Singapore Budget 2020: Key takeaways for HR leaders and employers

An enhanced wage credit scheme, a scheme to retain local workers, and a SkillsFuture support package for mid-career professionals - these are some of the things HR, employers and employees can look forward to in the next few years, as part of Singapore's Budget 2020 initiatives.

Deputy Prime Minister (DPM) and Minister for Finance Heng Swee Keat, delivered his #SGBudget2020 speech in Parliament yesterday, putting forth a range of support measures for Singapore, of which a range would help workers and enterprises deal with economic uncertainties brought forth by the COVID-19 outbreak.

A brief economic overview

According to DPM Heng, Singapore's economy grew by a modest 0.7% in 2019, the weakest growth since the 2008 financial crisis. Just as the global economy started to recover, the COVID-19 outbreak struck, and would "certainly impact" the country's economy, he shared.

DPM Heng added: "The Ministry of Trade and Industry (MTI) has downgraded the GDP forecast from between 0.5% to 2.5%, to between -0.5% and 1.5%. However, the duration and severity of this outbreak and the impact on the global economy are still unclear.

"While MTI's baseline is for GDP growth to come in at 0.5% for the full year, we must be prepared that the economic impact may be worse than we projected."

In light of this and in efforts to protect the people and their families, the government will set aside an additional S$800mn in the Budget to support frontline agencies who have been fighting and containing the outbreak.

Budget 2020 will aim to address these challenges and opportunities:

• To grow Singapore's economy, and transform its enterprises;
• Care for and nurture Singaporeans at every stage of their lives;
• Build a liveable and sustainable Singapore in the face of climate change, secure sovereignty as an independent nation, and ensure its fiscal sustainability; and
• Work with Singaporeans to build a nation and a home to call their own.

The manpower-relevant initiatives for HR leaders and employers are summarised below.

COVID-19 special packages: Job support, wage credit scheme enhanced, corporate tax rebates

The first is the Stabilisation and Support Package. This will stabilise the economy and support workers and enterprises, by helping workers to stay in their jobs and enterprises with cash flow. The government will provide additional help to sectors more directly affected by the outbreak.

To elaborate on the first package, the Stabilisation and Support Package would amount to S$4bn and, in supporting enterprises, their wage costs will be defrayed through two schemes:

First, there is the Job Support Scheme, to help enterprises retain their local workers. For every local worker in employment, the government will offset 8% of the wages, up to a monthly wage cap of S$3,600, for three months. This payment will be given to employers by the end of July 2020; the scheme will total S$1.3bn, and will benefit all enterprises and the 1.9mn local employees in Singapore.

Second, the government will enhance the Wage Credit Scheme to support wage increases for Singaporean workers. Currently, this scheme co-funds wage increases for Singaporean employees earning a gross monthly wage of up to S$4,000. Moving forward, the monthly wage ceiling will be raised from S$4,000 to S$5,000, for qualifying wage increases given in 2019 and 2020, to benefit more Singaporean employees.

The government co-funding levels for 2019 and 2020 qualifying wage increases will also be raised by five percentage points, to 20% and 15% respectively.

With these enhancements, another S$1.1bn will go to about 90,000 enterprises, to benefit more than 700,000 Singaporean employees.

To support households, the government will provide a special Care and Support Package, to provide additional, timely help to more households with cost of living. The less well-off will get more help.

Apart from the above, the Stabilisation and Support Package will also provide economy-wide support to help enterprises with cash flow.

First, will be the grant of a Corporate Income Tax Rebate for Year of Assessment 2020, at a rate of 25% of tax payable, capped at S$15,000 per company. This rebate will benefit all tax-paying companies and cost about S$400mn.

Second, will be the enhancement of several tax treatments under the corporate tax system for one year. DPM Heng shared: "For instance, I will allow enterprises a faster write-down of their investments in plant and machinery, and renovation and refurbishment, incurred for Year of Assessment 2021. This will put more cash in the hands of our enterprises. For example, hotels can now take advantage of this lull period to carry out upgrading work, and be better prepared for the upturn."

Third, in helping enterprises access working capital more easily, the government will also enhance the Enterprise Financing Scheme's Working Capital Loan component for one year. The maximum loan quantum will be raised from S$300,000 to S$600,000, and risk-share on these loans will be increased to 80%, from the current 50% to 70%.

The government will also support tenants and lessees of government-managed properties, including those under JTC, HDB, SLA, STB, and SDC. They can approach the government agencies to discuss options for more flexible rental payments such as instalment plans. Each request will be assessed individually, taking into account the enterprise's circumstances.

