No plans to raise Local Qualifying Salary of $1,400 for now

SINGAPORE - There are no plans to further raise the Local Qualifying Salary (LQS) of $1,400 for now, said Senior Minister of State for Manpower Zaqy Mohamad in Parliament on Tuesday (Sept 14).

From September next year, firms hiring foreign workers will have to pay all local employees the LQS, the Ministry of Manpower announced in August.

There were 103,000 full-time resident employees earning a gross monthly income of  below $1,400 last year, which is about 5.3 per cent of the full-time employed resident workforce.

This new LQS requirement will raise the wages of an estimated 77 per cent of these workers to at least $1,400 a month, Mr Zaqy said.

Currently, firms hiring foreigners are required to pay at least the LQS to the local workers whom they need to count towards their foreign worker quota.

Responding to questions from MPs such as Mr Yip Hon Weng (Yio Chu Kang) on whether the LQS will be reviewed regularly, Mr Zaqy said: "The LQS is a stable benchmark that has been in place for many years. It has been revised four times in the last five years.

"We recognise that the new LQS requirement in 2022 will have significant impact on employers... Hence, we have no plans to further increase the LQS for now, but will focus on the implementation of the new LQS rules, and also for the other sectoral and occupational progressive wages to establish their relevant wage benchmarks."

The LQS was increased from $1,000 in 2016 to $1,400 in 2020.

While the LQS will raise the wages of 77 per cent of workers earning less than $1,400, the remaining 23 per cent are in businesses that do not hire foreign workers, Mr Zaqy noted in response to a question from Progress Singapore Party Non-Constituency MP Hazel Poa.

"The vast majority of these businesses are very small, hiring fewer than 10 workers, and include small family operations such as hawker stalls and heartland shops... They don't have the business scale or reach, and we are mindful that sudden wage shifts to these micro-businesses can result in business failure," he said.

But these workers should still see meaningful wage increases over time with market forces, he added.

As for part-timers, the rate per hour will be set at $9, Mr Zaqy said in response to supplementary questions from Ms Poa.

He added that beyond the LQS, the progressive wage models are also expected to set the pace on wage increases.

For example, workers in the cleaning and the landscape sectors can potentially earn at least about $2,400 a month by 2028.

This progressive wage approach also continues to ensure wage increases are sustainable, he said.

"If wage growth of our lower-wage workers outpace productivity growth in the medium term, the sustainable response is for businesses to use this period to urgently enhance their firm-level productivity to better support wage increases for workers."

MPs like Mr Edward Chia (Holland-Bukit Timah GRC) also brought up the impact the new measures could have on businesses.

Mr Zaqy replied that there will be a run-in period that focuses on education and raising awareness rather than jumping straight into strict enforcement.

The compliance process will also be made as smooth as possible, tapping existing processes to keep additional reporting requirements minimal, he said.

"The effort to uplift our lower-wage workers is a massive undertaking, spanning the next decade or more," Mr Zaqy concluded.

"To do this well, we will need to go beyond a whole-of-government approach, or even a tripartite approach. We will need the whole of society - workers, consumers, employers, unions, the Government, members of the public - to come behind and support this effort."

This article was first published in The Straits Times. Permission required for reproduction.