Higher EP salaries for renewals mean employers may have to give big raises – or lose workers

WHEN higher Employment Pass (EP) qualifying salaries kick in for renewals this September, some companies may have to give big pay rises to keep their foreign employees – or let them go.

Since September 2022, qualifying salaries for new EP applications have been benchmarked to the top third of local professionals, managers, executives and technicians (PMETs) by age.

This starts at S$5,000 and increases from the age of 23, up to S$10,500 for those aged 45 and above. The exception is financial services, where the range is from S$5,500 to S$11,500.

This is “because local PMET wages have also been increasing with age, reflecting accumulation of skills and human capital”, said a Ministry of Manpower (MOM) spokesperson, in response to queries from The Business Times.

The aim is to provide a level playing field, they added. Keeping the EP qualifying salary flat would risk exposing locals – especially experienced ones – to competition from lower-paid foreigners.

The higher minimums have already been challenging for some.

Small and medium-sized enterprises (SMEs) may attract less-experienced applicants, as experienced workers prefer larger companies, said Berne Chung, managing director of equipment maker Component Technology. “So how can you pay them – fresh graduates – above S$5,000, to apply for an EP?”

For renewals, the current minimums are S$5,000 for financial services and S$4,500 otherwise. From Sep 1 this year, the higher salaries will apply – so some existing EP holders may need pay rises to get their passes renewed. MOM did not respond to BT queries on the share of EP holders who earn below the new qualifying salaries.

As qualifying salaries rise with age, EP holders earning close to the minimum for their age will need additional pay rises as the years go by.

Chung pays his existing EP holders above the prevailing S$4,500 minimum, but worries about keeping pace once the increases start.

To retain skilled and experienced workers, he converted some Filipino workers to S Passes after their EP renewal applications failed. MOM does not reveal reasons for work pass application rejections.

The new salary requirements may make it tougher to retain his three Malaysian EP holders, who will get pay rises of about 34 per cent in September.

While qualifying salaries may not be too high for some firms now, they could pose a problem as they rise.

A Wellness Holdings pays above the minimum, but group CEO Arich Tan noted: “If the minimum qualifying salary were to exceed the market rate for the roles in which we typically hire EP holders, it may become a cause for worry.”

Biotech company ImmunoScape’s chief executive officer Ng Choon Peng regards the rules as a “balancing act” between the interests of Singaporean workers and businesses. Global competition for top talent has pushed him to pay the market rate, far above the EP minimum.

Yet he warned: “If this minimum salary thing keeps going up, then you’ll put a lot of us out of business.”

Apart from costs, the implied pay rises for EP holders may pose problems for human resource (HR) policy.

Financial technology company M-DAQ may need to give off-cycle increments – something it has “never done” – so that salaries meet EP requirements, said head of HR Brian Lim. (*see amendment note)

“It’s really the equity part that we have to manage,” he added. Policy must be consistent, or it may affect workers’ morale: “We always advocate that an employee gets a salary increment based on merit (and) performance.”

Toby Koh, group managing director of Ademco Security, agreed: “This increment (indicated by MOM) is generally way higher than the annual average salary increase in the company. Hence, it is challenging to align local HR policies for locals with those for EP holders.”

Value for money

The question is whether EP holders’ performance will justify the pay rises.

“Theoretically, training can be done,” said Ang Yuit, vice-president of the Association of Small and Medium Enterprises (ASME). But with high training costs, companies feel their investments must yield immediate returns – and returns are not guaranteed, as poaching of EP holders is common.

Dainial Lim, director of immigration consultant Xignam Consulting, noted that for some job roles, there is a limit to how much experience and skills can enhance performance.

Said Chung: “We have to make do with the (EP) salary adjustments because we don’t have any more S Pass quota (slots). So then, if their performance cannot meet the requirements – because we have to balance the skill set against the amount of money we pay – we may have to let (them) go.”

Yet that might be the point: getting firms to seriously consider the value of EP holders.

ASME’s Ang notes a “gradual, but consistent increase of the base income required for EP hiring” over the last 10 years or so.

EPs have gone beyond the reach of many SMEs, or are used as short-term measures and strategic, “very, very targeted” plays for specific roles, said Ang. “(It’s) created a behavioural model, and I think, partly, it’s intentional.”

Said MOM’s spokesperson: “Fundamentally, businesses are profit-driven. It would not make business sense to increase the pay of EP holders just to meet the new qualifying salary, if they do not bring enough value, especially when there are locals who are competent and skilled, and can perform the same tasks and roles.”

They added that raising pay for EP holders solely to meet higher minimums, without fairly reviewing the salary of other employees in similar roles, could violate the Tripartite Guidelines for Fair Employment Practices.

SICC chief executive Victor Mills said that with the salary benchmark, firms will consider both EP applicants and local PMETs: “The policy, therefore, will enable access to needed, quality foreign talent. It does not restrict access.”

Noting that the changes were announced in 2022, the MOM spokesperson added: “We encourage businesses to plan ahead to ensure that they continue to hire EP holders who can meet our requirements.”

Inmoo Hwang, the chief operating officer of investment company ADDX, said the early announcement “gave companies additional time to plan for changes and adapt to the policy”.

Sachet Sethi, senior manager of tech and transformation at Robert Walters Singapore, said “the market does not seem to be talking about” the fear of losing EP holders due to higher qualifying salaries.

But he did note “a shift” towards people moving out of Singapore due to the rising cost.

Going abroad

Businesses that can get neither foreign nor local hires may be driven abroad, said Chung: “In the end, it’s like pushing us out of Singapore.”

He hopes to keep his headquarters here, but added: “We’re already establishing more and more manpower across the Causeway.”

Xignam Consulting’s Lim has asked an existing EP holder to return to his home country to work remotely. He intends to bring the employee back to Singapore only if his EP renewal is approved.

ASME’s Ang noted an increasingly common response to manpower woes: outsourcing non-critical functions such as accounting, finance and HR, or offshoring them to countries such as Malaysia and the Philippines.

“During Covid, a lot of people realised that it’s actually possible,” he said. “Whether I Zoom someone sitting in Punggol or someone sitting in Manila – it’s not very different.”

In the longer run, due to the lack of local manpower and rising costs, Singapore businesses will start to regard themselves as being “multi-city” or “multi-region”, Ang said.

*Amendment note: A previous version of the story incorrectly stated the name of M-DAQ’s head of Human Resources.