Budget 2026: Manpower & Businesses Changes – What Process Sector Employers Need to Do Next
Budget 2026 introduces a series of structural manpower and cost-related changes that will have a cumulative impact on employers in the Process sector over the next few years. These include higher local wage requirements, tighter foreign manpower policies and increased labour costs, alongside measures to support productivity, internationalisation and business transformation.
This circular highlights the key developments most relevant to Process sector employers and outlines practical steps to help companies plan ahead and respond effectively.
(Please note that this circular is intended as a general guide and set of ASPRI’s recommendations based on Budget 2026 announcements, to support members’ planning and decision-making. Members should assess the applicability to their own circumstances.)
1. Uplifting Lower-Wage Workers
Budget 2026 continues the Government’s emphasis on uplifting lower-wage workers through higher wages and skills upgrading. For employers, this translates into changes to local wage requirements alongside co-funding and training support to ease the transition. The measures in this section will take effect earliest and have immediate implications for wage planning and foreign worker quota eligibility.
(A) Raise the Local Qualifying Salary (LQS) – Effective: 1 July 2026
The Government will raise the LQS from $1,600 to $1,800 for full-time employed local workers. This means that firms hiring foreign workers must pay full-time employed local workers at least $1,800 per month. Part-time local workers must be paid at least $10.50 per hour. The computation of foreign worker quotas1 will correspondingly be adjusted with the new LQS:
Why this matters
- May require raising wages for locals below $1,800
- Otherwise, workers may count only 0.5, reducing your foreign worker quota entitlement
- Directly affect Work Pass /S Pass headcount planning immediately
Action for Members
✅Review local payroll bands
✅Identify staff between $1,600–$1,799
✅Recalculate foreign worker quota impact
✅Budget for wage adjustments
(B) Progressive Wage Credit Scheme – Extended to 2028
Government co-funding support for employers who raise wages of lower-wage local workers has been enhanced and extended.
Key enhancements include:
- Co-funding support strengthened for qualifying wage increases
- Scheme extended through 2027 and 2028
- Higher minimum qualifying wage increase from 2027
Why this matters
- Helps offset payroll cost increases from LQS adjustments
- Reduces net impact of raising local wages
- Supports workforce upgrading while managing costs
Action for Members
✅ Check eligibility for PWCS when planning wage increases
✅ Time increments to qualify for co-funding
✅ Use support to upgrade and retain workers
(C) Workfare Skills Support (WSS) – Enhanced Basic Tier
Additional training support for lower-wage local workers, including course fee support and training allowances.
Please visit Workfare Skills Support (WSS) (Level-Up) | WSG for more information
Why this matters
- Helps workers upgrade skills without income loss
- Supports employers in upskilling local workforce
- Improves productivity and reduces long-term reliance on lower-skilled manpower
Action for Members
✅ Encourage eligible workers to attend training
✅ Align training plans with upgrading pathways
✅ Leverage WSS together with PWCS for wage + skills improvements
2. Updating Foreign Worker Policies
The Government will continue to calibrate foreign worker policies to ensure a high-quality and complementary foreign workforce, while supporting industry transformation towards a more productive and leaner manpower model.
The following changes will progressively take effect and may impact hiring costs, salary thresholds and Work Permit levies for Process sector employers.
(A) Employment Pass
The EP minimum qualifying salary will be raised from $5,600 to $6,000. The Financial Services (“FS”) sector will continue to have a higher EP minimum qualifying salary, which will be raised from $6,200 to $6,600.
These changes will apply to new EP applications from 1 January 2027, and renewal applications from 1 January 2028.
(B) S Pass
The S Pass minimum qualifying salary will be raised from $3,300 to $3,600. The FS sector will continue to have a higher S Pass minimum qualifying salary, which will be raised from $3,800 to $4,000.
These changes will apply to new S Pass applications from 1 January 2027, and renewal applications from 1 January 2028.
