Becoming less reliant on foreign manpower: Why is it so hard for Singapore’s F&B indu
SINGAPORE: Over the past six years of running his own food and beverage (F&B) business, Foo Choo Kiat has had to double up as chef, cleaner and service staff from time to time.
“When there’s a shortage of manpower, you just got to work the shift,” said the 32-year-old, who opened Lola’s Café in 2013 and more recently, a dumpling eatery in Tanjong Pagar.
Advertisement “Hiring doesn’t happen so quickly, especially when it’s a new place, so my co-founder and I typically spend at least 6 months managing things on our own.”
Being starved of workers is a constant bugbear for F&B business owners like Mr Foo. With tighter foreign manpower curbs looming, many fear even bigger hiring woes ahead.
As announced by Finance Minister Heng Swee Keat in Budget 2019, the services sector’s dependency ratio ceiling (DRC) – the proportion of foreigners a firm is allowed to hire – will be lowered from 40 per cent to 38 per cent next year, and then to 35 per cent by 2021.
The sector’s S Pass sub-DRC will also be cut from 15 per cent to 13 per cent and then to 10 per cent over the next two years.
Advertisement Advertisement In his speech, Mr Heng cited uneven productivity growth across sectors and within services, segments like F&B and retail remain “very labour intensive”.
The number of S Pass and Work Permit holders in services has also risen by about 3 per cent annually, or 34,000 in the last three years – a trend, if continued, will be an “unsustainable path”, he said.
This call from the Government to improve productivity is not new and the latest adjustment, coming six years after foreign manpower quotas were first tightened, is a nudge for businesses to do more.
CIMB Private Banking economist Song Seng Wun, a long-time observer of the Singapore economy, noted that while the F&B sector likely hired more, its sales value has seen less pronounced growth, hovering at about S$10 billion annually over the last five years.
“Relatively stagnant sales turnover yet more people are hired. Obviously, this is not very sustainable or productive.”
[h=3]READ: Budget 2019: Foreign worker quota in services sector to be cut to 35% by 2021[/h][h=3]READ: Appeal of Singapore service sector jobs will gradually dim for foreigners, hence need to reduce quotas: Josephine Teo[/h]WHY IS IT SO HARD
Industry players told CNA that they understand the Government’s push and also hope to be less reliant on foreign manpower.
But the transition isn’t easy.
First, the harsh reality of not being able to attract Singaporean workers remains. The F&B industry, seen as being less glamourous with long working hours and lower wages, continues to be shunned by locals.
Hotelier and restaurateur Loh Lik Peng said: “The reality is that the industry doesn’t chime with the lifestyle choices of Singaporeans, who don’t want to work evenings, weekends or special occasions.”
Foreigners, on the other hand, have lower salary expectations and are willing to take on tougher work conditions, added Mr Foo.
With limited local manpower and tight profit margins, business owners said their hands are tied.
Second, the boom in F&B establishments in recent years has exacerbated demand for manpower. The increased competition has also squeezed profits and impacted productivity, experts said.
In particular, Mr Loh reckoned that mom-and-pop shops tend not to be optimal as they lack “the scale to be efficient”.
"They probably soak up more resources than ideal. With a proliferation of very small players, you will use up a lot more manpower,” said the founder of hotel and restaurant group Unlisted Collection.
Recalling when he first started Lola’s Café, Mr Foo admitted that enhancing productivity wasn’t exactly top priority.
“It was the time when we were supposed to be strategising, troubleshooting and thinking about how to improve, but my co-founder and I were busy filling in for the manpower we didn’t have.
“It was only when we had more outlets then it became a bigger problem – we cannot be filling in all the shifts, which motivated us to start thinking of solutions. And when you only have one shop, it doesn’t make a lot of sense to invest in equipment and enhance productivity.”
Third, technology can only go so far in transforming the industry into manpower-lean, according to the Restaurant Association of Singapore (RAS).
While it has been encouraging its members to explore digital and productivity solutions, the F&B industry comprises many different business models and dining concepts.
“(It) is challenging to expect all restaurants to become minimalist in service through technology adoption and automation, while upholding a similar or better service standard,” the industry association told CNA in an emailed response.
[h=3]READ: Budget 2019: Services sector to face 'challenge' of tighter foreign worker quota, but adapting firms will benefit[/h][h=3]READ: Tighter foreign worker quotas in services sector ‘necessary’ to sustain restructuring, says Zaqy Mohamad[/h]ON THE BOIL
As such, the RAS expects the further tightening of quotas to deal a hard blow to already-struggling F&B operators.
