More contract hiring, higher foreign labour costs: The trends shaping Singapore’s manpower landscape in 2026

[SINGAPORE] A rise in contract or project-based roles is among several trends expected to shape the labour market in 2026, as hiring sentiment cools sharply in the uncertain economic climate, said watchers.

Chua Han Teng, DBS senior economist, said: “Firms are likely holding a prudent stance for 2026, due to still-elevated global economic and trade policy uncertainties, even with some de-escalation in tariff tensions since Liberation Day.”

He expects Singapore’s overall unemployment rate to inch up marginally to a “still-low 2.2 per cent” in 2026, from 2 per cent in 2025.

While Maybank senior economist Chua Hak Bin does not expect unemployment to be a concern in 2026, he said employment growth could slow slightly to about 60,000.

This would barely maintain the momentum from 2025, for which his forecast is about 65,000, given that employment already grew by 42,500 in the first three quarters.

“We expect higher employment growth in the services sector in 2026, particular for the financial and hospitality sectors,” he said.

More selective hiring

Recruiters said that even if hiring demand remains positive, employers are becoming more selective.

They are likely to focus on capabilities that support digitalisation, sustainability and business expansion, said Foo See Yang, managing director and strategic business group head at recruitment agency Persol.

One trend is supporting core teams of permanent employees with contract staff, freelancers or project-based hires. Many organisations may adopt such “blended models” to “balance agility with cost efficiency”, said Linda Teo, country manager of ManpowerGroup Singapore.

This provides access to specialised skills while managing fixed costs, she added.

Kirsty Poltock, country manager of Robert Walters Singapore, said this approach helps companies stay agile to respond to market volatility.

Gloomier hiring sentiment is expected to persist into the new year, despite the Singapore economy ending 2025 on a much better note than expected.

In November, the Ministry of Trade and Industry (MTI) upgraded its full-year forecast for gross domestic product growth to “around 4 per cent”, the second upgrade since slashing the outlook to “zero to 2 per cent” in April.

Nonetheless, hiring confidence is likely dampened by global uncertainties such as geopolitical tensions, inflationary pressures and supply chain risks, said ManpowerGroup’s Teo.

It is worth noting, she added, that MTI’s outlook for 2026 growth is lower, at 1 to 3 per cent.

“As businesses navigate a more complex operating environment, some degree of workforce adjustment is likely,” she said. “However, this does not necessarily translate into widespread layoffs.”

Employers increasingly focus on redeploying and upskilling talent to meet evolving business needs, rather than “resorting to large-scale redundancies”, she added.

Competition for entry-level roles

Fresh graduates are likely to keep facing keen competition in the new year.

Graduates in 2024 had a tough year of job-searching, with 12.9 per cent still unemployed six months after graduation – a share that has risen for three straight years. Statistics for the class of 2025 will be out in early 2026.

In 2025, general hiring sentiment softened as the uncertain tariff environment spooked businesses. There were also structural reasons, such as a mismatch in skills and expectations, as well as disruption from artificial intelligence (AI), said industry watchers.

In August, the government announced 800 roles under the structured GRaduate Industry Traineeships (Grit) and Grit@Gov traineeship programmes, rolled out in October.

Separately, a S$5 billion Equity Market Development Programme – to strengthen the local equities market – may catalyse more financial-sector jobs, including for fresh graduates, said Maybank’s Dr Chua.

There should also be opportunities in the technology, healthcare and sustainability sectors, in particular.

Said ManpowerGroup’s Teo: “These industries are growing due to a combination of factors – including demographic changes, regulatory priorities and sustainability commitments – alongside digital transformation and innovation.”

However, competition will be keener, too. Even if employers are hiring, they are “far more specific about job-readiness and applied skills”, said Persol’s Foo.

“Fresh graduates who can demonstrate practical experience, through internships, projects or industry-linked programmes, continue to have strong opportunities.”

He also expects more “contract-to-permanent pathways”, where fresh graduates are hired for contract roles initially but can then be converted. This helps firms “balance headcount flexibility with the need to renew their talent pipelines”, he said.

One key reason for entry-level jobs drying up is that tasks typically given to junior staff are now performed by AI.

Sara Tiew, director for talent advisory in Asia-Pacific at professional services firm Aon, said this trend is likely to continue as organisations streamline their operating and staffing models.

But it will also “pave the way for new, more value-adding roles such as prompt engineers and data storytellers in the future”, she added.

Fresh graduates should look at roles that leverage AI, such as business intelligence analysts, cybersecurity associates and consultative sales specialists.