Why this matters
- Higher hiring costs for engineers, supervisors and specialists
- Potential salary compression across grades
- Renewal cases from 2028 may fail if below thresholds
Action for Members
✅ Review hiring budgets for 2027 onward
✅ Adjust salary bands early
✅ Identify renewal cases that may be impacted
(C) Work Permit
For the Process sector,
- R2 WPHs from Malaysia, North Asian Sources and People’s Republic of China (“PRC”), the monthly levy rate will be raised by $150, from $450 to $600.
- R2 WPHs from Non-Traditional Sources, the monthly levy rate will also be raised by $150, from $650 to $800.
- There is no change to the levy rate for R1 WPHs.
To give businesses time to adjust, the changes to the levy rates for WPHs will be implemented from 2028. MOM will release more details on the implementation timeline in due course.
Why this matters
- Direct manpower cost increase
- +$150/month = $1,800 per worker per year
- Significant impact for firms with large R2 workforce
- May affect tender pricing and margins
Action for Members
✅ Model levy impact in 2028 budgets now
✅ Assess upgrading workers from R2 → R1
✅ Improve productivity/automation
✅ Factor higher costs into bids
3. Driving Productivity & Transformation (AI & Automation Support)
Recognising rising manpower costs and tighter labour supply, Budget 2026 strengthens support for productivity, automation and AI adoption to help businesses adapt structurally. These measures are intended to reduce reliance on manpower, improve operational efficiency and support longer-term transformation.
- Expanded tax deductions/allowances for qualifying AI-related expenditure under the Enterprise Innovation Scheme (EIS)
- Productivity Solutions Grant (PSG) extended to include more AI-enabled and automation solutions
- New initiatives (e.g. “Champions of AI”) to help enterprises deploy AI at scale
Why this matters
- Provides a pathway to offset rising manpower costs structurally, not just temporarily
- Supports firms in becoming less manpower-intensive and more productive, in line with policy direction
- AI and automation can reduce reliance on basic-skilled labour, mitigating future levy increases
- Relevant for planning, scheduling, asset management, safety, inspection and back-office functions in the Process sector
Action for Members
✅ Identify suitable functions for AI or automation (e.g. planning, maintenance, QA/QC, reporting, compliance)
✅ Review PSG-supported AI solutions applicable to your operations
✅ Assess eligibility for enhanced tax deductions under EIS when investing in AI
✅ Incorporate productivity investments into medium-term workforce and cost strategies
4. Supporting Internationalisation & Market Diversification
To help businesses manage domestic cost pressures and diversify growth, Budget 2026 enhances support for internationalisation and overseas market expansion. The measures in this section lower the cost of entering new markets, deepen presence in existing ones, and improve access to financing for overseas activities, providing companies with additional pathways for revenue growth.
(A) Higher grant support levels for internationalisation
(B) Enterprise Financing Scheme – Higher loan quantum
(A) Market Readiness Assistance (MRA) Grant – Enhanced
Key enhancements (from 1 April 2026):
- Grant support increased to up to 70% of eligible costs for local SMEs
- Grant cap of $100,000 per company per new market extended
- Enhanced support applies until 31 March 2029
New flexibility (from 2H 2026):
- Removal of the “new to target overseas market” criterion
- Companies can receive support to deepen presence in existing overseas markets, not just first-time entry
(B) Higher Grant Support Levels for Other Internationalisation Schemes
Grant Support Level (from 1 April 2026 – 31 March 2029):
- SMEs – Up to 70%
- Non-SMEs – Up to 50%
Schemes covered include:
- Business Adaptation Grant(until 6 Oct 2027)
Supports firms affected by tariffs to adapt operations and strengthen supply chains
- Global Innovation Alliance (GIA) schemes
Supports overseas expansion through market access programmes, partnerships and innovation-focused initiatives
(C) Enterprise Financing Scheme (EFS) – Higher Loan Quantum
Key changes (from 1 April 2026)
Borrower-level caps removed for:
- EFS – SME Fixed Assets Loan
- EFS – Trade Loan
Overall borrower group exposure limit set at $50 million across all EFS facilities
Why this matters
- Higher grant support (up to 70% for SMEs) significantly reduces the cost of overseas expansion
- Removal of the “new market” requirement allows companies to deepen and scale existing overseas operations, not just enter new markets
- Enhanced financing under the Enterprise Financing Scheme improves access to capital for overseas projects, fixed assets and trade financing
- Provides a viable pathway for firms facing rising domestic manpower costs to diversify revenue sources and spread operational risk
Action for Members
✅ Review current and planned overseas activities to identify eligible costs under MRA and other internationalisation grants
✅ Consider using MRA to strengthen presence in existing overseas markets, not just new ones
✅ Assess suitability of enhanced EFS loan limits to support overseas equipment, assets or trade financing
✅ Factor these enhanced schemes into medium-term growth and diversification strategies
5. Managing Business Costs & Cashflow
In the near term, Budget 2026 provides targeted measures to help businesses manage cost and cashflow pressures, including temporary tax relief. While these measures do not offset longer-term structural changes, they provide short-term support as companies adjust to a higher-cost operating environment.
