Introduction

Singapore's Progressive Wage Credit Scheme (PWCS) has been significantly enhanced for 2025-26, offering employers unprecedented support to uplift lower-wage workers. With government co-funding now reaching 40% for wage increases in 2025 and 20% in 2026, businesses have a strategic opportunity to reduce the financial burden of mandatory wage adjustments while fulfilling Progressive Wage Model (PWM) and Local Qualifying Salary (LQS) requirements.

For employers managing workforce costs amid rising business expenses, understanding how to stack these benefits can mean the difference between financial strain and sustainable growth. This comprehensive guide breaks down the enhanced PWCS framework, demonstrates how it integrates with PWM and LQS mandates, and provides practical tools to calculate your potential government support.

Understanding the Enhanced PWCS for 2025-26

The Progressive Wage Credit Scheme represents the Singapore Government's commitment to supporting both employers and lower-wage workers during the transition to higher wage standards. Announced as part of Budget 2025, the enhanced scheme provides crucial financial relief as businesses navigate mandatory wage increases under the Progressive Wage Model and Local Qualifying Salary framework.

What's New in PWCS 2025-26

The government has significantly boosted co-funding support for the final two years of the scheme. For wage increases provided in 2025, employers now receive 40% co-funding, up from the originally planned 30%. This enhanced support also applies retroactively to wage increases given in 2024 that are sustained through 2025, providing additional relief for forward-thinking employers who raised wages early.

Looking ahead to 2026, the co-funding rate increases to 20%, up from the original 15%. Similarly, this enhanced 2026 support extends to wage increases granted in 2025 that continue into 2026. This two-year co-funding structure acknowledges the compounding effect of annual wage increases and helps employers manage sustained wage growth.

The wage ceiling has also been raised from $2,500 to $3,000 for the 2025-26 qualifying years, bringing more employees within the scope of support. However, to maintain focus on lower-wage workers, employees whose average monthly wage exceeds $4,000 after the wage increase remain ineligible for PWCS benefits.

How PWCS Co-funding Works

The mechanics of PWCS are designed for simplicity and automatic application. Employers don't need to submit applications; the Inland Revenue Authority of Singapore (IRAS) automatically calculates and disburses payments based on Central Provident Fund (CPF) contribution data. Payments typically arrive in the first quarter of the year following the qualifying year.

To qualify for PWCS support, employees must be Singapore Citizens or Permanent Residents who have received CPF contributions from a single employer for at least three months in both the preceding year and the qualifying year. The wage increase must be at least $100 on average per month to be eligible for co-funding.

The two-year co-funding mechanism is particularly valuable. When an employer grants a wage increase in 2025, the government co-funds that increase at 40% in 2025. If the employer sustains that wage level into 2026, the government provides an additional 20% co-funding in 2026 on the same wage increase. This structure effectively rewards employers who commit to sustained wage improvements rather than temporary adjustments.

The Progressive Wage Model: Mandatory Wage Floors

The Progressive Wage Model establishes sector-specific minimum wages tied to skills development and productivity improvements. Unlike a universal minimum wage, PWM creates structured career ladders with corresponding wage requirements for specific industries and occupations.

Sectors Currently Under PWM

As of 2025, PWM covers nine sectors and occupations affecting more than 155,000 local workers. The cleaning sector was the first to implement PWM in 2014, followed by security, landscape maintenance, and lift and escalator maintenance. More recently, the retail and waste management sectors joined PWM, with the food services sector set to implement requirements soon.

Each sector has distinct wage schedules based on job roles and skill levels. For example, retail assistants and cashiers saw their baseline monthly gross wages increase from $2,175 to $2,305 in September 2025, with further increases planned to $2,435 in 2026 and $2,565 in 2027. These increases represent consistent year-on-year growth of $130.

Beyond sector-specific PWM, Occupational Progressive Wages (OPW) cover administrators and drivers across all industries that employ foreign workers. This expansion ensures that even workers outside traditional PWM sectors benefit from structured wage growth tied to skills development.

PWM Training Requirements

PWM isn't just about wages; it's fundamentally about upgrading the workforce through skills development. Employers must ensure workers achieve at least one Workforce Skills Qualifications (WSQ) Statement of Attainment or complete equivalent in-house training programs.

These training requirements create a virtuous cycle where wage increases are justified by enhanced capabilities, making the pay rises sustainable for businesses. The government supports this through initiatives like Workfare Skills Support, which subsidizes training costs for eligible workers.

Local Qualifying Salary: The Baseline Standard

While PWM applies to specific sectors and occupations, the Local Qualifying Salary (LQS) sets a baseline wage requirement for all other local full-time employees in companies that hire foreign workers. The LQS currently stands at $1,600 per month for full-time employees and $10.50 per hour for part-time workers, raised from $1,400 and $9 respectively in July 2024.

