Singapore Budget 2026: What It Means for Employers and HR Teams

Singapore Budget 2026 introduces several workforce-related measures that will affect how organisations plan headcount, manage payroll costs and structure remuneration over the next few years. For HR teams, the changes go beyond compliance. They influence local manpower eligibility, foreign hiring strategy, wage planning and the systems needed to support accurate payroll processing.

While some updates take effect from mid-2026, others begin in 2027 and 2028. Organisations that prepare early will have more flexibility to manage costs, avoid renewal disruptions and communicate changes clearly to employees.

This article summarises the key Budget 2026 updates relevant to HR and payroll, and outlines what employers and HR teams should focus on now to stay ahead.

1. Key Implementation Dates At A Glance

• 2026 (Q2): Corporate Income Tax Rebate

• 2026 (1 July): Local Qualifying Salary Changes

• 2026: Progressive Wage Credit Scheme (PWCS) Co-Funding Rate Increase 
  [for wage increases in 2026; scheme extended to 2028]

• 2027 (1 January): 1 Employment Pass (EP) and S Pass Qualifying Salary Changes

• 2027 (1 January): CPF Contribution Rate Changes

• 2027: PWCS Minimum Qualifying Wage Increase

• 2027: Senior Employment Credit (SEC) Extension

• 2027–2028: AI Adoption & Enterprise Innovation Scheme

• 2028: Work Permit (WP) Levy and Structure Changes

• 2029 (end): Tax Support For Giving and Corporate Volunteering

2. Wage And Payroll Updates

2.1 Local Qualifying Salary Increase

To uplift lower-wage workers and keep pace with wage growth, the Government increases the Local Qualifying Salary requirements for firms that employ foreign workers. If an organisation employs foreign workers such as Work Permit, S Pass, or Employment Pass holders, employers will need to meet both of the following conditions:

• Pay Progressive Wage Model (PWM) wages to local employees covered under the relevant sectoral or occupational PWMs.
• Pay at least the Local Qualifying Salary for all other local employees not covered under PWMs.
  

Key Changes Include

• From 1 July 2026, the Local Qualifying Salary for full-time local employees will increase from $1,600 to $1,800 per month.
• For part-time local employees, the minimum will be $10.50 per hour. This matters because the number of local employees who meet the LQS is used to determine a firm’s foreign worker quota entitlement.

How Local Headcount Will Be Counted (From 1 July 2026)

To align quota computation with the new LQS, local workforce counting will be adjusted as follows:

• 1 local workforce count for each local worker paid at least $1,800 per month
• 0.5 local workforce count for each local worker paid at least $900 but less than $1,800 per month
• Part-time locals earning monthly gross wages below $900 will not be counted toward a firm’s quota entitlement

Key Actions to Take

• Identify local employees below $1,800 and assess whether adjustments are needed before July 2026
• Review how pay structure affects local headcount counts, especially if foreign worker quota is important to operations
• Ensure PWM-covered locals are correctly paid according to the relevant PWM requirements, and non-PWM locals meet the revised LQS 

2.2 Progressive Wage Credit Scheme (PWCS) Enhancements 

The Progressive Wage Credit Scheme (PWCS) provides co-funding support to help employers manage the cost of raising wages for lower-wage employees. Under Budget 2026, the scheme is enhanced and extended, which makes it especially relevant for how organisations plan salary increments from 2026 to 2028.

The scheme currently applies under the following conditions:

• It applies to wage increases given to Singapore Citizen and Permanent Resident employees.
• Employees’ average wage must be $4,000 or lower to be eligible for PWCS. A wage cut-off for PWCS eligibility will apply from 2024 onwards.
• The average gross monthly wage increase must be at least $100 in qualifying years 2022 to 2026, and at least $200 in qualifying years 2027 and 2028, to be eligible for PWCS.
• Support for wage increases up to $3,000 gross monthly wage ceiling will run from 2022 to 2028. The Government will provide support for wage increases at the stipulated co-funding levels from 2022 to 2028.
• Eligible wage increases in each qualifying year will be co-funded for two years. For example, a 2025 wage increase will be supported in qualifying year 2025, and also in 2026 if sustained.

