This post was previously published on 1 April 2016. For more up to date information on the PIC scheme and other budget initiatives, please refer to our most recent blog post on Singapore Budget updates, with the latest available information from IRAS. For the full details, visit the IRAS PIC site.
The economic slowdown has kept Singaporeans on the edge of their seats for months, in anticipation of newly-appointed Finance Minister Heng Swee Keat’s first Budget presentation. The Budget was finally presented last week, and promises to provide some relief for SMEs. Here’s what you need to know.
1. Buy it, use it, fix it, upgrade it
The Industry Transformation Programme aims to help Singaporean firms innovate, scale up, and internationalize. The core message of Budget 2016 is the importance of technology and innovation, driven by a whole series of initiatives to achieve this.
What’s available:
The Automation Support Package:
- Provides companies with grants of up to 50% project costs, capped at S$1 million.
- Provides companies with grants of up to 100% investment allowance for automation equipment
- Improves SMEs’ access to loans for equipment purchases, with the Government taking on 70% of the risk, up from 50%
- Will drive robotics development in healthcare, construction, manufacturing, and logistics
- Will heavily reduce paperwork between businesses and the government
- Is targeted to bring about S$600 million savings per year by cutting down on man hours spent on administrative work
- A new enterprise will be set up to match entrepreneurs with mentors, investors, and talent
- S$150 million will be invested to help SMEs grow and expand overseas
Your next steps:
The main goal of Budget 2016’s heavy investment in technology and automation is to reduce the pressure on companies in terms of labour costs, while creating more higher value-added jobs.
All the help you need is right where you can find it – do you still need convincing to automate your business? Take advantage of the help offered to you:
Automate, but get your workers involved too.
- Even cake shops are making the jump
Is it scary? Yes. Expensive? Yes. Inevitable? You guessed it, yes. With grant supports of up to 50%, and 70% risk-share with the government on loans, do you really have an excuse?- Talk to your workers – management is often so disconnected from the ground that they don’t realize what bottlenecks their workers are facing, or even perhaps what ideas they have for improving processes.
- Reward your workers for ideas that boost your bottomlines, either by delivering products of greater quality or value, reducing costs, or driving productivity.
- Reassure your workers that they will not lose their jobs to machinery – remind them to upgrade their skills and provide them with the support to do so (complement equipment grants with course funding to train your employees – read more about what’s available below under “level up”). There will always be jobs for those willing to keep up with the digital age.
- Talk to your workers – management is often so disconnected from the ground that they don’t realize what bottlenecks their workers are facing, or even perhaps what ideas they have for improving processes.
- Get your business in order digitally and online
- Inefficient paper work is out and carefully sorted electronic information is in. When even the government is preaching about the amount of money that can be saved on administrative tasks, you know they’ve done their research and have concluded that this is the best way forward.
- Businesses of all trades are going online – not only is digital sales cheaper in terms of overheads and manpower, it is now the best way to reach IT-savvy customers who want everything quickly and efficiently.
- Bring all your documents and processes online so that you can maximize your cost savings in all areas from administration to communication and innovation (thanks to the National Trade Platform), and even financing (with the Business Grants Portal to be launched in Q4 of 2016).
- Inefficient paper work is out and carefully sorted electronic information is in. When even the government is preaching about the amount of money that can be saved on administrative tasks, you know they’ve done their research and have concluded that this is the best way forward.
2. Going, going, gone
Singapore’s Budget may provide much-needed support for homegrown businesses and employees in tough times, but you cannot expect it to last forever. The Productivity and Innovation Credit (PIC) Scheme’s payout rate is scheduled to drop from 60% to 40% for qualifying expenditure incurred from 1 August 2016. All other conditions of the scheme will remain the same, and the scheme has been extended to 2018. The PIC Scheme will no longer be available from 2019 onwards.
What’s available:
The Productivity and Innovation Credit Scheme:
- Provides businesses with 400% tax deductions or 60% (40% from 1 August 2016) cash allowances on up to $400,000 of their expenditure per year in each of the Six Qualifying Activities
- Acquisition and Leasing of PIC IT and Automation Equipment
- Training of Employees
- Acquisition and Licensing of Intellectual Property Rights (IPR)
- Registration of Patents, Trademarks, Designs and Plant Varieties
- Research and Development (R&D) Activities
- Design Projects Approved by DesignSingapore Council
Your next steps:
Can you feel the clock ticking? You have only up until the end of July to get your 60% cash payout under the PIC scheme.
Other SME support options, such as the Innovation and Capability Voucher (ICV) and Increase SME Productivity with Infocomm Adoption & Transformation (iSPRINT) Scheme are subject to change, with the former no longer supporting consultancy projects in the areas of Quality Management – ISO 9001: 2008 and Environmental Management – ISO 14001: 2004 from 31 March 2016, and the latter expiring on the same date.
The Capability Development Grant (CDG) looks set to change its terms by 31 October 2016 as well, when its Grant Appeal Advisory Panel is likely to cease or switch out.
Get with program before it’s too late!
While the Government makes every effort to support as many businesses as it can in the best possible way, it is unrealistic to expect its grants and other schemes to act as crutches for struggling businesses for years to come.