“The current DRC of 40 per cent is already a challenging one and businesses are barely managing, with many typically short of 10 to 20 per cent manpower at any one given period.
“Many of our members are shocked with the sudden implementation,” said the association, which has more than 400 members operating over 3,600 outlets here.
It also warned that there could be unintended effects such as local workers, usually hired for senior and managerial roles, “having to ‘down-fill’ operational roles” that are typically done by foreigners.
This disrupts the upskilling plans that these companies may have for their local staff, the RAS said.
“This impact will be even more pronounced in companies (that) are in the process of planning for overseas expansion, where locals are the preferred staff to be sent to oversee their business operations,” it added.
[h=3]READ: Government will help businesses transform, reduce reliance on foreign manpower: Indranee Rajah[/h]Certain segments within the F&B industry may also be hit more than the rest.
Mr Song thinks the likes of neighbourhood coffeeshops will feel the biggest impact, given their inability to pay more and attract local workers.
Mr Foo said “mass-market” F&B operators like himself will also feel the heat.
“I can’t afford to pay salaries such as those offered by higher-end restaurants, hotels or fine-dining places. If I do so, maybe I can hire more Singaporeans but I’ll need to raise my prices, which means losing my customers,” he said.
Even with the quotas scheduled to be reduced over the next two years, F&B operators that CNA spoke to expect the fight for local workers to intensify soon.
Apart from mulling over more competitive salary and non-monetary benefits, they are also looking at how to tap on more technology for repetitive tasks.
For Mr Song, however, F&B businesses here will need to leverage tech for more than just kitchen processes if they want to cope with the upcoming quota cuts.
“For a developed economy, our F&B industry still feels somewhat backward compared to countries around the region … like Japan, South Korea or China where QR codes are used for ordering or billing. Do we really still need someone to be going around with pen and paper?”
Ultimately, the sector has to raise its wages to attract locals, which means that customers here will have to accept the reality of paying more.
“Its two sides: Employers need to pay more and if they can, I think they will be able to hire more locals,” said Mr Song. “This means that you and I will need to accept that we just have to pay more for our food.”
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SINGAPORE: Over the past six years of running his own food and beverage (F&B) business, Foo Choo Kiat has had to double up as chef, cleaner and service staff from time to time.
“When there’s a shortage of manpower, you just got to work the shift,” said the 32-year-old, who opened Lola’s Café in 2013 and more recently, a dumpling eatery in Tanjong Pagar.
Advertisement “Hiring doesn’t happen so quickly, especially when it’s a new place, so my co-founder and I typically spend at least 6 months managing things on our own.”
Being starved of workers is a constant bugbear for F&B business owners like Mr Foo. With tighter foreign manpower curbs looming, many fear even bigger hiring woes ahead.
As announced by Finance Minister Heng Swee Keat in Budget 2019, the services sector’s dependency ratio ceiling (DRC) – the proportion of foreigners a firm is allowed to hire – will be lowered from 40 per cent to 38 per cent next year, and then to 35 per cent by 2021.
The sector’s S Pass sub-DRC will also be cut from 15 per cent to 13 per cent and then to 10 per cent over the next two years.
Advertisement Advertisement In his speech, Mr Heng cited uneven productivity growth across sectors and within services, segments like F&B and retail remain “very labour intensive”.
The number of S Pass and Work Permit holders in services has also risen by about 3 per cent annually, or 34,000 in the last three years – a trend, if continued, will be an “unsustainable path”, he said.
This call from the Government to improve productivity is not new and the latest adjustment, coming six years after foreign manpower quotas were first tightened, is a nudge for businesses to do more.
CIMB Private Banking economist Song Seng Wun, a long-time observer of the Singapore economy, noted that while the F&B sector likely hired more, its sales value has seen less pronounced growth, hovering at about S$10 billion annually over the last five years.
“Relatively stagnant sales turnover yet more people are hired. Obviously, this is not very sustainable or productive.”
[h=3]READ: Budget 2019: Foreign worker quota in services sector to be cut to 35% by 2021[/h][h=3]READ: Appeal of Singapore service sector jobs will gradually dim for foreigners, hence need to reduce quotas: Josephine Teo[/h]WHY IS IT SO HARD
Industry players told CNA that they understand the Government’s push and also hope to be less reliant on foreign manpower.