Key Changes Include

1) Co-funding rates and coverage period

PWCS co-funding will increase from 20% to 30% for wage increases given in qualifying year 2026, with payouts in 1Q 2027. This enhanced co-funding also applies to wage increases given in qualifying year 2025 that are sustained in 2026. The scheme is also extended to 2027 and 2028 as follows:

• 2027 wage increases: 30% co-funding, paid in 1Q 2028
• 2028 wage increases: 20% co-funding, paid in 1Q 2029

2) Minimum qualifying wage increase raised from 2027

For wage increases given in qualifying years 2027 and 2028, the minimum qualifying wage increase will rise from $100 to $200. In addition, wage increases below $200 that qualify in qualifying year 2026 and are sustained in 2027 will continue to be co-funded in 2027.

Key Actions to Take

• Incorporate the higher 2026 co-funding into wage review decisions, particularly for roles where wage adjustments are already being considered.
• Align 2027 and 2028 increment planning with the $200 minimum qualifying increase to avoid missing PWCS support.
• Establish a clear tracking process between HR and payroll to ensure that wage increases are sustained across qualifying years, as payouts depend on sustained increases.

3. Foreign Workforce Updates

3.1 Employment Pass (EP) And S Pass Qualifying Salary Changes 

Under Budget 2026, the minimum qualifying salaries for both EP and S Pass will be raised across all sectors. These revised minimum qualifying salaries will apply to new applications from 1 January 2027 and renewals from 1 January 2028.

Key Changes Include

1) Higher minimum qualifying salaries for EP

The EP minimum qualifying salary will increase as follows:

• All sectors (except Financial Services): from $5,600 to $6,000, increasing progressively with age from 23, up to $11,500 at age 45 and above
• Financial Services: from $6,200 to $6,600, increasing progressively with age from 23, up to $12,700 at age 45 and above

2) Higher minimum qualifying salaries for S Pass 

The S Pass minimum qualifying salary will increase as follows:

• All sectors (except Financial Services): from $3,300 to $3,600, increasing progressively with age from 23, up to $5,100 at age 45 and above
• Financial Services: from $3,800 to $4,000, increasing progressively with age from 23, up to $5,650 at age 45 and above

Key Actions to Take

• Review EP and S Pass salary benchmarks and offer templates ahead of 1 January 2027, especially for roles where pay bands are close to the revised qualifying thresholds.
• Align workforce planning and budgeting with the updated age-based salary progression, particularly for mid-career and senior roles where qualifying salaries increase more steeply.
• Plan long term foreign workforce strategy to manage cost and resourcing impacts as thresholds rise.

3.2 Work Permit (WP) Levy And Structure Changes

Work Permit updates under Budget 2026 include higher Foreign Worker Levy rates for selected sectors and a simplified levy structure for the Services and Manufacturing sectors based on Dependency Ratio utilisation. These changes will be implemented from 2028, with MOM to release further details on the timeline in due course. 

Key Changes Include

The table below sets out the current monthly levy rates by sector, tier and source group (where applicable) for easy reference.

Note: North Asian Sources refer to Hong Kong, Macau, South Korea, and Taiwan. Non-Traditional Sources refer to Bangladesh, Bhutan, Cambodia, India, Laos, Myanmar, the Philippines, Sri Lanka, and Thailand.

Key Actions to Take

• Review current Work Permit workforce by sector, R1/R2 tier, and source group (for the Process sector) to confirm correct classification and quantify the expected levy impact from 2028.
• Incorporate the projected levy increases into 2028 manpower budgets and workforce plans early, particularly for operations with a higher reliance on R2 roles in the Marine Shipyard or Process sectors.
• Update Services and Manufacturing dependency ratio utilisation and budgeting assumptions, given that Tier 1 and Tier 2 will be merged while Tier 3 remains 

4. CPF and Senior Workforce Updates

4.1 CPF Contribution Rate Changes, Senior Employment Credit (SEC) and CPF Transition Offset (CTO) Extensions 

The Government will continue its phased approach to raising CPF contribution rates for older Singaporean and Permanent Resident employees, as part of longer-term efforts to strengthen retirement adequacy. To help employers manage higher senior workforce costs, Budget 2026 extends the Senior Employment Credit (SEC) to support the hiring and retention of older Singaporean workers and extends the CPF Transition Offset (CTO) to offset part of the employer CPF increase in 2027.

Key Changes Include

1) CPF contribution rates will increase from 1 January 2027 for Singaporean and PR employees aged above 55 to 65. 

CPF Contribution Rates from 1st January 2026 to 1st January 2027 

Note: CPF Transition Offset for 2027 (0.25%-pt) only applies to the age band above.

