[Perspective] Should loss-making firms need to pay higher salaries too?

The National Wages Council’s (NWC) wage guidelines for 2026/2027 include a new category of firms that “are not doing well and are not profitable”. It recommends that these employers give lower-wage employees earning no more than $2,800 a month a pay rise of at least $120.

For employers struggling against market headwinds, the NWC’s recommendation may seem counter-intuitive. When a company is making losses and fighting for survival, the instinctive and logical response is often to freeze wages, cut spending or even retrench staff to control costs.

Asking a loss-making company to raise wages at such a time can feel like kicking it when it is down. It is hardly surprising that some employers felt the recommendations were asking too much of them.

But the NWC’s wage recommendations are not mandatory. Take its 2025 guidelines: Only about a quarter of employers implemented the recommendations in full. While as many as 60% of employers raised wages, the increases fell short of the recommended 5.5% to 7.5%.

NWC member and Singapore National Employers Federation president Mark Lee told a press conference that many employers last year said they found it difficult to meet the recommended wage increases. The new category introduced this year should encourage more employers to adopt the guidelines.

This adjustment reflects a dilemma that wage policy must address: safeguarding income growth for lower-wage employees without overlooking the businesses’ ability to keep operating.

Singapore’s economy is expected to maintain strong growth this year, driven mainly by sectors such as electronics and precision engineering that are benefiting from the global artificial intelligence boom. Yet geopolitical tensions are pushing up costs, while sectors serving domestic consumers, such as food services and retail, are grappling with weak spending.

Lower-wage employees in sectors with poor prospects face the most immediate and severe cost-of-living pressures. An extra $120 a month may not fully offset rising living costs, but it can provide some relief for meals, transport and everyday bills.

If lower-wage employees miss out on pay rises simply because their employers are not profitable, the income gap between them and other workers could widen further.

On the other hand, the new category raises another concern. Could otherwise profitable firms seize the opportunity to use “unprofitability” as a convenient excuse to avoid larger wage increases?

The NWC has anticipated this concern. The guidelines note that, unlike subjective and vague descriptions of whether a company is “doing well”, profitability has a clear accounting definition: a company is profitable when its revenue exceeds its expenses.

The Ministry of Manpower will verify companies’ actual financial position through regular surveys and audits. In unionised companies, unions are also better placed to provide oversight, preventing employers from abusing the new category as an excuse to evade recommendations for larger wage increases.

The $120 minimum increase set by the NWC is already a compromise reached by employers, unions and the government after taking businesses’ financial constraints into account.

For lower-wage employees, the recommended minimum increase of $120 seeks to balance what businesses can afford with wage protection. But if a company can survive over the long term only by keeping wages down, without being able to improve productivity, services or its business model, the question is not merely whether it can raise pay, but whether the business itself is sustainable.

Similarly, lower-wage employees who go without reasonable remuneration for extended periods should consider switching jobs. With Singapore’s unemployment rate currently low and the labour market tight overall, seeking a better employer is a reasonable choice — provided they can.

This year’s wage guidelines stress that businesses’ operating difficulties should not be lightly dismissed, nor should the cost-of-living pressures facing lower-wage employees be ignored. In the long run, however, sustained wage growth must still rest on higher productivity and business competitiveness.

(The writer is a senior correspondent at Lianhe Zaobao.)