LQS Purpose and Application

The LQS serves a dual purpose in Singapore's workforce framework. First, it prevents employers from hiring resident employees on token salaries simply to access foreign worker quotas. Second, it ensures local workers receive a baseline standard of compensation aligned with the cost of living in Singapore.

For quota calculations, employees earning between $800 and $1,600 monthly count as 0.5 of a local worker, while those earning $1,600 or above count as one full local worker. This structure incentivizes employers to pay above the LQS threshold to maximize their foreign worker quota entitlement.

Unlike PWM, which has training requirements and progressive wage schedules, LQS is purely a salary threshold. However, both frameworks work together to create a comprehensive wage floor across the economy, with PWM providing structured growth in covered sectors and LQS ensuring baseline standards elsewhere.

Strategic Stacking: Maximizing PWCS with PWM and LQS

The true power of PWCS emerges when employers strategically align their wage policies with PWM and LQS requirements. This approach transforms mandatory compliance expenses into opportunities for government cost-sharing, potentially reducing the net cost of wage increases by up to 40% in 2025.

Scenario 1: PWM-Covered Employees

Consider a cleaning company with 50 general cleaners currently earning the PWM baseline of $1,910 per month (the rate effective from July 2025 to June 2026). The company needs to raise wages to $2,080 by July 2026 to maintain PWM compliance, representing a $170 monthly increase per employee.

Without PWCS, this wage adjustment would cost the company $102,000 annually ($170 × 50 employees × 12 months). However, by granting the increase in 2025 and sustaining it through 2026, the employer can access PWCS co-funding.

In 2025, the government co-funds 40% of the $170 increase, providing $68 per employee per month or $40,800 annually. In 2026, the sustained increase receives an additional 20% co-funding, yielding $34 per employee per month or $20,400 annually. Over the two years, the company receives $61,200 in total support, reducing the net wage increase cost to $40,800 or just 40% of the total wage increase.

Scenario 2: Non-PWM Employees Meeting LQS

A retail company has 30 warehouse staff members earning $1,500 monthly, below the LQS threshold. To comply with LQS requirements and maintain work pass eligibility, the company raises wages to $1,700 monthly, a $200 increase per employee.

This $200 increase qualifies for PWCS support even though these employees aren't covered by PWM. The company receives 40% co-funding in 2025 ($80 per employee monthly or $28,800 annually) and 20% in 2026 if sustained ($40 per employee monthly or $14,400 annually). The total government support of $43,200 reduces the two-year net cost from $72,000 to $28,800.

Optimizing Timing for Maximum Benefit

Employers should consider the timing of wage increases carefully to maximize PWCS benefits. Wage increases granted in 2024 and sustained through 2025 now qualify for the enhanced 40% co-funding rate in 2025, even though the original 2024 rate was only 30%. This retroactive enhancement rewards early movers.

Similarly, wage increases granted in 2025 and sustained into 2026 receive both the 40% co-funding in 2025 and the enhanced 20% in 2026. This makes 2025 the optimal year to implement significant wage adjustments, capturing the highest available co-funding rate while setting up sustained support into 2026.

PWCS Eligibility Requirements and Exclusions

Understanding eligibility criteria ensures employers can effectively plan their wage strategies and avoid surprises when PWCS payments are calculated. The requirements are straightforward but specific, and certain employers are explicitly excluded from the scheme.

Employee Eligibility Criteria

Eligible employees must be Singapore Citizens or Permanent Residents earning gross monthly wages up to $3,000 before the wage increase and up to $4,000 after the increase. They must have received CPF contributions from a single employer for at least three calendar months in the preceding year and three months in the qualifying year. The months don't need to be consecutive, providing flexibility for businesses with seasonal employment patterns.

The wage increase must average at least $100 per month over the qualifying year. This means irregular bonuses or one-time payments don't count toward PWCS; the increase must represent a sustained adjustment to the regular wage structure.

Employees who are also business owners—sole proprietors, partners in partnerships, or individuals who are both shareholders and directors—are ineligible for PWCS. This exclusion ensures the scheme supports genuine employer-employee relationships rather than owner compensation structures.

Employer Exclusions

Local government agencies, statutory boards, ministries, and departments cannot claim PWCS. Foreign entities including embassies, trade offices, representative offices, and international organizations are also excluded. The scheme targets Singapore-registered businesses facing competitive market pressures and cost constraints.

