Tuesday, 24 February 2015

Singapore Budget 2015 - Older Workers Gained

Budget 2015: Wage Credit Scheme extension among moves to help businesses cope
Higher CPF for Older Workers
24 Feb 2015 09:55
TODAY reports:
SINGAPORE: The pain caused by Central Provident Fund (CPF) changes announced on Monday (Feb 23) will be soothed by help from the Government in other areas, such as the extension of the Wage Credit Scheme (WCS) and deferment of foreign worker levy hikes, businesses say.

The advance notice on the CPF changes, which include a higher salary ceiling and raised contribution rates for older workers from next year, will allow companies to adjust prices in preparation, they added.

Although the changes were "expected", Soup Spoon managing director Andrew Chan said firms have been struggling to cope with higher costs in other areas.

“The market has been getting increasingly competitive, especially in my trade,” he said, adding that rental, transport and food costs have been increasing with higher demand.

The raising of CPF contribution rates for older workers will affect Mr Chan because about one in five employees in his restaurant chain are aged 50 and above.

However, with the WCS being extended till 2017 and levy hikes for S Pass and Work Permit holders being held off, Mr Chan said these would alleviate the higher labour costs he would face.

The impact of higher CPF contributions will vary among industries and affect labour-intensive businesses the most, said Energycorp Global President and chief executive officer Michael Heng, who welcomes higher CPF contributions to help older workers meet retirement needs.

Due to the labour crunch, his two companies pay workers older than 50 above the market rate. Between the labour shortage and high labour costs, the former is a more serious problem confronting his companies, he noted.

“When you are not able to hire, it is a more serious problem. You cannot cope,” said Mr Heng. “When you have nobody, you cannot create. If you don’t create, you don’t earn anything.”

Singapore Business Federation (SBF) chief executive officer Ho Meng Kit said that while CPF changes would incur higher costs, companies would benefit in the long run after overcoming adjustment pains in the short term with the help of the supporting measures outlined in the Budget.

In addition, higher CPF contributions could help attract older workers back to the workforce to address the labour crunch, he added.

Meanwhile, the National Trades Union Congress welcomed the CPF changes, which it had lobbied for.

“We are heartened that the Government has heeded our call, which will help workers save more for retirement and healthcare expenditures, and bring about fairer wages for older workers, further boosting their retirement savings,” said its president Diana Chia.

While the higher contribution rates for older workers will translate to lower take-home pay for members aged 50 to 55, DBS economist Irvin Seah said the additional interest announced for the first S$30,000 in CPF accounts would be an incentive for retired Singaporeans to not make excessive lump-sum withdrawals - a change recommended by the advisory panel and which has been accepted by the Government.

Mr Seah added: “It will encourage those who have little CPF savings to defer the withdrawal and keep their savings for their future needs.”


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