2) Senior Employment Credit (SEC) and the CPF Transition Offset (CTO) will be provided from 2026 to 2027 to help employers manage higher senior employment and CPF-related costs. *No application required*

For wages paid between 1 January 2024 and 31 December 2027, employers can receive up to 7% of wages for Singaporean workers aged 60 and above who earn up to $4,000 per month, with the exact support level varying by the worker’s age and wage. Employers will qualify if they:

• Employ Singapore Citizens aged 60 and above

• Pay monthly wages below $4,000

• Make timely mandatory CPF contributions for the employee

3) CPF Transition Offset (CTO) extended to 2027
The CTO will also be extended for one more year with the 0.5 percentage-point increase in the employer CPF contribution rate for senior workers aged above 55 to 65 from 1 January 2027. To offset part of the additional cost, employers will receive a CTO that is equivalent to half of the 2027 increase in employer CPF contributions.

Key Actions to Take

• Update payroll systems and statutory setups to apply the revised CPF rates.
• Incorporate the higher employer CPF contributions into 2027 manpower budgets, factoring in the one-year CPF Transition Offset when estimating net cost impact.
• Align HR and Finance on manpower budgeting for business units with a higher concentration of senior employees.

5. AI Adoption & Enterprise Innovation Scheme

Budget 2026 introduces a coordinated push to accelerate AI adoption across the economy, alongside expanded incentives and grants to help businesses develop capabilities and deploy AI solutions.

Key Changes Include 

1) Enterprise Innovation Scheme (EIS) enhancements for YA 2027 and YA 2028

*more details will be provided by mid-2026*

The EIS supports innovation and capability-building through tax deductions or allowances of 400% on qualifying expenditure. Currently, it covers five activities:

(i) Qualifying Research and Development in Singapore

(ii) Registration of Intellectual Property

(iii) Acquisition and licensing of IP rights

(iv) Training courses eligible for SkillsFuture Singapore funding and aligned with the Skills Framework

(v) Innovation projects with polytechnics, ITE or other qualified partner institutions

Key features under the current structure:

• Qualifying expenditure cap of $400,000 per YA for activities (i) to (v)

• Qualifying expenditure cap of $50,000 per YA for activity (v)

• Option to convert up to $100,000 of total qualifying expenditure into a 20% non-taxable cash payout, in lieu of tax deductions or allowances

Note: 

• The list of partner institutions under innovation projects will be expanded to include the Sectoral AI Centre of Excellence for Manufacturing

• A new qualifying activity will be introduced for qualifying AI expenditure, where businesses can claim 400% tax deductions or allowances on up to $50,000 of qualifying AI expenditure per YA *cash payout conversion option does not apply*

2) Expansion of the Productivity Solutions Grant (PSG) for AI adoption

To support AI adoption, a wider range of AI-enabled solutions will be made available under the PSG, which supports businesses in adopting pre-approved IT solutions and equipment to improve productivity and automate processes. 

Key Actions to Take

• Partner with business leaders on job redesign and process improvement where AI can enhance productivity.
• Strengthen workforce upskilling plans to build AI literacy and digital capability, including training pathways that are eligible for SkillsFuture support and aligned with the Skills Framework.
• Support AI adoption by clarifying how roles will change, equipping managers to support their teams, and providing practical guidance on using the new tools.
• Review internal guidelines on responsible AI use and data governance to manage risk and ensure consistent practices.
• Coordinate early with Finance to plan for YA 2027 and YA 2028 EIS claims, including how AI expenditure and training investments will be tracked once IRAS issues details by mid-2026.
  

6. Enhanced Support For Companies Going Global

Budget 2026 recognises that overseas expansion, especially for smaller firms, can strain cash flow and execution capacity. In response, the Government is strengthening grant, tax and financing support to help companies enter new markets, deepen presence in existing ones and scale overseas operations more confidently.

Key Changes Include

1) Enhanced grant support for overseas expansion
Grant support will be enhanced to up to 70% for SMEs and up to 50% for non-SMEs under schemes that help companies expand overseas.

2) Enhanced Market Readiness Assistance (MRA) grant
The MRA grant will be enhanced to support deeper expansion in existing markets, and funding support will be raised to up to 70% of eligible costs, capped at S$100,000 per company per new market, from 1 April 2026 to 31 March 2029.

