Bosses may not get wage subsidies for some contract workers

Singapore

EMPLOYERS hiring contract workers through third-party staffing agencies may not enjoy wage subsidy benefits from the Jobs Support Scheme, The Business Times has learnt.

Still, the authorities and industry watchers have urged agencies to pass the subsidies on to customers, even though they are not obliged to do so.

The S$18 billion Budget initiative to help save local jobs, which was ramped up last week as Singapore's "circuit breaker" was extended, will see the government funding up to 75 per cent of salaries for nine months.

The first tranche of payouts, with a value of some S$7 billion, started from mid-April onwards.

But these subsidies are credited to the firms that make the Central Provident Fund (CPF) contributions on employee wages, a Ministry of Finance (MOF) spokesperson confirmed.

As such, staffing agencies that pay outsourced workers directly would be eligible to collect the subsidies.

BT understands that some companies, especially larger enterprises, were not counting on the Jobs Support Scheme for relief since they may already book the salaries as service fees to agencies - not as staff costs.

The Singapore Business Federation (SBF) told BT that it has not received any feedback along these lines from the business community.

But Kurt Wee, president of the Association of Small and Medium Enterprises, told BT: "If you outsource to somebody, the outsourced party is probably paying the person a fraction of what you pay. So the small and medium-sized enterprises (SMEs) would want to enjoy that wage benefit if it's a full secondment arrangement."

Taking into account the staffing agencies' cut, he estimated that SMEs typically pay between 110 per cent and 130 per cent of the workers' actual salaries to the third-party firms.

The MOF spokesperson told BT: "We encourage employment agencies and their customers to reach a mutually agreeable position relating to the cost of services provided. Companies should assess their contracts with the employment agencies to see what recourse is available."

For instance, employment agencies could adjust service fees to take in the wage subsidies, suggested Lawrence Chai, who is director of corporate services firm 3E Accounting.

Passing on the savings in full will reduce the chances of the employer terminating the contract, he added.

Similarly, SBF chief executive Ho Meng Kit proposed either coming to a mutual agreement on the service costs, or taking up alternative dispute resolution options such as mediation.

Indeed, some Singapore National Employers Federation members have reported that agencies are tapping scheme payouts to cut service costs, executive director Koh Jun Kiat told BT. Such agencies "will be able to retain their clients, who can then keep the jobs of their contract workers".