Introduction

On 12 February 2026, Prime Minister and Minister for Finance Lawrence Wong delivered Singapore's Budget 2026 statement in Parliament — and it came loaded with workforce-shaping measures that HR leaders simply cannot afford to overlook.

Against a backdrop of mounting geopolitical uncertainty, shifting global trade dynamics, and an economy projected to moderate to 2–4% growth this year, PM Wong made it clear that Singapore must refresh its strategies to stay competitive. While much of the public conversation has centred on CDC vouchers and cost-of-living payouts, the real story for businesses lies in a sweeping package of employment policy changes that will affect hiring costs, training strategies, wage structures, and foreign workforce planning for years to come.

This article unpacks every HR-relevant announcement from Budget 2026 and gives you a clear action plan to stay ahead.

Executive Summary

• Work pass costs are going up: EP qualifying salaries rise from S$5,600 to S$6,000 (Jan 2027); S Pass from S$3,300 to S$3,600. Financial services thresholds are even higher.
• Lower-wage support is expanding: The Local Qualifying Salary increases from S$1,600 to S$1,800 from 1 July 2026, and the Progressive Wage Credit Scheme gets enhanced co-funding (from 20% to 30% in 2026) and a two-year extension to 2028.
• Skills infrastructure is being rebuilt: SkillsFuture Singapore and Workforce Singapore will merge into a single statutory board — the biggest overhaul of Singapore's jobs-skills ecosystem in a decade.
• Senior worker support continues: The Senior Employment Credit is extended to end-2027, and CPF contribution rate increases for workers aged 55–65 will proceed in 2027.
• Businesses get near-term relief: A 40% corporate income tax rebate for YA2026, with a minimum benefit of S$1,500 for any company employing at least one local worker.

Employment Pass and S Pass: Higher Salary Bars Ahead

The headline change for many employers will be the increase in qualifying salaries for both Employment Pass (EP) and S Pass holders. Starting from January 2027, the minimum qualifying salary for new EP applicants will rise from S$5,600 to S$6,000. For the financial services sector, the bar goes even higher — from S$6,200 to S$6,600.

S Pass holders face similar increases. The qualifying salary will move from S$3,300 to S$3,600 for most sectors, and from S$3,800 to S$4,000 for financial services.

Here's what makes this manageable: the government is phasing these changes in. For renewals, the new salary requirements won't kick in until January 2028 — giving businesses a full year of breathing room to plan salary adjustments. Age-tiered salary thresholds for older EP and S Pass applicants will also be raised in line with these changes.

Work Permit Levy Adjustments

Budget 2026 also announced Work Permit levy adjustments in selected sectors, with changes taking effect from 2028 to give businesses time to prepare. The marine sector will see a levy increase of S$100 for basic-skilled workers, while the process sector faces a S$150 increase. The current tiered levy structure for manufacturing and services sectors will also be simplified.

These levy changes, combined with the salary threshold increases, signal a clear message: Singapore wants employers to invest more in local talent development while ensuring that foreign hires are genuinely high-quality additions to the workforce. If you're managing a mixed workforce with S Pass and Work Permit holders, our S Pass requirements guide covers the current framework in detail.

Local Qualifying Salary: A Meaningful Raise for Lower-Wage Workers

The Local Qualifying Salary (LQS) — the minimum salary that employers must pay full-time local employees if they want to hire foreign workers — will increase from S$1,600 to S$1,800 effective 1 July 2026. While this may seem like a modest adjustment, it affects a significant number of businesses, particularly in retail, food services, and other sectors that rely on a mix of local and foreign workers.

The LQS effectively sets a floor: if your company employs foreign workers on any type of work pass, every local employee must earn at least S$1,800 per month. Businesses that haven't been paying attention to this threshold could find themselves out of compliance, which can jeopardize work pass renewals and new applications.

This increase is part of the government's broader effort to raise wages at the lower end of the income spectrum, ensuring that hiring foreign workers doesn't come at the expense of fair pay for Singaporeans.

Progressive Wage Credit Scheme: More Generous, Longer Runway

The Progressive Wage Credit Scheme (PWCS) has been one of Singapore's most impactful tools for encouraging employers to raise wages for lower-paid workers, and Budget 2026 gives it a significant boost.

Three key changes stand out. First, the government's co-funding rate for 2026 jumps from the previously planned 20% to 30% — meaning for every dollar you raise a qualifying worker's wages, the government picks up 30 cents. This same 30% rate will apply in 2027, dropping to 20% in the final year of 2028. Second, the scheme is extended for two more years until 2028, giving businesses more time to benefit. Third, from 2027 onwards, the minimum wage increase required to qualify changes from S$100 to S$200, rewarding firms that provide more meaningful pay bumps rather than token adjustments.

