Singapore Budget 2020 – Spotlight on Enhancements to Wage Credit Scheme
Singapore Budget 2020 – Spotlight on Enhancements to Wage Credit Scheme

Posted on 05 March 2020

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The $4 billion Stabilisation and Support Package to provide economy-wide support to help enterprises with cashflow over the Covid-19 outbreak primarily consists of the $1.3 billion Jobs Support Scheme and $1.1 billion enhancements to the Wage Credit Scheme (WCS).

We look into the WCS and its changes, as well as the enhancements initiated in Budget 2020, and their impact on the labour force of Singapore during the Covid-19 outbreak.

What is the WCS?

The WCS was introduced in Budget 2012 and extended in Budget 2015. Primarily, it supports businesses embarking on transformation efforts and encourages employers to share productivity gains with workers by co-funding wage increases.

The IRAS website explained that under the first extended period of the Scheme, 2016-2017, the Government co-funded 20% of qualifying wage increases up to a gross monthly wage level of $4,000. In addition, gross monthly wage increases (at least $50) previously given in 2015 and 2016 by the same employer continued to be co-funded at 20% if they were sustained in 2016 and 2017.

Under the second extended period of the Scheme, 2018-2020, the Government co-funded qualifying wage increases at 20% in 2018, 15% in 2019 and 10% in 2020.

Enhancements to the WCS in Budget 2020

During Budget 2020, several enhancements to WCS were announced. The $1.1 billion would go to about 90,000 enterprises to benefit more than 700,000 Singaporean employees.

Government co-funding ratios for wage increases in 2019 and 2020 were raised from the current 15% and 10%, to 20% and 15% respectively. In addition, gross monthly wage increases (at least $50) given in 2017, 2018 and 2019 by the same employer will be co-funded at the respective levels of co-funding if they are sustained in 2018, 2019 and 2020.

Finance Minister Heng Swee Keat also announced during the Budget Debate Round-Up Speech that Enhancements to the WCS will be provided in the second half of this year so that support for enterprises can be spread out in a more sustained way.

“These measures in the package also come on top of the existing support schemes for firms,” he clarified. “For example, there will be a WCS payout of more than $600 million to firms next month, based on the parameters announced in Budget 2018.”

The Budget 2020 website produced a table explaining the enhancements, reproduced below:

Scheme

Existing WCS
as announced in Budget 2018

Enhanced WCS
as announced in Budget 2020

Qualifying years2

  • 2018, 2019, 2020
  • 2019, 2020

Level of co-funding

  • 20% of qualifying wage increases in 2018
  • 15% of qualifying wage increases in 2019
  • 10% of qualifying wage increases in 2020
  • 20% of qualifying wage increases in 2019
  • 15% of qualifying wage increases in 2020

Gross monthly wage ceiling

  • $4,000
  • $5,000

Qualifying wage increases

  • Increases in gross monthly wage of at least $50 given to Singaporean employees in the qualifying year, up to a gross monthly wage level of $4,000, will be co-funded.
  • In addition, increases in gross monthly wage of at least $50 given in 2017, 2018 and 2019 up to a gross monthly wage level of $4,000, and sustained in subsequent years of the scheme, will be co-funded.
  • Increases in gross monthly wage of at least $50 given to Singaporean employees in the qualifying year, up to a gross monthly wage level of $5,000, will be co-funded.
  • In addition, increases in gross monthly wage of at least $50 given in 2017, 2018 and 2019 up to a gross monthly wage level of $5,000, and sustained in subsequent years of the scheme, will be co-funded.

 

Additionally, all WCS payouts from March, until the final payouts in 2021 when the scheme is expected to end, will be credited directly to employers' bank accounts through PayNow Corporate or Giro. These happen once a year, and are automatically calculated, eligible employers will receive letters from IRAS informing them of their payouts.

 

Response and Analysis

In Budget 2013, the WCS was introduced to help businesses pursue their transformation journey, amidst rising wage costs and to encourage employers to share productivity gains with employees by providing co-funding on wage increases for local workers. It was generally well-received.

Thus, CNA described it as “heartening” that WCS has been extended and increased. In light of the Covid-19 outbreak, the scheme will also help businesses retain their employees.

However, Senior Minister of State for Trade and Industry Chee Hong Tat said that more important than helping companies cut cost is to push them to use this period to improve their capabilities and productivity, and raise the skills of their workers.

“These are important because we know the recovery will come as a matter of time. And when the recovery comes, we want our companies and our workers to be ready to seize those new opportunities,” he said.

Chai Wai Fook, Partner, Tax Services at Ernst & Young Solutions LLP also emphasised that “Budget 2020 is a strategic road map that not just supports businesses and workers in this current fragile economic situation but also drives continued focus on transforming businesses and upskilling workers for the future.”

Minister Heng concluded during the Budget Debate Round-Up Speech, “The two biggest items in the Stabilisation and Support Package – the JSS and the WCS – are focused on preserving and enhancing jobs.

“With greater job assurance, workers are in a better frame of mind to go for training. It will also avoid them having to cut down too much on consumption.”

Thus, the WCS reflects a commitment to upskilling and upgrading workers not only through the downtime created by the coronavirus outbreak, but throughout Singapore’s growth as well.

 

References and Further Information

Stabilisation and Support Package

Budget Speech 2020

Budget Debate Round-Up Speech 2020

Singapore Budget 2020 Full Coverage by Singapore Business Review

Heart of the Matter Podcast – Singapore Budget 2020: A report card

Wage Credit Scheme

 

City photo created by jcomp - www.freepik.com

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