, the government showed that it was serious in tackling the labour shortage businesses were facing by giving SMEs handouts.

These handouts, in the form of corporate tax rebates capped at $30,000 to offset higher rental costs, and improvement of the Productivity and Innovation Credit $1 for $1 capped at $15,000 for SMEs investing in practices that would boost productivity and rely less on labour. Most significant in attracting wage and status-conscious Singaporeans to work in retail, service and other blue collar sectors is the Wage Credit Scheme. In this Scheme, the government would shoulder 40%  of wage increases given to Singaporean staff earning a gross monthly wage of up to $4,000. $3.6 billion is set aside for this to attract Singaporeans to take up  jobs that foreigners are doing now – service, nursing, drivers, cleaners, kitchen staff etc. To encourage SME to move from foreign to a local workforce, foreign worker levies have gone up and the foreigner cap for the service sector has gone down from 45% to 40% now.   SME would however be upset here with these added restrictions.

The devil is however in the details and critics among the public or SME would still say it is never enough. The ones who benefit most are the SMEs, especially SMEs selling practices and applications to fellow SMEs to boost their productivity.  The Wage Credit Scheme in theory should be able to attract Singaporeans back to work in some sectors as SME are able to pay more but ultimately, would SME pay more if they can help it? Probably not. The better incentives would be still be tax rebates and subsidies.


4 responses

  1. The Real Question is really how this Cake is depends on the Eating of It thereof ! The People’s Jury is still out,its tough to criticize hypothetical fictional accounts of what will or will not happen ! Gerald Heng Sr. Metrowest Boston,MA.USA.

    February 26, 2013 at 12:56 pm

  2. Pingback: Daily SG: 27 Feb 2013 | The Singapore Daily

  3. Realist

    I worked in 3 SMEs previously and I can guarantee you that SMEs will not increase pay, not if they can help it. Why should they if they can always replace you with a cheap worker? Foreign worker ratio of 45% to now 40% is merely a baby step. SME owners can easily get around it by putting 1 or 2 family members as Singaporean workers, or by getting 1 or 2 of their loyal foreign workers to become PRs.
    The govt don’t need to budget $3.6bln for this Wage Credit Scheme — after the 3 years by 2016 when it is time for the next GE, the govt will find that they only need to spend $1.5bln at most.

    February 27, 2013 at 3:32 pm

  4. Another Realist

    Realist – I Agree. SME would not increase wages and the 40% wage credit scheme won’t work. At the most the SME would go into profit sharing to keep workers rather than increase wages. The problem is if SME close shop, its Singaporean staff, at least 60% of the company, would lose jobs. I feel the better way is relax quota, but increase foreign worker levy. Levy then rolled back as more PIC.

    February 27, 2013 at 11:39 pm

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