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The rising cost of upskilling and reskilling is becoming a growing concern for employers, with 30% identifying it as a workforce challenge as businesses prepare for changing technology needs.
Employers in Singapore are continuing to take a measured approach to wage increases and hiring, even as their business outlook for 2027 has improved modestly compared with a year ago, according to the Singapore National Employers Federation’s (SNEF) Survey on Wage and Employment Outlook 2026/2027.
The survey found that rising manpower costs remain the top workforce challenge for employers, with businesses also facing higher costs to upskill and reskill their employees.
Conducted between June and August 2026, the survey gathered responses from more than 300 companies employing close to 160,000 workers across 20 industries. The respondents represented a mix of small, medium-sized, and large enterprises.
Rising manpower costs remain top challenge
Rising manpower costs remained the top manpower challenge, with 83% of employers citing it in 2026, compared with 79% in 2025.
More employers are also concerned about the rising cost of upskilling and reskilling their workforce as they prepare for changing business and technology needs. A total of 30% identified this as a challenge in 2026, an increase from 23% in 2025.
At the same time, labour market tightness has eased compared with a year ago. The proportion of employers expecting difficulties in attracting and retaining PMETs over the next 12 months fell to 41%, from 47% in 2025.
Similarly, 35% reported concerns about a shortage of local high-skilled talent, down from 42% a year earlier.
Despite the easing in competition for talent, attracting suitable talent remains the top HR priority for employers, cited by 59%.
Employers are also placing greater focus on artificial intelligence (AI), with 48% prioritising the exploration, adoption and enhancement of AI in 2027, increase from 39% in 2026.
Upskilling and reskilling employees also remain key priorities as businesses prepare their workforce for changing needs.
Business outlook improves modestly
Business sentiment has improved somewhat, although uncertainty remains a concern for many employers.
The proportion expecting uncertain business prospects in 2027 fell to 63%, from 72% in 2026. Meanwhile, slightly more employers expect their businesses to perform well in 2026, at 65%, compared with 63% in 2025.
However, the outlook remains uneven across sectors.
While some outward-oriented sectors are benefiting from stronger external and technology-driven demand, domestically oriented sectors such as retail trade and food and beverage services continue to contend with weaker consumer demand and rising operating costs.
This points to an increasingly K-shaped economy, with sectors that employ a larger share of lower-wage workers and rely more heavily on local demand facing greater business and manpower cost pressures despite improvements in the wider economy.
Hiring plans also remain cautious.
More than half of employers, or 54%, do not plan to increase their headcount. Meanwhile, 40% plan to increase their headcount, while the remaining 6% plan to reduce their headcount.
The findings come as Singapore’s labour market continues to show signs of stability, although hiring activity has become more cautious.
In its latest labour market report, the Ministry of Manpower (MOM) found that employment continued to grow in Q1 2026, while unemployment remained low. However, hiring and resignation rates fell, and job vacancies eased from the previous quarter.
Retrenchments also edged up from 3,690 in Q4 2025 to 3,830 in Q1 2026, with the increase concentrated mainly in manufacturing, financial services and professional services.
The latest figures suggest that while Singapore’s labour market remains broadly stable, employers are becoming more selective in their hiring as business conditions remain uneven.
More employers are planning wage moderation or freeze in 2027
The cautious approach is also reflected in employers’ wage plans for next year. 51% of employers plan to implement wage moderation or a wage freeze in 2027, increase from 48% in 2026. Meanwhile, 49% are planning to implement a wage increase.
The findings indicate continued caution around wage growth, particularly among small and medium-sized employers. Among companies employing lower-wage workers, however, most remain committed to providing built-in wage increases in 2027.
86% plan to give built-in wage increases next year, although this is 10 percentage points lower than the 96% recorded in 2026. The remaining 14% are planning a wage freeze. None of the employers surveyed plans to implement wage cuts in 2027.
Employers continue to focus on workforce capabilities
Kuah Boon Wee, Vice-President, SNEF Council, said the findings show that labour market pressures have eased somewhat, but employers continue to face significant cost pressures and uncertainty around the business outlook.
This, he said, was reflected in the measured approach to wage adjustments, with slightly more companies planning wage moderation or a wage freeze.
"It is encouraging to note that many employers are continuing to invest in workforce capabilities, job redesign and AI adoption to strengthen productivity and competitiveness."
On lower-wage workers, he noted that most employers remain committed to supporting them, although fewer companies are planning wage increases compared with the previous year.
ALSO READ: Retrenchments edged up in Q1, but Singapore's labour market stayed broadly stable, says MOM
Infographic / SNEF
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