1. Local Qualifying Salary (LQS) to Increase from 1 July 2026

The Local Qualifying Salary (LQS) determines:

Whether a local employee counts towards a company’s foreign worker quota
The minimum salary that must be paid to local workers if the firm hires foreign employees

New LQS Levels

From 1 July 2026:

Full-time local employees → $1,800 per month (previously $1,600)
Part-time local employees → $10.50 per hour

This means that companies employing foreign workers must ensure their local employees meet these new salary thresholds.

2. Impact on Foreign Worker Quota Computation

With the new LQS:

Monthly Salary of Local Worker	Local Workforce Count
At least $1,800	1 count
$900 to < $1,800	0.5 count
Below $900	Not counted

This ensures firms cannot hire locals on token wages simply to increase their foreign worker quota entitlement.

3. Progressive Wage Credit Scheme (PWCS) Enhanced and Extended

The PWCS helps employers cope with higher wage costs when they raise salaries for lower-wage workers.

It was previously enhanced at Budget 2025, and Budget 2026 introduces further support.

4. Higher Government Co-Funding for Wage Increases in 2026

For qualifying wage increases in 2026:

Co-funding increases from 20% → 30%

This also applies to:

✔ Wage increases given in 2025 and sustained in 2026

This provides immediate financial support for employers raising wages.

Singapore Budget 2026: Harnessing AI as a Strategic Advantage for Businesses

5. PWCS Extended to 2028

The scheme will now cover:

Qualifying Year	Government Co-Funding	Payout Period
2026	30%	1Q 2027
2027	30%	1Q 2028
2028	20%	1Q 2029

This gives businesses longer runway to adjust wage structures.

6. Higher Minimum Wage Increase Requirement from 2027

To better target meaningful wage growth:

Qualifying Year	Minimum Wage Increase
2026	$100
2027	$200
2028	$200

However:

✔ Wage increases below $200 that qualify in 2026 and are sustained in 2027 will still be co-funded.

For 2028, support will be for one year only, as the scheme is scheduled to lapse after that.

7. Existing PWCS Eligibility Conditions (Unchanged)

To qualify for PWCS:

Employee’s wage must be:
- Up to $3,000 before the increase
- Up to $4,000 after the increase
Wage increase must be sustained
Support is provided for up to two years

These conditions remain in place.

What This Means for Employers

Higher Local Salary Floor

Businesses that hire foreign workers must:

✔ Review salaries of local employees
✔ Budget for higher manpower costs from July 2026

Changes to Foreign Worker Quota

The new LQS may:

Reduce quota eligibility if salaries are not adjusted
Require workforce restructuring

Stronger Wage Support

With higher PWCS co-funding and extended support:

The Government will share more of the wage increase burden
Early wage adjustments will be financially advantageous

What This Means for Lower-Wage Workers

These changes will:

Raise minimum income levels
Provide more sustainable wage growth
Strengthen job quality

This is part of Singapore’s broader strategy to ensure inclusive economic growth.

Singapore Budget 2026: Key Tax Changes Every Business Should Know

Quick Summary

Measure	Key Change	Effective Date
Local Qualifying Salary	Increase to $1,800	1 July 2026
PWCS Co-Funding (2026)	20% → 30%	Wage increases in 2026
PWCS Extension	Extended to 2028	New
Minimum Wage Increase	$200 from 2027	From 2027

Strategic Takeaways for Businesses

Forward-looking employers should:

✔ Adjust local wage structures early
✔ Optimise PWCS support by planning qualifying wage increases
✔ Review foreign worker dependency and quota impact
✔ Invest in productivity and workforce transformation

Disclaimer: This article is for informational purposes only and does not constitute tax or compliance advice. Employers should consult tax professionals or refer to official IRAS guidance for tailored instructions.

Source: https://www.iras.gov.sg/news-events/singapore-budget/budget-2026–tax-changes-and-enterprise-disbursements