Businesses don't need to apply for PWCS. IRAS automatically calculates entitlements based on CPF contribution data and disburses payments by the first quarter of the following year. However, employers should maintain accurate records of wage increases and employee tenure to verify that PWCS calculations align with expectations.

Interactive PWCS Calculator

Use this calculator to estimate your potential PWCS co-funding for 2025-26. Enter your employee's current wage, planned increase, and timing to see detailed support calculations.

Implementation Strategies for Maximum Benefit

Successfully leveraging PWCS requires more than understanding eligibility criteria; it demands strategic workforce planning and proactive wage policy development. Employers who treat PWCS as part of a comprehensive talent strategy, rather than merely a cost-reduction mechanism, position themselves for sustainable growth.

Conducting a Wage Structure Audit

Begin by comprehensively auditing your current wage structure against PWM, LQS, and PWCS requirements. Identify which employees fall under PWM coverage, which are subject to LQS baselines, and which currently earn wages that would qualify for PWCS support upon increase.

This audit should segment employees by current wage bands, calculating the gap between current compensation and mandatory requirements. For PWM-covered roles, reference the specific wage schedules for your sector and project future increases through 2027 based on published timelines. This forward-looking analysis enables multi-year budget planning that accounts for both wage costs and expected government support.

Pay particular attention to employees currently earning between $2,800 and $3,000. These workers sit at the upper end of PWCS eligibility, and increases must be carefully calibrated to stay within the $4,000 post-increase ceiling while still meeting the $100 minimum increase requirement.

Timing Wage Increases Strategically

The two-year co-funding structure creates opportunities for strategic timing. Employers planning multiple wage adjustments should consider front-loading increases into 2025 to capture the 40% co-funding rate, then sustaining those levels through 2026 to secure an additional 20% support.

For businesses with annual performance review cycles, aligning these reviews with PWCS qualifying years ensures wage increases are properly captured. Companies with mid-year or quarterly review processes may need to consolidate increases into specific months to meet the three-month CPF contribution requirements in qualifying years.

Consider implementing wage increases early in 2025 rather than late in the year. This maximizes the months of CPF contributions in the qualifying year, ensuring employees meet the three-month minimum and potentially qualifying for higher average wage calculations if increases are phased throughout the year.

Integrating Skills Development

PWM's training requirements shouldn't be viewed as compliance burdens but as opportunities to build workforce capabilities while reducing wage increase costs. By investing in WSQ certifications or robust in-house training programs, employers justify wage increases through demonstrated skill development, making the salary adjustments more sustainable long-term.

Government subsidies through Workfare Skills Support can cover significant portions of training costs, effectively allowing employers to access free or low-cost skills development while meeting PWM requirements. This layered support—training subsidies plus wage co-funding—can reduce the total cost of workforce upgrading substantially.

Develop training pathways aligned with your industry's PWM wage ladder, creating clear progression routes from entry-level positions to supervisory roles. This structured approach to career development improves retention while ensuring workers continuously qualify for higher wage bands based on enhanced capabilities.

Managing Cash Flow and Budget Planning

While PWCS payments arrive automatically, they come in the first quarter of the year following the qualifying year. Employers must manage cash flow accordingly, as wage increases take effect immediately while government reimbursements arrive months later.

Build PWCS projections into annual budgets as a receivable item, but maintain conservative estimates to avoid budget shortfalls if actual payments differ from projections. Consider establishing a reserve fund specifically for wage increases, which can be replenished as PWCS payments arrive, creating a revolving pool to manage future increases.

For multi-year planning, model different scenarios based on potential policy changes beyond 2026. While PWCS is currently scheduled to end in 2026, the scheme's repeated extensions and enhancements suggest ongoing government commitment to supporting wage progression. Budget planning should include scenarios for both continuation and sunset of PWCS support.

Common Pitfalls and How to Avoid Them

Even with careful planning, employers can encounter challenges in maximizing PWCS benefits. Understanding common mistakes helps businesses avoid costly errors and ensure they capture all available support.

Misunderstanding the Wage Ceiling

The $3,000 wage ceiling applies to wages before the increase, while the $4,000 ceiling applies after the increase. Some employers mistakenly believe both thresholds apply to pre-increase wages, potentially excluding employees who actually qualify.

For example, an employee earning $2,900 who receives a $200 increase to $3,100 remains eligible for PWCS. The pre-increase wage ($2,900) is below $3,000, and the post-increase wage ($3,100) is below $4,000. Both conditions are satisfied, making this increase eligible for co-funding on the full $200 monthly raise.

Failing to Sustain Wage Increases

The two-year co-funding benefit only applies if wage increases are sustained into the following year. Employers who grant temporary wage increases or bonuses that don't represent permanent salary adjustments forfeit the second year of co-funding.

