Cash grant will take a chunk off wage bills
Cash grant will take a chunk off wage bills
Employers say Govt’s novel new scheme offers temporary respite
By Alvin Foo and Robin Chan
Chief financial officer Hans-Martin Stech.
SUPERMARKET chain Sheng Siong is poised to slice about $567,000 per month from its wage bill as a result of the Government’s new cash grant to subsidise companies’ wage bills.
It is just one example of how 120,000 employers in Singapore will benefit from the newly-announced Jobs Credit scheme.
In Sheng Siong’s case, the funds are likely to be re-channelled into growing the company’s presence here and grooming its staff. Said managing director Lim Hock Chee: ‘It will ease our cash flow and help us and other companies to tide over the economic downturn.’
Other companies also cheered the latest measure, as they can now use the money to boost cash reserves or even channel funds into training and research.
PestBusters boss Thomas Fernandez said: ‘It’ll trim at least 8 per cent off my total wage bill, so I can shift excess funds into research, and raise training time for staff from 30 hours a year to 45 hours.’
Under the scheme, companies will get 12 per cent of an employee’s monthly wage, for up to $2,500. This works out to a maximum of $300 a month for each employee, equal to a 9 percentage point cut to their Central Provident Fund rate.
It covers only workers who are paid CPF and they must be Singaporeans or permanent residents.
In Sheng Siong’s case, 2,022 of its 2,945 staff are under the CPF payroll - translating to savings of $1.7 million a quarter, or about $567,000 a month.
But firms warn that the scheme would offer only a temporary means to rescue jobs at an extraordinarily difficult time.
The scheme lasts one year but could be extended, in some form, next year if the downturn continues.
Qian Hu’s executive chairman and managing director Kenny Yap said: ‘It offers a temporary comfort and cushion. If companies need to retrench, this scheme will delay the process and buy them more time to wait for the storm to be over.’
Thankfully, Mr Yap has no intention of cutting staff.
Bosses cautioned that with revenues falling 30 or 40 per cent, cutting the wage bill by 12 per cent may not be sufficient to prevent job losses. If they continue to bleed, layoffs will still be inevitable.
Others said they may also need more help to cope with slower business.
Network Courier’s managing director V. S. Kumar said the Government could offer more aid in reducing utility, phone and Electronic Road Pricing charges to ease the pain of a 20 to 30 per cent drop in business.
Although companies typically hire staff based on merit, some said that the new plan may encourage them to favour keeping Singaporeans on their payroll.
Qian Hu’s Mr Yap said: ‘With this scheme, if all things are equal, I’ll probably give the Singaporean more chance and priority to retain his or her job.’
Tax experts say companies with a large proportion of Singaporean staff who are interested in retaining them will benefit most from the new plan.
PricewaterhouseCoopers tax partner David Sandison said: ‘It’s definitely better than a CPF cut, as it is much more flexible and much more focused. For companies that are struggling, this could be the lifeline that keeps them afloat.’
AsiaTel, an IT and telecommunications company
Employs: 15 staff, all are eligible for Jobs Credit scheme
Saves: Up to $2,500 a month
‘This is a very direct cost reduction measure and definitely helps small companies like us. The amount my company can save is equivalent to one or even two persons’ wages.’
Chief executive Yeo Poh Seng
Infineon Technologies Asia Pacific, a German-based chip maker
Employs: 2,400, about 1,500 are eligible for Jobs Credit scheme
Saves: Up to $450,000 a month
‘The positive impact on the wages bill is quite significant. It will provide MNCs like Infineon some positive cash flow and help to ease the pressure off our labour cost for the time being.’
Chief financial officer Hans-Martin Stech
Network Courier, a courier services firm
Employs: 170 staff, about 90 are eligible for Jobs Credit scheme
Saves: About $12,000 a month
‘The scheme is good as it cuts my wage bill by 5 per cent. But my business is falling at least 20 per cent, so I’m hoping for more help with operating costs such as utilities and phone charges.’
Managing director V. S. Kumar
Jobs Credit scheme cuts costs directly
Temporary one-year scheme
120,000 employers to benefit
Automatically granted to all eligible employers via CPF - they do not have to apply
All businesses that make CPF contributions for their employees - with the exception of local and foreign government organisations - are eligible
Four quarterly payments in March, June, September, December
Amount paid depends on number of employees (Singaporeans and PRs only), and wage costs based on contributions to CPF made for them in the preceding quarter. Government pays 12 per cent of wage cost, subject to a monthly wage cap of $2,500 per employee.
Source : Straits Times - 24 Jan 2009
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