Budget 2026 changes how much it costs to hire in Singapore. From higher salary floors for local and foreign workers to extended wage subsidies, SMEs need to plan ahead. Here is every workforce-related change and when it takes effect.
What Changed for Hiring Costs in Budget 2026?
| Current | New | Effective | |
|---|---|---|---|
| Local Qualifying Salary (LQS) | S$1,600 | S$1,800 | Jul 2026 |
| Employment Pass (EP) minimum | S$5,600 | S$6,000 | 2027 |
| S Pass minimum | S$3,150 | S$3,600 | 2027 |
| Progressive Wage Credit Scheme | Existing | Extended | Budget 2026 |
| Senior Employment Credit | Existing | Extended through 2027 | Budget 2026 |
| Workfare Skills Support | Existing | Basic tier enhanced | Budget 2026 |
| Work Permit levies | Current rates | Adjustments | 2028 |
Who Is Affected by the LQS Increase?
The Local Qualifying Salary (LQS) is the minimum monthly salary a local employee must earn to count toward your company’s foreign worker quota. From July 2026, LQS rises from S$1,600 to S$1,800.
This affects SMEs that rely on Work Permit or S Pass holders. If your local employees earn below S$1,800, they will no longer count toward your quota — potentially reducing the number of foreign workers you can hire.
Who needs to act: Companies with local employees earning between S$1,600 and S$1,799 per month. Review payroll and adjust before July 2026 to maintain your foreign worker entitlement.
How Do EP and S Pass Salary Thresholds Change?
From 2027, minimum qualifying salaries for foreign work passes increase:
| Current Minimum | New Minimum (2027) | Change | |
|---|---|---|---|
| Employment Pass (EP) | S$5,600 | S$6,000 | +S$400 |
| S Pass | S$3,150 | S$3,600 | +S$450 |
These are minimum thresholds. Actual qualifying salaries may be higher depending on the candidate’s age, qualifications, and sector benchmarks under COMPASS (Complementarity Assessment Framework).
Planning note: If you have EP or S Pass holders whose salaries are near the current minimum, budget for increases before renewal. New applications from 2027 onward must meet the higher thresholds.
What Is the Progressive Wage Credit Scheme Extension?
The Progressive Wage Credit Scheme (PWCS) co-funds wage increases for lower-wage workers. Budget 2026 extends the scheme to help employers absorb mandated Progressive Wage Model (PWM) increases.
PWCS covers workers in sectors with mandatory progressive wages — including cleaning, security, landscape, retail, food services, and waste management. The government co-funds a portion of the wage increase, reducing the net cost to employers.
Why it matters for SMEs: If you employ workers in PWM-covered sectors, the extension means continued government co-funding as wages rise. This directly offsets your incremental payroll costs.
How Does the Senior Employment Credit Help?
The Senior Employment Credit (SEC) provides wage offsets for employers hiring workers aged 60 and above. Budget 2026 extends this credit through 2027.
SEC offsets are automatically applied — employers do not need to apply. The credit is calculated based on the wages of eligible older workers and paid directly to employers.
Practical impact: If you have older workers on your payroll, the SEC extension means continued wage offsets through 2027. Factor this into retention and hiring decisions for senior staff.
What About Workfare Skills Support?
Budget 2026 enhances the basic tier of Workfare Skills Support, which provides training assistance for lower-wage workers. The enhancement increases support for workers earning below the Workfare income ceiling.
This complements the PWCS extension — while PWCS helps employers absorb wage increases, Workfare Skills Support helps workers access training to improve productivity and earnings over time.
What Is the SSG-WSG Merger?
SkillsFuture Singapore (SSG) and Workforce Singapore (WSG) will merge into a new statutory board. This consolidation aims to streamline workforce development by bringing training, career services, and enterprise support under one agency.
What this means for SMEs: Training grant applications, career conversion programmes, and workforce development schemes currently split across SSG and WSG will eventually be administered by a single entity. During the transition, existing programmes and application channels are expected to continue. Watch for announcements on the new board’s name, structure, and any changes to application processes.
What Should SMEs Do Now?
- Review payroll before July 2026 — identify local employees earning between S$1,600 and S$1,799. Adjust to S$1,800 to maintain foreign worker quota
- Budget for EP/S Pass increases — if renewing passes in 2027, plan for the higher salary thresholds (EP S$6,000, S Pass S$3,600)
- Claim PWCS co-funding — if you employ workers in PWM-covered sectors, ensure you are receiving the Progressive Wage Credit. Check with IRAS for disbursement details
- Check SEC eligibility — if you employ workers aged 60+, the extended Senior Employment Credit reduces your effective payroll cost through 2027
- Factor in the CIT rebate — the 40% CIT rebate and S$1,500 cash grant provide additional cost relief that can offset some hiring cost increases
- Watch for SSG-WSG merger updates — training and workforce programmes may change as the new statutory board takes shape
Related Guides
- Budget 2026 Singapore Business Grants Hub — all Budget 2026 SME changes at a glance
- Budget 2026 CIT Rebate & Cash Grant — 40% tax rebate + S$1,500 cash grant details
- Budget 2026 AI Skills & Free Tools — SkillsFuture AI courses and free tool access
- Progressive Wage Credit Scheme — PWCS scheme details
- SkillsFuture Enterprise Credit — SFEC for workforce transformation
- Hiring & Training Grants Guide — overview of hiring and training support
- SME Salary & Wage Support Grants — salary and wage subsidies for SMEs
- Grant Pitfalls Guide — common application mistakes
- Singapore Grants Glossary — key terms and definitions
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