Sectors directly affected by COVID-19 (i.e. tourism, aviation, retail, food services, and point-to-point transport services) will get additional support in the form of:

• Enhanced support under the Adapt and Grow initiative for 2020, specifically through redeployment programmes in the tourism, aviation, retail, and food services sectors.
• The government will extend the funding period for reskilling from three months to a maximum of six months.
• Together with the Jobs Support Scheme, support will be provided to help employers in these sectors to retain and train more than 330,000 local workers. These workers can make full use of the downtime for training and upskilling, to prepare for the recovery.

Affected sectors will also get help with operating costs and cash flow, as follows:

Tourism sector

• A Property Tax Rebate of 30% for the year 2020, for the accommodation and function room components of licensed hotels and serviced apartments, and prescribed Meetings, Incentives, Conventions, and Exhibitions venues.
• International cruise and regional ferry terminals will receive a 15% Property Tax Rebate, and the Integrated Resorts will receive a 10% Property Tax Rebate.
• For enterprises in the tourism sector, the government will work with Participating Financial Institutions to introduce a Temporary Bridging Loan Programme for a year, with a loan quantum of up to S$1mn and interest rate capped at 5%. The government will take on 80% of the risk of the loan. This will provide more cash flow on top of the enhanced working capital loan.

Aviation sector

• The government will implement a suite of measures, comprising rebates on aircraft landing and parking charges, assistance to ground handling agents, and rental rebates for shops and cargo agents at Changi Airport. A 15% Property Tax Rebate will also be granted for Changi Airport.

Food services and retail

• The National Environment Agency (NEA) will provide a full month of rental waiver to stallholders in NEA-managed hawker centres and markets.
• Other government agencies, like HDB, will provide half a month of rental waiver to its commercial tenants.
• To support establishments that operate in private property, a 15% Property Tax Rebate will be granted for qualifying commercial properties. DPM Heng strongly urged landlords to pass this on to their tenants by reducing rentals.
• The Ministry of Transport has announced a Point-to-Point Support Package. DPM Heng added: "I am heartened to know that many taxi and private hire car operators have come out strongly to support the initiative by matching the government’s contribution. This spirit of partnership is what we need to weather this challenging period together."

For more on this, refer to Annex A of the Budget Speech 2020. 

Investing in the 'Next Bound of SkillsFuture': One-off credit top-up, mid-career credit scheme, and more

Budget 2020 will do more to support Singaporeans as they seek to acquire new skills in the midst of major structural change in the global economy, through the Next Bound of SkillsFuture.

Three key thrusts of the Next Bound of SkillsFuture:

• Enabling the individual;
• Enhancing the role of enterprises in developing their staff; and
• Focusing especially on mid-career workers.

In supporting Singaporeans to continue learning, the government will provide a one-off SkillsFuture Credit top-up of S$500 for every Singaporean aged 25 years and above. This top-up will be available for use from 1 October 2020. Unlike the earlier S$500 credit which had no expiry date, this top-up will expire in about five years, by end-2025. This is to encourage Singaporeans to take action early to learn new skills, and to make the best use of this period of economic slowdown.

The government will also introduce a new SkillsFuture Enterprise Credit, which employers can use to defray 90% of out-of-pocket costs of job redesign, skills training, and business transformation. It will benefit over 35,000 enterprises, most of which will be SMEs, and with S$10,000 allocated to each enterprise.

The Productivity Solutions Grant will also be expanded, to include support for pre-approved job redesign consultancy services.

The government will also support large anchor enterprises, in training efforts; these anchor enterprises are supported by SMEs, and the government aims to partner with up to 40 of such anchor enterprises to benefit 4,000 SMEs over the next five years.

For mid-career locals currently in their 40s and 50s, the government will launch a new SkillsFuture Mid-Career Support Package. This will:

• Increase the capacity of reskilling programmes;
• Provide a hiring incentive for employers that hire and reskill jobseekers over 40 who have gone through a reskilling programme;
• Provide a special SkillsFuture Credit top-up of S$500 for every Singaporean aged 40 to 60 in 2020; and
• Allow for peer-level support and career guidance through a group of volunteer Career Advisors.

In other employability efforts, Budget 2020 will continue to support lifelong employability in Singapore, with a new Senior Worker Support Package.

First, the Special Employment Credit and Additional Special Employment Credit will be refashioned into a Senior Employment Credit, which will take effect from 2021. It will provide employers with wage offsets when they hire Singaporean workers aged 55 and above, with the support levels tapering down over time as the retirement and re-employment ages are gradually raised.

Second, when employer CPF contribution rates go up in 2021,  employers will receive a CPF Transition Offset for the year, to offset half of the increase in employer contributions.

Third, through the Senior Worker Early Adopter Grant, the government will support companies that increase their own retirement and re-employment ages before legislated changes take place.

Fourth, a part-time re-employment grant will support and encourage companies to formalise part-time re-employment provisions.