“These positions require graduates to work alongside AI systems, using technology to enhance decision-making, drive innovation and deliver more personalised client experiences,” she said.

“Success in these roles demands agility, a commitment to continuous upskilling, and the ability to integrate technological advancements into daily work.”

Higher foreign labour costs, tighter criteria

Foreign manpower costs are set to rise in the new year.

From Jan 1, the minimum qualifying salary for Employment Pass (EP) application renewals will rise to S$5,600, from S$5,000 now. For the financial industry, the new level is S$6,200, up from S$5,500.

From Sep 1, the minimum qualifying salary for S Pass renewals will also be raised by S$150 to S$3,300. This may mean higher wages for such workers, in roles that are not easily filled by locals, said Aon’s Tiew.

“Increasing salaries to meet the new minimum requirements could place additional strain on manpower costs,” said ManpowerGroup’s Teo.

“While replacing foreign employees with local hires is one possibility, this may prove challenging as these roles were originally filled due to local skill gaps.”

Under the Fair Consideration Framework, employers must first consider local applicants before hiring foreign professionals.

Employers that value continuity and expertise may thus give salary increases to retain critical EP holders, if their current pay sits below the new threshold, said Robert Walters’ Poltock.

Some firms may also lean more on contract, project-based or consulting engagements where pass requirements differ, as part of a broader flexible workforce strategy, she added.

Teo said businesses facing financial constraints may consider switching EP holders to S Passes, where a lower salary is required.

In rare cases where neither salary adjustments nor reclassification to an S Pass are feasible, companies may “evaluate alternative workforce strategies”, such as relocating certain roles outside of Singapore.

In the short term, employers may face a manpower crunch as they adjust to the new EP qualifying salary and seek out local talent, she added.

Persol’s Foo sees shortages as likely in segments where salaries are close to the new threshold, such as engineering, logistics, advanced manufacturing and certain service roles.

“Companies that plan early – by reviewing salary bands, redesigning roles and investing in productivity – will be better positioned,” he said.

Structured pathways for skilled trades?

The new year may bring the first indications of policy-supported career progression for skilled trades, such as electricians and plumbers.

This should include a “stackable” curriculum where individual skills can be accumulated towards higher qualifications, and allow individuals to earn higher wages as they acquire skills, said observers.

This may be similar to the Progressive Wage Model (PWM) for lower-paying sectors such as cleaning, security and waste management. The framework allows workers to be paid more as long as they gain specific new skills.

Watchers believe the government may conduct consultations or roll out pilot programmes in 2026, bearing in mind that consumers and businesses are likely to be concerned about the impact on costs.

Yet, the challenge is to develop Singaporean skills to a level where both quality and prices are higher, said Walter Theseira, an economist from the Singapore University of Social Sciences (SUSS).

“There is no point in having Singaporeans compete with foreign workers at the acceptable or more basic end of the quality spectrum, nor is there a point in preventing foreign workers from working in that area,” he said.

In renovation works, for example, there is a clear market need for services such as basic painting, hacking and tiling. Many “price-sensitive” consumers want to be able to engage foreign workers for these, at a low price.

But there is also demand – and a high willingness to pay – for “much higher-skilled services” dealing with feature walls or exotic tiles and materials, he added.

“There is also high market demand for the supervision and management of trade work, which requires the supervisor to also be highly skilled.”

Beyond clear evidence of certification and skill levels, consumers must also be assured that work done by a certified worker is of better quality.

“Given how the government has approached similar problems in other industries, there may be some kind of progressive skills and wage model, with requirements for training, experience and evidence of quality to go up the ladder,” he said.

Aslam Sardar, chief executive officer of the Institute for Human Resource Professionals, said that what is needed to uplift this segment are “clear progression pathways that allow individuals to advance through both technical and leadership tracks, supported by certification, stackable skills that are industry recognised, and fair, transparent wage structures tied to skills mastery”.

Aon’s Tiew said Singapore could learn from Germany’s dual-apprenticeship system, which combines standardised curricula, practical work experience and formal certification to support stable earnings and career mobility.

“For skilled-trades pathways to succeed locally, the government should develop portable and stackable curricula that are commonly recognised by employers, (and) align career progression and wage growth with skill acquisition as part of (the) Jobs Transformation Maps,” she said.

To ensure the industry adopts the model, the public sector must take the lead, said SUSS’ Prof Theseira.

“For example, public works of a certain magnitude may require that the contractor have a minimum number of Singaporeans with the appropriate skills level employed to do and supervise the work,” he said.

“This is how PWM was implemented, and this could be similarly implemented.”