Rising Employment Pass (EP) and S Pass qualifying salaries and a higher Local Qualifying Salary may be “painful” to companies grappling with high business costs according to OCBC Group Research.
However, OCBC and other industry observers believe that these policy changes and other measures announced at Budget 2026 may push firms to improve productivity and move up the value chain.
At the Budget announcement on Feb 12, Prime Minister Lawrence Wong announced that the EP minimum qualifying salary for non-financial services and financial services sectors will respectively increase from $5,600 to $6,000 and $6,200 to $6,600. The corresponding increases for the S Pass are $3,300 to $3,600 and $3,800 to $4,000 respectively.
For matured workers aged 45 and above, the EP minimum qualifying salaries will be raised respectively from $10,700 to $11,500 and $11,800 to $12,700. With respect to the S Pass for this demographic, the minimum salary for non-financial services sectors will rise to $5,100 while remaining unchanged for the financial services sector. The EP and S Pass adjustments will come into effect on Jan 1, 2027 for new applications and Jan 1, 2028 for renewals.
Meanwhile, the Local Qualifying Salary, or the minimum salary that local employees must be paid in firms that hire foreign workers, will be raised from $1,600 to $1,800. Work Permit levies for marine and process sector workers will be also respectively raised by $100 and $150 in 2028.
“These moves may be painful to companies currently struggling with high business costs, but are not new per se and have featured in previous budgets as part of the integral push for firms to upgrade and move up the value chain of activities, while balancing foreign talent inflows with local employment quality,” write OCBC economists Selena Ling and Jonathan Ng in their report on the Budget.
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For Deloitte Singapore immigration leader Christina Karl, the measures are a continuation of Singapore’s broader effort to upgrade the quality of both local and foreign manpower. “It reinforces the stance that foreign professionals must come in at salary levels that reflect genuine expertise and productivity, and that they should complement, not undercut, the local workforce,” she says.
Similarly, ISCA council member Lee Eng Kian says that the EP and S Pass minimum salary increases are in line with the government's strategy to strengthen the Singaporean core while remaining open to global talent.
He adds that the impact will vary across sectors and firm sizes, with the phased implementation beginning 2027 for new applications and 2028 for renewals providing a buffer for firms to adjust. For the accountancy sector, Lee believes that firms should use the “runway” to explore productivity improvements such as adopting AI-enabled solutions.
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According to Lee, “many” small accounting firms, who are reliant on foreign professionals for junior and mid-level roles, may face challenges to continue employing foreign staff at current volumes with the new salary thresholds. He believes firms can tap the Productivity Solutions Grant and Enterprise Innovation Scheme to implement AI tools for reporting, compliance, and data analytics, enhancing operations and services.
Higher costs weigh down on businesses
Other parties are more wary of the announced changes to manpower policies which will result in higher costs. For instance, Lennon Lee, tax leader at PwC Singapore points out that the changes can impact some segments of the economy — including service, F&B and retail — that rely heavily on foreign labour. He asks, “Given the tight local labour market, a key question is whether these businesses will eventually have to pass on the higher costs to consumers?"
Meanwhile, on the B2B side, equities analysts expect higher labour costs to impact companies especially for offshore and marine giant Seatrium.
“We expect higher labour costs to weigh on Seatrium, though this is more of a medium-term concern as the changes will only take effect from 2028,” writes OCBC Group Research in an equities report dated Feb 12.
Meanwhile CGS International analysts Lock Mun Yee and Lim Siew Khee suggest that labour-intensive sectors may experience more cost pressures due to the higher salary thresholds for employment pass holders and foreign worker levies. However, they expect the impact to be “muted” for Seatrium. In their report dated Feb 13, they estimate staff costs for Seatrium to increase by $5 million which is only 1% of their forecasted FY2026 profit for the company.
Industry groups also expressed concern at the adjustments to the employment passes and levies. In a statement, the Singapore National Employers Federation says that while it recognises the intent of the manpower cost adjustments to maintain a high-quality and complementary foreign workforce, it expects many employers to be “concerned” about the measures’ cumulative impact on business costs.
“We hope the Government will review prevailing economic conditions closer to implementation and consider the implementation timing accordingly,” shares SNEF. “We would also like to reiterate our request for the Government to consider additional flexibilities for employers with progressive employment practices or sector-differentiated flexibilities where appropriate.”