The PWCS works hand-in-hand with the Progressive Wage Model, which ties pay growth to skills development and career progression. For a detailed breakdown of how PWCS stacks with PWM and LQS, see our PWCS co-funding guide with calculator. For employers in the cleaning, security, landscape, lift maintenance, retail, food services, and waste management sectors where Progressive Wages are mandatory, these enhanced subsidies provide meaningful financial support during a period of rising business costs.

The Big Merger: SkillsFuture Singapore and Workforce Singapore Become One

Perhaps the most structurally significant announcement in Budget 2026 for the HR ecosystem is the decision to merge SkillsFuture Singapore (SSG) and Workforce Singapore (WSG) into a new single statutory board, jointly overseen by the Ministry of Education (MOE) and the Ministry of Manpower (MOM).

This isn't just an organisational reshuffle. It represents a fundamental rethinking of how Singapore connects learning to employment. Currently, SSG (under MOE) focuses on skills training and managing SkillsFuture credits, while WSG (under MOM) engages employers and helps job seekers find work. As PM Wong acknowledged, while coordination between the two has improved, faster technological change and more frequent job transitions demand systems that work more seamlessly together.

The new agency will serve as a one-stop shop for skills training, career guidance, and job matching. For employers, this means more integrated support across workforce planning, job redesign, hiring, and development. For workers, it means clearer career pathways and stronger transition support.

Here's some important context: over 600,000 Singaporeans took up SkillsFuture-supported training in 2025, boosted by the December 2025 expiry of a one-off credit top-up. Some 123,000 enrolled in courses directly linked to employability — full-qualification programmes, stackable courses, and the SkillsFuture Career Transition Programme. The SkillsFuture Level-Up Programme alone has benefited more than 60,000 mid-career workers since its launch in 2024.

The merger consolidates a decade of building two separate agencies. WSG, originally the Workforce Development Agency, was formed in 2016 alongside SSG. The Workforce Development Agency had kicked off the SkillsFuture movement a year earlier in 2015. Now, these parallel tracks converge.

What This Means for Employers

If you've ever felt frustrated navigating between WSG and SSG for different workforce development needs, the merger should simplify things considerably. Instead of dealing with two agencies for training subsidies, career conversion programmes, job redesign grants, and hiring support, you'll have a single point of contact.

The practical timeline is still being worked out — existing services from both WSG and SSG will continue without disruption until the new agency is fully operational. But forward-thinking HR teams should start thinking about how to take advantage of the consolidated system once it's live.

For more on how skills-based approaches are reshaping recruitment, see our guide on skills-based hiring trends in Singapore.

Supporting Senior Workers: Extended Credits and CPF Changes

Singapore's aging workforce is a well-documented challenge, and Budget 2026 addresses it through several interconnected measures.

Senior Employment Credit Extended to End-2027

The Senior Employment Credit (SEC) provides wage offsets of up to 7% for employers who hire Singaporean workers aged 60 and above earning up to S$4,000 per month. Budget 2026 extends this scheme to the end of 2027, giving employers continued financial incentive to hire and retain older workers.

CPF Contribution Increases Proceeding in 2027

In line with the recommendations of the Tripartite Workgroup on Older Workers, the government will proceed with the next step of planned CPF contribution rate increases for senior workers starting from January 2027. The total contribution rates will be raised by 1.5 percentage points for employees aged above 55 to 60, and by 1.0 percentage point for those aged above 60 to 65. Of this, the employer's share of the increase is 0.5 percentage points for both age groups.

To ease the impact on employers, the government will continue providing the CPF Transition Offset, covering half of the increase in employer contributions for 2027. The Ordinary Wage ceiling also rose to S$8,000 in 2026 — the final step in a phased increase that began in September 2023.

CPF Retirement Top-ups

Singaporeans aged 50 and above in 2026 (born in 1976 or earlier) with CPF retirement savings below the Basic Retirement Sum of S$110,200 will receive a one-time CPF top-up of up to S$1,500. Those with balances below S$60,000 get the full amount, while those between S$60,000 and the Basic Retirement Sum receive S$1,000. These top-ups will be credited in December 2026.

AI and Workforce Transformation: The National AI Council

Budget 2026 makes it unequivocally clear that artificial intelligence isn't a side project — it's the centrepiece of Singapore's economic strategy going forward. PM Wong announced the formation of a National AI Council, which he will personally chair. The council will drive targeted "AI missions" across four priority sectors: advanced manufacturing, transport connectivity, finance, and healthcare.

For HR leaders, the workforce implications are significant. The government plans to help workers use AI to move into higher-value tasks rather than being displaced by it. PM Wong cited the accountancy profession as an example: AI can now automate data consolidation, preparation, and bookkeeping, allowing professionals to spend more time on client advisory, forensic work, and complex analysis.

