SINGAPORE: The hike in foreign worker levy may affect a company's bottomline but consumers too will feel the heat.
Those in the services sector and economists said businesses may have no choice but to pass down additional costs to consumers.
The Jumbo group of restaurant employs some 800 people, half of which are foreign workers mainly from China and Malaysia.
The company said about one-third of its operating cost goes to paying wages.
It estimates that it'll have to fork out about 20 per cent more in the immediate future when the higher foreign worker levy kicks in, in July.
In the long term, it expects to foot double the amount of levy it's paying now which will constitute about six to eight per cent of its total operating costs.
The company said it will try to absorb the costs for as long as it can but inevitably, consumers will have to share the burden.
Ang Kiam Meng, general manager, Jumbo Group of Restaurants, President, Restaurant Association of Singapore, said: "If we are in business we can't keep on absorbing costs without raising prices, that's the reality.
"There's a cost to increasing productivity. We are always talking about Japan, those advanced countries. They have higher productivity but we have to also recognise and accept that the prices there are also higher.
"For example, our crab is selling at S$40 a kg but our Japan outlet in Shinagawa, Tokyo, is selling it at S$80 per kg. It’s double the price. In fact that price, to the market, they feel it is very reasonable and acceptable. So as the consumer is willing to pay more, of course the restaurant is able to pay more to the worker with the same amount of work or with more incentives given for the staff to work harder."
He said customers could be paying up to 20 per cent more for their meals.
Economists said the impact will be felt from the second half of the year.
Alvin Lie, economist, Standard Chartered, said: "If we do see raw food material prices increasing, that will be added burden to operators. For example, small food operators, they are already under pressure. You might see a lot of these businesses exiting their business if they don't get additional help from the government.”
The government has said though that it will give strong financial support alongside the increase in levies.
In fact, Finance Minister Tharman Shanmugaratnam has said that over the next five years, the financial support businesses receive to help them improve productivity will be significantly larger than the additional payout that they will have to make in foreign worker levies.
But observers said there is only so much automation the service industry can rely on because essentially, service is about people.
For example, the Jumbo Group of Restaurant has already put in place work processes to help enhance productivity.
It has been using a hand held point of sale system to take orders since the year 2000.
It also has a Central Kitchen that prepares base dishes and ingredients for all its 10 restaurants.
But still, Mr Ang acknowledges that there is still room for improvement especially at the backend.
For example, improvements in logistics and looking at other ways the Central Kitchen can support the group's other restaurants.
There's also the intense competition for manpower especially with the two Integrated Resorts coming up.
Industry players said there's no turning away from foreign labour.
Mr Liew added: “With the new IRs opening, I think there is already a strain on certain skilled manpower especially, and with that additional levy, you would see that operators might be paying a higher price to either retain their staff or to attract new people to come into the industry.
Mr Ang added: "Speaking from the F&B point of view, it's very difficult to get workers especially locals. So depends on how the industry moves. If we are able to adopt job redesign or whatever new processes and if it results in a balance of the cost increase, then everyone will be happy.”
Other service sectors that could see higher pricing include the hospitality and healthcare industry as they hire a significant number of foreign workers. - CNA/vm
Those in the services sector and economists said businesses may have no choice but to pass down additional costs to consumers.
The Jumbo group of restaurant employs some 800 people, half of which are foreign workers mainly from China and Malaysia.
The company said about one-third of its operating cost goes to paying wages.
It estimates that it'll have to fork out about 20 per cent more in the immediate future when the higher foreign worker levy kicks in, in July.
In the long term, it expects to foot double the amount of levy it's paying now which will constitute about six to eight per cent of its total operating costs.
The company said it will try to absorb the costs for as long as it can but inevitably, consumers will have to share the burden.
Ang Kiam Meng, general manager, Jumbo Group of Restaurants, President, Restaurant Association of Singapore, said: "If we are in business we can't keep on absorbing costs without raising prices, that's the reality.
"There's a cost to increasing productivity. We are always talking about Japan, those advanced countries. They have higher productivity but we have to also recognise and accept that the prices there are also higher.
"For example, our crab is selling at S$40 a kg but our Japan outlet in Shinagawa, Tokyo, is selling it at S$80 per kg. It’s double the price. In fact that price, to the market, they feel it is very reasonable and acceptable. So as the consumer is willing to pay more, of course the restaurant is able to pay more to the worker with the same amount of work or with more incentives given for the staff to work harder."
He said customers could be paying up to 20 per cent more for their meals.
Economists said the impact will be felt from the second half of the year.
Alvin Lie, economist, Standard Chartered, said: "If we do see raw food material prices increasing, that will be added burden to operators. For example, small food operators, they are already under pressure. You might see a lot of these businesses exiting their business if they don't get additional help from the government.”
The government has said though that it will give strong financial support alongside the increase in levies.
In fact, Finance Minister Tharman Shanmugaratnam has said that over the next five years, the financial support businesses receive to help them improve productivity will be significantly larger than the additional payout that they will have to make in foreign worker levies.
But observers said there is only so much automation the service industry can rely on because essentially, service is about people.
For example, the Jumbo Group of Restaurant has already put in place work processes to help enhance productivity.
It has been using a hand held point of sale system to take orders since the year 2000.
It also has a Central Kitchen that prepares base dishes and ingredients for all its 10 restaurants.
But still, Mr Ang acknowledges that there is still room for improvement especially at the backend.
For example, improvements in logistics and looking at other ways the Central Kitchen can support the group's other restaurants.
There's also the intense competition for manpower especially with the two Integrated Resorts coming up.
Industry players said there's no turning away from foreign labour.
Mr Liew added: “With the new IRs opening, I think there is already a strain on certain skilled manpower especially, and with that additional levy, you would see that operators might be paying a higher price to either retain their staff or to attract new people to come into the industry.
Mr Ang added: "Speaking from the F&B point of view, it's very difficult to get workers especially locals. So depends on how the industry moves. If we are able to adopt job redesign or whatever new processes and if it results in a balance of the cost increase, then everyone will be happy.”
Other service sectors that could see higher pricing include the hospitality and healthcare industry as they hire a significant number of foreign workers. - CNA/vm