3) Double Tax Deduction for Internationalisation (DTDi) enhanced
The DTDi cap will be raised to S$400,000, with more qualifying activities eligible for automatic tax-deduction claims. Companies currently enjoy a 200% tax deduction for selected qualifying activities, previously capped at S$150,000.

4) Enterprise Financing Scheme upgraded
The scheme will be upgraded through higher loan limits and a new overall exposure cap of S$50 million per borrower.

Key Actions to Take

• Decide the operating model for each market early (local hire vs relocation vs remote/hub support) and map it to a headcount plan with clear hiring phases.
• Confirm local employment requirements in target markets (e.g. employment law basics, payroll setup, statutory contributions and market-standard benefits) before committing to start dates.
• Review cross-border employment contracts and assignment terms (e.g. duration, compensation approach, benefits coverage, tax/payroll handling and repatriation terms).
• Align HR and Finance on which expansion-related activities may be supported under grants or tax schemes and set up a simple documentation process from the start.
  

7. Corporate Income Tax Rebate

To help companies manage cost pressures, Budget 2026 introduces a Corporate Income Tax (CIT) Rebate for YA 2026. All taxpaying companies, whether tax resident or not, will receive a rebate of 40% of corporate tax payable for YA 2026. In addition, active companies that employed at least one local employee in 2025 (the “local employee condition”) will receive a minimum benefit of $1,500 in the form of a CIT Rebate Cash Grant. The total combined benefit from the CIT Rebate and CIT Rebate Cash Grant is capped at $30,000 per company.

Key Changes Include

1) CIT Rebate for YA 2026

• 40% of corporate tax payable will be granted to all taxpaying companies for YA 2026.
• The CIT Rebate is capped at $30,000 when combined with the CIT Rebate Cash Grant.

2) CIT Rebate Cash Grant (minimum benefit of $1,500)

• Active companies that meet the local employee condition (employed at least one local employee in 2025) will receive a CIT Rebate Cash Grant of $1,500.

How the rebate is applied based on eligibility

Key Actions to Take

• Check with Finance whether company meets the local employee condition and what the likely YA 2026 benefit could be.
• Factor the rebate into 2026 manpower and cost planning discussions, especially where HR budgets are involved.
• Use the cost relief strategically to support workforce priorities such as hiring needs, retention, and capability building where it makes sense for the business.
• Align internally on how the rebate will be applied so workforce plans remain realistic and budget backed.

8. Tax Support For Giving And Corporate Volunteering

Budget 2026 reinforces Singapore’s push to sustain giving and volunteering by extending enhanced tax support for both corporate donations and employee volunteerism.

Key Changes Include

1) 250% tax deductions for qualifying donations extended to end 2029

Individuals and businesses will continue to receive 250% tax deductions for qualifying donations made to Institutions of a Public Character (IPCs), with the scheme extended until end 2029.

2) Corporate Volunteer Scheme extended to end 2029

The Corporate Volunteer Scheme, which provides 250% tax deductions when employees volunteer or are seconded to IPCs, will also be extended until end 2029.

3) New SG Partnerships Fund to support ground-up initiatives

A new SG Partnerships Fund (S$50 million) will be launched to support ground-up initiatives, including grants of up to S$1 million for larger, multi-year projects. For employers, this signals broader momentum around sustained community impact and partnerships that corporate CSR programmes may tap into overtime.

Key Actions to Take

• Formalise or expand corporate volunteering programmes where relevant, including clear participation guidelines and partner organisations.
• Align employee engagement initiatives with broader CSR and tax approach, so programmes are meaningful and administratively consistent.
• Leverage volunteering efforts to support employer branding and ESG positioning, especially if community impact is part of your talent narrative.
• Strengthen documentation processes for volunteering time and secondments to support tax deduction eligibility and internal reporting.

Budget 2026 introduces multiple changes that will shape workforce cost planning, statutory compliance and day-to-day HR and payroll operations. For many organisations, the challenge is moving from “what changed” to implementation, updating payroll settings, aligning budget assumptions, communicating clearly with employees and tightening internal controls.

How PayrollServe Can Help

PayrollServe supports you through this transition by turning Budget 2026 announcements into practical next steps. We help you update statutory settings and payroll processes, model CPF and manpower cost impact, align workforce plans and HR policies so implementation is consistent across systems and stakeholders.

Speak to us today for hands-on support to roll out Budget 2026 changes smoothly and keep your HR compliance on track

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