SINGAPORE — The Government will be increasing Workfare Income Supplement (WIS) handouts “significantly” but at the same time tightening its criteria to ensure “they are focused on the low-income”, said Deputy Prime Minister Tharman Shanmugaratnam in his Budget speech yesterday.

Enhancements to the scheme, which supplements the incomes of low-wage workers by giving them a cash and Central Provident Fund (CPF) top-up, will benefit about 480,000 workers and cost the Government S$650 million per year.

In the enhanced WIS, coverage will be expanded to include low-income workers earning a monthly wage of up to S$1,900, up from the cap of S$1,700.

Maximum Workfare payouts will also be increased by 25 to 50 per cent. This means that workers aged 45 and above will have their maximum payouts increased by S$700 while those between 35 and 44 years old will see their payouts increased by S$350.

For example, a worker aged 45 earning S$1,000 a month will receive S$2,100 in payouts under the enhanced WIS instead of S$1,400 in the previous scheme.

Taking into account the “strong call” by unionists to help recipients with their immediate expenses, Mr Tharman also announced that the proportion of cash in Workfare payouts will be increased to 40 per cent from the previous 29 per cent.

The other 60 per cent will be deposited in their CPF, more of which will be channelled into Medisave and Special Accounts equally.

These changes will apply to work done from last month, with the first Workfare payment under the enhanced scheme to be made on June 1.

Giving an example of a 60-year-old cleaner earning S$1,000 monthly, Mr Tharman, who is also Finance Minister, noted that he will receive S$3,500 in WIS annually — equivalent to 3.5 months of additional income.

Said Mr Tharman: “Of the S$3,500, S$1,400 will be paid in cash, which is more than S$100 a month. Both his healthcare and retirement savings will also receive a boost.”

Noting that “a small percentage of WIS recipients” own second properties or have spouses who are fairly well off, Mr Tharman said that “these individuals would be better off and are not the target of the WIS scheme”.

“We will thus implement additional eligibility criteria for WIS to exclude those with a spouse earning more than S$70,000 per year and individuals or couples owning a second property,” he added.

Along with the revisions, he also announced that employer and employee CPF contribution rates for low-wage workers will be raised to the same level as higher-income workers without a reduction of take-home pay “for most of them” come January next year.

Noting that low-wage workers’ employer CPF contribution rates had been reduced in 2007 to boost their employability, Mr Tharman also added that schemes such as the Special Employment Credit for older workers and Workfare Training Support Scheme have also helped.

“The revisions will … make it easier for employers to calculate the CPF they need to contribute for most workers, as their CPF contribution rates will be the same as for higher-income workers,” said Mr Tharman.

Employer CPF contribution rates currently stand at 16 per cent for employees below 50 years old, 14 per cent for those between 50 and 55 years and 10.5 per cent for workers between 56 and 60 years old.

The increased employer CPF contribution rates is expected to cost employers S$83 million this year.

Employee CPF contribution will also be raised to normal levels to “help them with their retirement and medical needs without reducing take-home pay for workers”, said Mr Tharman.

For example, a 45-year-old worker earning S$800 per month will now have his employee contribution rate increased to 20 per cent from 16.5 per cent, while his employer will contribute at a rate of 16 per cent next year, up from the current 11 per cent.

As such, the worker will be able to save S$15,000 more in his CPF by age 65, said Mr Tharman.

Those who are self-employed and earning a net trade income of between S$6,000 and S$18,000 annually will also have their Medisave contribution rates increased, he added.