Have you taken advantage of the help available to you yet? We don’t mean just taking whatever money gets handed to you to stay afloat, either. There’s a reason “transformation”, “productivity”, and “innovation” are such key buzzwords in recent years – at the end of the day, if all the government aid you’ve been receiving is taken away, will you be able to grow on your own?
If you haven’t already, make sure that you educate yourself on what equipment, training, and software you may need to consider to up your productivity while all these options remain available to you. Relying on government intervention can only do so much, your business must be able to stand on its own and become ever more productive as competition heats up.
*Hint: We’ll be launching affordable subscription options for SAP Business One within the next month. Subscribe to our blog (use the form below or to the right) and keep a look out for our plans to help you maximize your savings with the PIC scheme before it downsizes after July.
3. Level up now or it’s game over
Workers can – nay, must, continue to upgrade their skills. An estimated S$1 billion per year has been set aside to ensure Singaporean talent stays ahead of the curve and continues to prove Singapore’s worth as one of the top financial and trading hubs in Asia. These initiatives come on the back of a record high of layoffs since 2009.
What’s available:
The Workfare Training Support (WTS) Scheme:
Provides 95% course funding for Singaporean citizens aged 35 years and above, earning not more than S$1900 a month. Citizens with disabilities aged 13 years and above may also apply for this scheme. The following course categories are eligible:
- Singapore Workforce Skills Qualifications
- Part-time ITE Skills Certificate, Part-time NITEC and Part-time Higher NITEC courses offered by the Institute of Technical Education (ITE)
- Part-time Diploma, Advanced Diploma, Specialist Diploma and Diploma (Conversion) programmes offered by the five local Polytechnics
- Certifiable Skills Training courses accredited or supported by the Singapore Workforce Development Agency (WDA)
For more information, please refer to WorkFare’s official website on WTS.
The SkillsFuture Credit Scheme:
Provides S$500 credit for training courses to all Singaporeans aged 25 years and above, from January 2016. The following course categories are eligible:
- Courses subsidised or approved by the Singapore Workforce Development Agency (WDA), including online courses
- Selected courses offered by Ministry of Education (MOE)-funded institutions
- Courses supported by public agencies
- SkillsFuture@PA courses offered by the People’s Association, courses offered by the Infocomm Development Authority of Singapore’s Silver Infocomm Junctions and selected courses under National Silver Academy
For more information, please refer to the official SkillsFuture website.
Your next steps:
Employees eligible for either (or both) of the schemes should consider what courses will help them to either:
- Upgrade their skills for their current job, so that they prepare themselves for promotion
- Acquire skills to exit sunset industries and safeguard themselves against unemployment…and apply for the relevant courses.
- Advise their employees to take up the schemes – not only to safeguard their individual futures, but to help the company ride out tough times with newly acquired knowledge and skills
- Provide support for their employees, in terms of equipping them with information on the schemes available to them (as well as suggesting which are the most useful courses that will benefit both the employee and company), and giving them the necessary time off to attend their chosen courses
- Reward employees who have taken the initiative to apply for the schemes and thus upgraded their capabilities at work – employers may rely on the Transition Support Package, which will co-fund 20% of wage increases given to Singaporean employees earning a gross monthly wage of S$4000 and below. The package has been extended until 2017, and about 70% of payouts are expected to go to SMEs.
Bonus: More facts and figures for SMEs
- Jurong is set to be the next technology hub The Jurong Innovation District, situated near to Nanyang Technological University (NTU), is to become a space for students, researchers, and professionals to design, test, and produce technologically advanced products and services for the future – not unlike USA’s Silicon Valley. The project is to be completed in 2022.
- Trade Associations and Chambers (TACs) are set to receive more help from the Government SPRING (Standards, Productivity and Innovation Board) will partner the TACs to drive 30 industry-wide solutions to common challenges faced by SMEs, buoyed by up to S$30 million over the next 5 years and underlined by SPRING’s Collaborative Industry Projects. It is expected that these investments will help SMEs to upgrade and transform through the help of the TACs.
- Public sector construction projects to increase significantly More than S$2.5 billion public sector contracts will be awarded for smaller projects (projects with construction value estimated to be below $100 million). This is expected to make up for the decline in demand within the private sector, particularly for smaller firms.
- Corporate income tax rebates have been raised from 30% to 50% There is a cap of S$20,000 rebate for each year, and the rebates will be available from 2016 to 2017.
- Heartland shops will receive more support Businesses will be benefit from the Revitalisation of Shops package amounting to about S$15 million a year
- Foreign worker levy increases deferred Marine and Process sectors will avoid the increases for a year. Manufacturing Work Permit levies will also remain unchanged. However, Services and Construction Work Permit holders as well as S Pass holders in every sector will still see levy increases, in view of the growing foreign workforce in these areas
Got two whole hours to spare? Watch the full Budget 2016 presentation video below.
It can be overwhelming for business owners to take in all the changes presented for Budget 2016, but intimidation is no reason to procastinate or move forward haphazardly in the hopes that things will somehow all work out.
Need some advice? Blue Ocean Systems is here for you.
Got some advice? Leave a comment below.
Know someone who could benefit from all this information? Click any of the buttons below to share it with them!
4 thoughts on “Budget 2016: What Singapore SMEs Need to Know”
Comments are closed.