But the transition isn’t easy.
First, the harsh reality of not being able to attract Singaporean workers remains. The F&B industry, seen as being less glamourous with long working hours and lower wages, continues to be shunned by locals.
Hotelier and restaurateur Loh Lik Peng said: “The reality is that the industry doesn’t chime with the lifestyle choices of Singaporeans, who don’t want to work evenings, weekends or special occasions.”
Foreigners, on the other hand, have lower salary expectations and are willing to take on tougher work conditions, added Mr Foo.
With limited local manpower and tight profit margins, business owners said their hands are tied.
Second, the boom in F&B establishments in recent years has exacerbated demand for manpower. The increased competition has also squeezed profits and impacted productivity, experts said.
In particular, Mr Loh reckoned that mom-and-pop shops tend not to be optimal as they lack “the scale to be efficient”.
"They probably soak up more resources than ideal. With a proliferation of very small players, you will use up a lot more manpower,” said the founder of hotel and restaurant group Unlisted Collection.
Recalling when he first started Lola’s Café, Mr Foo admitted that enhancing productivity wasn’t exactly top priority.
“It was the time when we were supposed to be strategising, troubleshooting and thinking about how to improve, but my co-founder and I were busy filling in for the manpower we didn’t have.
“It was only when we had more outlets then it became a bigger problem – we cannot be filling in all the shifts, which motivated us to start thinking of solutions. And when you only have one shop, it doesn’t make a lot of sense to invest in equipment and enhance productivity.”
Third, technology can only go so far in transforming the industry into manpower-lean, according to the Restaurant Association of Singapore (RAS).
While it has been encouraging its members to explore digital and productivity solutions, the F&B industry comprises many different business models and dining concepts.
“(It) is challenging to expect all restaurants to become minimalist in service through technology adoption and automation, while upholding a similar or better service standard,” the industry association told CNA in an emailed response.
[h=3]READ: Budget 2019: Services sector to face 'challenge' of tighter foreign worker quota, but adapting firms will benefit[/h][h=3]READ: Tighter foreign worker quotas in services sector ‘necessary’ to sustain restructuring, says Zaqy Mohamad[/h]ON THE BOIL
As such, the RAS expects the further tightening of quotas to deal a hard blow to already-struggling F&B operators.
“The current DRC of 40 per cent is already a challenging one and businesses are barely managing, with many typically short of 10 to 20 per cent manpower at any one given period.
“Many of our members are shocked with the sudden implementation,” said the association, which has more than 400 members operating over 3,600 outlets here.
It also warned that there could be unintended effects such as local workers, usually hired for senior and managerial roles, “having to ‘down-fill’ operational roles” that are typically done by foreigners.
This disrupts the upskilling plans that these companies may have for their local staff, the RAS said.
“This impact will be even more pronounced in companies (that) are in the process of planning for overseas expansion, where locals are the preferred staff to be sent to oversee their business operations,” it added.
[h=3]READ: Government will help businesses transform, reduce reliance on foreign manpower: Indranee Rajah[/h]Certain segments within the F&B industry may also be hit more than the rest.
Mr Song thinks the likes of neighbourhood coffeeshops will feel the biggest impact, given their inability to pay more and attract local workers.
Mr Foo said “mass-market” F&B operators like himself will also feel the heat.
“I can’t afford to pay salaries such as those offered by higher-end restaurants, hotels or fine-dining places. If I do so, maybe I can hire more Singaporeans but I’ll need to raise my prices, which means losing my customers,” he said.
Even with the quotas scheduled to be reduced over the next two years, F&B operators that CNA spoke to expect the fight for local workers to intensify soon.
Apart from mulling over more competitive salary and non-monetary benefits, they are also looking at how to tap on more technology for repetitive tasks.
For Mr Song, however, F&B businesses here will need to leverage tech for more than just kitchen processes if they want to cope with the upcoming quota cuts.
“For a developed economy, our F&B industry still feels somewhat backward compared to countries around the region … like Japan, South Korea or China where QR codes are used for ordering or billing. Do we really still need someone to be going around with pen and paper?”
Ultimately, the sector has to raise its wages to attract locals, which means that customers here will have to accept the reality of paying more.
“Its two sides: Employers need to pay more and if they can, I think they will be able to hire more locals,” said Mr Song. “This means that you and I will need to accept that we just have to pay more for our food.”
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