Additionally, institutes of higher learning will partner with more enterprises to provide real-work settings for local students to learn in, through the SkillsFuture Work-Study Programmes. The capacity for these programmes will be doubled by 2025.

For more on this, refer to Annex B2 of the Budget Speech 2020.

Reduction in S-Pass holders' ceiling in specific sectors

Given Singapore’s declining local labour force growth, foreign workers are still a necessary complement, but more opportunities must still be created for Singaporeans. In doing so, the government will take further steps this year, and will reduce the S-Pass sub-dependency ration ceiling (DRC) for those in the construction, marine shipyard, and process sectors, from 20% to 15%. This will be carried out in two phases beginning in January 2021.

However, the government will not reduce the S-Pass DRC for the manufacturing sector at this point, given economic uncertainties.

The government will also maintain foreign worker levy rates for all sectors for 2020.

Support for retirees and persons with disabilities

To help working seniors with less CPF savings to save more, the government will introduce a Matched Retirement Savings Scheme from 2021 to 2025, wherein the government will match every dollar of cash top-up made to the CPF Retirement Account, capped at S$600 per annum. This will apply to about 435,000 Singaporeans. Lower, to middle-income Singaporeans aged 55 to 70 who have not been able to set aside the prevailing Basic Retirement Sum will be eligible.

Next, in providing stronger support for employers of persons with disabilities (PWDs), the government will introduce the new Enabling Employment Credit (EEC). It will be available for five years, from 2021 to 2025, at a cost of about S$31mn annually.

To ensure that it remains helpful for PWDs to find employment and remain in the workforce, the EEC will be reviewed after two years, with adjustments to be made if necessary and make adjustments if necessary. On this, the MOM will provide more details at the upcoming Committee of Supply debate.

Support for enterprises and startups on digitalisation, internationalisation and transformation

The government will allocate S$8.3bn over the next three years to drive Singapore's Transformation and Growth strategy, covering three thrusts:

Enabling stronger partnerships

The first thrust is enabling stronger partnerships – with the world and within Singapore. As a small, open economy, Singapore must continue to strengthen partnerships with the world, and build new links in new domains. Singapore must also strengthen partnerships to bring good ideas to global markets.

To make the most of Singapore's global links, the country must strengthen partnerships within itself to bring good ideas to global markets. Even as enterprises compete to differentiate themselves, they must come together to solve common challenges, and gain a competitive edge together. Trade Associations and Chambers play an important role in this.

Deepening enterprise capabilities

Under this thrust, the government will support enterprises at each stage of their growth, to deepen their capabilities. This will be done through identifying business needs; adopting pre-approved digital technologies; and taking the first steps to enter new markets.

To catalyse investment into deep-tech startups, an additional S$300mn will be set aside under the Startup SG Equity. This is expected to draw in more than S$800mn of private funding over the next 10 years, and will give deep-tech startups better access to capital, expertise and industry networks.

Aside from helping startups, the government will also enhance support for both new and established enterprises through an Enterprise Grow Package. This Package aims to help enterprises identify business needs, adopt preapproved digital technologies, and take the first steps to enter new markets.

• First, the GoBusiness platform will be launched, as a single touchpoint for enterprises to transact with the government digitally;
• Second, will be the greater adoption of digital technology. Here, the SMEs Go Digital programme will be expanded. Across all 23 ITM sectors, there will be Industry Digital Plans or equivalents, to enable enterprises to access pre-approved digital solutions; and
• Third, to help more enterprises enter new markets, the government will enhance the Market Readiness Assistance grant by expanding the funding support and coverage, to include, for example, FTA consultancy.

The government will also introduce an Enterprise Transform Package, focusing on leadership, which will support business leaders of promising SMEs in achieving the next bound of growth.

• Enterprise Singapore will launch the Enterprise Leadership for Transformation Programme, to support business leaders of promising small and medium enterprises in achieving the next bound of growth.
• Over the next three years, they aim to support business leaders of 900 enterprises in business transformation, with training and mentorship.
• The government will work with Institutes of Higher Learning, banks, and industry experts, and facilitate collaboration.

In tandem, it will continue to broaden transformation through the Enterprise Development Grant, by expanding its reach. In FY2020, the government expects to support about 3,000 projects through the Grant, an increase of more than 10% from the number today.

Developing Singaporeans

The government will introduce a new Asia-Ready Exposure Programme, to support youths in their visits to cities in ASEAN, China or India; enhanced support levels for internships under the Global Ready Talent Programme. These initiatives will support the government's vision of Singapore as a global-Asia node of technology, innovation and enterprise – an economy driven by innovation and digitalisation; and a launchpad for multi-nationals and regional corporates to access Asia, and for Asian enterprises to go global.

For more on this, refer to Annex B1 of the Budget Speech 2020.

Lead image / Screengrab of Budget 2020 reading in Parliament, on MOF's website Infographics / MOF