The government's approach includes redesigning the SkillsFuture website to help Singaporeans quickly find AI-related courses matched to their work needs and proficiency levels, plus six months of free access to premium AI tools for those who complete selected AI training courses. Practical AI capability building will start with the accountancy and legal professions before expanding to other fields.

A new AI park will be established at one-north to catalyse collaboration between research, industry, and government on practical AI applications.

Corporate Tax Relief: The 40% Rebate

While not directly an HR measure, the 40% corporate income tax rebate for Year of Assessment 2026 provides welcome breathing room for businesses facing cost pressures. Every active company that employed at least one local worker last year will receive a minimum benefit of S$1,500, capped at S$30,000 per firm.

This rebate is designed as short-term relief, acknowledging that many firms — particularly SMEs — are dealing with rising manpower costs, higher rentals, and global uncertainty. For HR budgets specifically, it may free up some funds that can be redirected toward compliance with new wage requirements or investment in workforce training.

The government is also expanding the Enterprise Innovation Scheme so that AI-related spending qualifies for 400% tax deductions for YA2027 and YA2028, capped at S$50,000 per year. The Productivity Solutions Grant will be broadened to cover a wider range of digital and AI-enabled tools. For companies looking to invest in HR technology, AI-powered recruitment tools, or workforce analytics platforms, these incentives make the business case even stronger.

Workfare Skills Support: Boosting Training Allowances

The Workfare Skills Support (WSS) scheme, which helps lower-wage workers upgrade their skills, will see enhanced hourly training allowances under the basic tier. This is particularly relevant for employers in sectors covered by the Progressive Wage Model, where skills upgrading is directly linked to wage progression.

In 2025, additional WSS support was introduced for workers taking up long-form training courses. Budget 2026 takes this further by increasing the basic hourly allowance, making it more financially viable for lower-wage workers to invest time in skills upgrading — and by extension, making it easier for employers to release these workers for training without worrying about their financial wellbeing.

The SkillsFuture Mid-Career Training Allowance, which provides Singaporeans aged 40 and above with up to S$3,000 (50% of their salary) during full-time training, will also be extended to cover part-time training courses. This is a meaningful expansion, as many mid-career workers can't afford to leave their jobs entirely for training.

Complete Summary of Key Changes

Industry-Specific Impacts

Your Action Plan: What to Do Now

Budget 2026 introduces changes on multiple timelines — some immediate, others phased over the next two years. Here's a practical roadmap for HR leaders and employers.

Immediate (Q1–Q2 2026):

1. Audit your LQS compliance. With the increase to S$1,800, review all local employee salaries — particularly part-time staff whose pro-rated wages must also meet the threshold. Non-compliance can affect your ability to hire or renew foreign workers.
2. Maximise the PWCS. With co-funding at 30% this year (before it potentially reverts to lower levels), now is the time to implement planned wage increases for lower-wage workers. Document everything for your PWCS claims.
3. Apply for the corporate tax rebate. This is automatic for qualifying companies, but ensure your YA2026 filing is in order to capture the full benefit.

Medium-term (Q3 2026 – Q4 2027):

4. Budget for higher EP and S Pass costs. Map out which foreign employees need salary adjustments and when. New applications from January 2027; renewals from January 2028.
5. Explore AI adoption subsidies. The expanded Productivity Solutions Grant and Enterprise Innovation Scheme's AI provisions can help offset the cost of workforce-related technology investments.
6. Prepare for CPF changes. Factor the 2027 CPF contribution increase for senior workers into your payroll forecasts. The CPF Transition Offset will cover half the employer increase, but you'll still need to absorb the rest.

Long-term (2027–2028):

7. Engage with the new merged jobs-skills agency. Once SSG and WSG are fully combined, reassess the workforce development grants and programmes available to you. The consolidated system should offer more integrated support for hiring, training, and job redesign.
8. Plan for Work Permit levy changes. If you're in the marine, process, manufacturing, or services sectors, the 2028 levy adjustments need to be in your forward budgets.

Conclusion

Budget 2026 is not a dramatic overhaul — it's a carefully calibrated set of moves that, taken together, reshape the cost structure and strategic options for every employer in Singapore. The higher work pass salaries, enhanced lower-wage worker support, and institutional merger of SSG and WSG all point in one direction: Singapore wants its businesses to invest more deeply in people, skills, and productivity rather than relying on low-cost foreign labour.

The good news is that the government isn't asking employers to shoulder the burden alone. Between the 40% corporate tax rebate, enhanced PWCS co-funding, AI adoption subsidies, and Senior Employment Credit extension, there are meaningful financial incentives for companies that lean into these changes rather than resist them.

The employers who come out ahead will be those who treat Budget 2026 not as a compliance exercise, but as a strategic prompt to rethink how they build, develop, and retain their workforce. Start planning now — the timelines are clear, and the early movers will be best positioned.

For the full Budget 2026 details, refer to the official government website at singaporebudget.gov.sg.