Corporate Income Tax (CIT) Rebate and Cash Grant
To provide support for companies in managing cost pressures, a CIT Rebate of 40% of tax payable will be granted in the Year of Assessment (“YA”) 2026. Companies that are active and have employed at least one local employee in Calendar Year (“CY”) 2025 (referred to as the “local employee condition”) will receive a minimum benefit of $1,500 in the form of a CIT Rebate Cash Grant.
The total maximum benefits (i.e., sum of CIT Rebate and CIT Rebate Cash Grant) that a company can receive is $30,000. A company is considered to have met the local employee condition if it has made CPF contributions to at least one local (i.e., Singapore Citizen or Permanent Resident) employee, excluding shareholders who are also directors of the company, in CY 2025.
For example, Company A has a tax payable of $30,000 for YA 2026 and is entitled to a total CIT Rebate of $12,000 (i.e., 40% * $30,000). If Company A employed at least one local employee in CY 2025, it will receive a $1,500 CIT Rebate Cash Grant, with the remaining $10,500 as CIT Rebate.
Eligible companies will automatically receive the benefits from 2Q CY 2026 onwards.
Summary: What This Means for Process Sector Employers
Budget 2026 signals a clear and deliberate shift in Singapore’s manpower and business policy direction:
- Higher wages for locals are structural, supported by co-funding and skills upgrading.
- Foreign manpower policies will tighten progressively, with higher salary thresholds and levies.
- Productivity, AI and automation are no longer optional, but essential adjustment levers.
- Internationalisation support is strengthened to help firms diversify revenue and manage domestic cost pressures.
- Short-term business cost relief (e.g. CIT rebate) provides limited breathing room, but does not offset long-term structural changes.
For Process sector companies, the combined effect is higher baseline labour costs, coupled with strong policy encouragement to transform operating models.
Practical Steps for the Process Sector
- Recalibrate manpower cost models to account for cumulative impacts from LQS adjustments, higher EP/S Pass thresholds and upcoming Work Permit levy increases.
- Reassess workforce composition to identify roles that can be localised, redesigned or automated, and distinguish these from roles that genuinely require foreign expertise.
- Leverage government support for productivity and automation (including AI and digital tools) to structurally offset rising manpower costs and reduce reliance on basic-skilled labour.
- Consider internationalisation as a revenue and risk buffer, to mitigate sustained domestic cost pressures
- Adopt strategic wage planning to maintain foreign worker quota eligibility while managing payroll costs sustainably.
ASPRI will continue to:
- Monitor the implementation details across agencies,
- Consolidate member feedback and ground concerns,
- Engage relevant authorities where sector-specific issues arise, and
- Provide further Process-sector focused guidance as details are firmed up.
Members who wish to share indicative workforce profiles or concerns (on a confidential and aggregated basis) may contact the ASPRI Secretariat.
Additional Resources
Enterprise Singapore Budget 2026 Overview
Learn more about the initiatives to support businesses for where they are growing.
Ministry of Trade and Industry COS Website
For key announcements made at the Committee of Supply (COS) 2026.
Ministry of Finance Budget Website
For full details on Budget 2026 and the speech by Prime Minister and Minister for Finance, Mr Lawrence Wong.
Learn more about other initiatives announced at Budget 2026.