SOME company bosses are calling for changes to a government wage subsidy scheme introduced in last year's Budget.

They say it favours larger firms that are more able to afford better pay rises over smaller companies, while also giving rise to unrealistic staff expectations.

Although they praised the efficient nature of the scheme, some felt the money could be better spent on more specific measures to benefit certain small and medium-sized enterprises (SMEs).

The Wage Credit Scheme covers 40 per cent of the pay rises Singaporean workers earning a monthly salary of up to $4,000 receive over three years. There is no need for employers to apply for the scheme and the wage credits will be paid to them automatically based on their CPF contributions.

A Singapore Business Federation (SBF) poll of 215 companies late last year found the scheme had a modest impact on whether bosses give pay hikes. Just 37 per cent of employers surveyed said they will give larger salary increments, with the rest saying they will not change pay levels.

The SBF noted that an "unintended consequence" of the scheme is that larger companies have greater resources to raise salaries and are better able to attract and retain staff while benefiting from the subsidy.

"This may cause SMEs to lose these employees who are attracted to the higher wages offered by the larger corporations," it added.

The scheme, which is set to cost $3.6 billion over three years, is part of a three-year transition support package to help companies restructure amid a tight labour market. It aims to encourage bosses to share productivity gains with their workers.

But some bosses told The Straits Times the scheme should be tweaked so that the benefits are better directed.

Mr Tan Jit Khoon, CEO of printing firm Winson Press, said: "The intention is good, but the money can be better spent, more targeted to direct help to where it's needed most. (Multinationals) will have to give pay increments anyway, so the money becomes a windfall for them."

Mr Lau Tai San, chairman of Kim Ann Engineering, said: "The scheme may benefit the non- SMEs and large SMEs more. Hence, it may need to be reviewed or refined for smaller SMEs."

Other bosses suggested raising the monthly salary cap to $4,500 or $5,000 so that more workers can benefit.

Various parties have suggested other ways to refine the scheme. For instance, Labour MP Zainal Sapari said the scheme should have a higher co-funding percentage to bring about better pay rises for lower-income workers. For instance, the Government could look into raising the percentage, maybe even to 80 per cent, for those earning below $2,000, he said last year.

The scheme has enabled firms such as Rasel Catering Singapore, which has about 50 staff, to be more generous with increments last year, and companies say it aids them in talent retention.

One key advantage, say bosses, is that unlike several other government initiatives, the wage subsidy is hassle-free and is automatically paid. In contrast, other schemes may require filling forms or submitting tax returns to claim cash payouts or tax deductions.

However, bosses say it could also leave a company saddled with a high wage bill after the scheme expires in 2015.

"This is only for three years, after which we have to bear the full burden. I may have to pass on the costs to consumers then," said PestBusters chief executive Thomas Fernandez.

Some bosses also say the scheme gives rise to more wage pressures, as they are obliged to give healthier pay hikes to those earning above $4,000 and even to staff who are underperforming.

"Now I'm pressured to give these staff a decent increment, otherwise they may leave or even join a competitor," said an SME boss who declined to be named.