Budget 2022: EP, S-pass salary bump a blow to tech sector, but signals urgency in building local talent
THE salary bump to qualifying salaries for Employment Pass (EP) and S-Pass (SP) holders has businesses and observers noting the blow to talent-starved sectors while signalling the need to train local talent.
The tech sector in particular has been facing talent shortages and this new measure may even impede the growth of the infocomm technology sector in Singapore, according to Ivan Chang, treasurer of industry group SGTech.
"By raising the minimum qualifying salaries for E and S Passes, tech talent will become even more scarce and companies will end up paying more for the relevant skills. Already, wages in the tech sector and for tech roles have ballooned over the last year. This measure will thus worsen the wage cost inflation for tech roles," said Chang.
Qualifying salaries for EP and SP holders are set to rise by S$500, with older EP applicants to be raised in tandem, and will take effect by Sep 1, 2022.
The EP qualifying salary for all sectors except financial services will increase to S$5,000, while that of the financial services sector will increase to S$5,500. SP qualifying salary for all sectors except financial services will increase to S$3,000, while the minimum for the financial services sector will be raised to S$3,500. The SP qualifying salary is set to see another two more increases in September 2023 and September 2025.
Other business leaders and observers on the other hand welcomed the move to attract the right kind of foreign talent to Singapore's shores, to help hone the island republic's advantage on the world stage.
"Budget 2022's tweaking of manpower policies has thematically built on initiatives that have been introduced in recent years, including Tech.Pass, which was established to attract leading technology experts and entrepreneurs globally, as well as the Nongsa Digital Park initiative, which effectively builds a talent hinterland for Singapore," said Andrew Yeo, practice lead for Asia at public policy advisory Global Counsel.
The adjustment to EP holders' qualifying salaries was to ensure that they are comparable in quality to the top one-third of the local professionals, managers, executives and technicians (PMET) workforce. Similarly, the adjustment to SP holders' qualifying salaries was made to ensure they are comparable in quality to the top one-third of local associate professionals and technicians.
Employment frameworks play an important part in building the right kind of diverse teams for global companies headquartered in Singapore, according to Arne Jeroschewski, founder and chief executive officer, logistics platform Parcel Perform.
"What's important is the spirit of supporting a global business headquartered here in Singapore, and supporting them with the opportunity to have a diverse team here that is able and well equipped to manage a global business. Adjusting those metrics doesn't put that into question," said Jeroschewski.
The small and medium-size enterprises are likely to feel the hit more keenly, as Nilay Khandelwal, managing director of recruitment firm Michael Page Singapore, notes that acquisition cost of foreign talent will become more expensive.
"Employers in Singapore will need to find a balance on where they spend their money on niche talent when it comes to securing local versus foreign talent," said Khandelwal.
This could potentially lead to offshoring of IT talent, according to SGTech's Chang. The industry body's members will likely have to reevaluate their hiring plans.
"Given the acute shortage of local tech talent, the increased business costs will hit SMEs, with little or no alternatives, the hardest. This may increase the rate of failure among tech SMEs," said Chang.
While salary has been a defining benchmark in the EP criteria, Singapore could potentially look at assessing candidates via their skills as well, to complement the criteria.
"This skills-based approach consists of a 4-step process: To pre-define skills in demand, to implement skills tests to complement the existing EP criteria, to ensure skills transfer to the local workforce and to track any such skills transfer," said Chang.
Still, he notes the importance of retraining and upskilling local talent as well: "Overall, the impetus for talent programmes run by SGTech will become even more important as we attempt to retrain locals to enter ICT roles."
This is something that all commentators echoed: the need to build the local talent pool with the necessary skills for the jobs of tomorrow.
"It is also important to note that leveraging professionals from overseas should only be a short-term measure for Singapore. As we transition into a skills-based economy, locals must be supported and encouraged to grow and develop new competencies," said Tonny Loh, Partner, Heidrick & Struggles Singapore office.
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