Ensure wage increases are reflected in employment contracts and reflected consistently in monthly CPF contributions. One-time bonuses, variable payments, or temporary allowances don't count toward PWCS-eligible wage increases. The increase must represent a permanent adjustment to base salary.

Overlooking Part-Time Workers

Part-time workers can qualify for PWCS if they meet the CPF contribution requirements. However, their wage calculation differs from full-time employees. For part-timers, use the formula: Total monthly gross wages ÷ total hours worked in the month. If this hourly rate increases by amounts that scale to at least $100 monthly equivalent, the increase qualifies.

Many employers exclude part-timers from wage planning, missing opportunities for PWCS support. With LQS requiring $10.50 per hour for part-time workers, increases to meet this threshold often qualify for substantial co-funding.

Inadequate Record-Keeping

While PWCS applications are automatic, employers should maintain detailed records of wage increases, employee tenure, and CPF contributions. Discrepancies between expected and actual PWCS payments can arise from data mismatches or employee transitions that affect eligibility.

Document the rationale for each wage increase, linking adjustments to PWM requirements, LQS compliance, or voluntary uplift strategies. This documentation proves invaluable if questions arise about PWCS calculations or if future audits require justification of wage policies.

Looking Beyond 2026: Preparing for the Future

While PWCS is scheduled to conclude in 2026, the scheme's evolution suggests ongoing government commitment to supporting progressive wages. The repeated extensions and enhancements since the original Wage Credit Scheme launched in 2013 indicate that some form of wage support will likely continue, though specific structures remain uncertain.

Building Sustainable Wage Practices

Rather than viewing PWCS as temporary relief, forward-thinking employers use this period to build sustainable wage practices that can continue without government support. This means linking wages directly to productivity improvements, developing clear career progression pathways, and investing in workforce capabilities that justify higher compensation.

Companies that successfully transform lower-wage roles into higher-value positions reduce reliance on external support while improving competitiveness. The cleaning sector demonstrates this potential; firms that invested in automation, enhanced service quality, and worker training sustained wage increases beyond PWM minimums because improved productivity supported higher costs.

Engaging with Industry Associations

Industry associations and tripartite committees play crucial roles in shaping PWM requirements and advocating for business concerns. Active engagement with these bodies ensures your sector's interests are represented in policy discussions and provides early warning of upcoming changes.

The National Wages Council issues annual guidelines that influence wage trends across the economy. Understanding these recommendations helps businesses anticipate future requirements and plan wage adjustments proactively rather than reactively.

Investing in HR Technology

Managing complex wage structures across PWM requirements, LQS thresholds, and PWCS eligibility demands robust HR systems. Modern payroll and HR platforms can automate compliance tracking, flag employees approaching wage thresholds, and model the financial impact of various wage scenarios.

Technology investments made today to manage current requirements will prove invaluable as frameworks continue evolving. Systems that integrate with CPF submission processes ensure data consistency, reducing discrepancies in PWCS calculations and simplifying record-keeping.

Conclusion

The enhanced PWCS for 2025-26 represents a significant opportunity for Singapore employers to manage the transition to higher wage standards while maintaining financial sustainability. With 40% co-funding in 2025 and 20% in 2026, the government is providing substantial support for businesses committed to uplifting lower-wage workers.

Success requires more than passive participation. Employers must strategically align wage policies with PWM and LQS requirements, implement increases at optimal times to maximize two-year co-funding, and build sustainable practices that extend beyond government support periods. The calculator provided in this guide offers a starting point for financial planning, but comprehensive strategy development should consider workforce capabilities, sector-specific requirements, and long-term business goals.

As Singapore continues emphasizing progressive wages through interconnected policies—PWM sector requirements, LQS baselines, Progressive Wage Mark accreditation, and PWCS support—employers who embrace these frameworks position themselves as employers of choice. The businesses that thrive won't be those merely complying with minimums, but those viewing progressive wages as integral to attracting talent, improving productivity, and building resilient operations.

The window for maximum PWCS benefit is finite. With 2025 offering the highest co-funding rates in the scheme's history, now is the time to conduct wage audits, develop strategic implementation plans, and position your business to capture all available support while building foundations for sustainable wage growth beyond 2026.

Methodology

This article draws on official government sources including the Inland Revenue Authority of Singapore (IRAS), Ministry of Manpower (MOM), and Singapore Budget 2025 announcements. Wage schedules and co-funding rates reflect current policy as of October 2025. Businesses should verify specific requirements with relevant government agencies and consult professional advisors for circumstances unique to their operations. The calculator provides estimates based on standard scenarios and may not account for all individual circumstances affecting PWCS eligibility or payout amounts.