How will the Progressive Wage Model (PWM) impact the cost of commercial cleaning in Singapore from 2023 to 2028?
The general price levels of commercial cleaning and cleaning overall is projected to increase at a significant rate due to recent changes in the Progressive Wage Model (PWM) of the cleaning industry in Singapore.
This time, the adjustments and increments of the wage floor for 2023 to 2028 are much steeper than previous years with basic general cleaner wages to reach at least $2420 in 2028.
To put things in perspective, the wage of cleaners will increase, on average , by about 10% per year. In a sector where labour wages take up to 70 to 80% of total revenue, it stands to reason current prices of services will be forced to rise for sustainable operations to occur.
In short, the general price of cleaning will increase. Significantly.
This article seeks to make clear the cost associated with the PWM increment to help service buyers better understand the cost associated with hiring and running a cleaning service operation. With a combined experience of over decades of experience in facility management, we aim to shed light on the key hidden costs associated with hiring and operating an office and commercial cleaning business.
Our objective is two-folds:
(i) to help service buyers better empathise with the cost structures service providers face to discourage the practice of cheap sourcing
(ii) to help policymakers better regulate the vendors or service buyers who are employers of outsourced or in-house cleaners in the future.
Our hope is by elucidating these cost realities transparently, both service providers and service buyers can work on sustainable commercial terms which are fair and sustainable for all.
Simple Price Changes
A summary table of the increase in basic wages can be found in the table below provided by the media.
However, the table above does not cover the full cost associated with employing a cleaner. For instance, the cost of workplace and work injury insurance , CPF contributions , a 2 weeks end year PWM bonus (mandatory). A simple graphic below illustrates some of the hidden cost not included in the displayed table above.
Comprehensive Price Changes - Cost of labour
So far, we have only presented , factually, what the cost of labour would be. To be clear: This would be the same cost if either a service buyer or a service vendor were to directly employ a cleaner.
However, we have omitted the cost of
- Providing cleaning tools , replenishing cleaning chemicals,
- Replacement of labour in the event of churn
- Training the worker on the ground
- Supervisory cost
- Customer and account management service
The value proposition typically associated with outsourcing cleaning and facility work in contrast to in-sourcing cleaning. With these cost factored in, the cost of outsourcing cleaning will likely be as follows.
I wrote more extensively about the implications of the Progressive Wage Model in a featured Straits Times article here. However , in summary, we believe
- Outcome-based contracts, rather than purely time-based or manpower based contracts could be a way forward. And technology adoption on both the facility manager and the service provider is key here.
- Stakeholder facility and cleaning consumption levels must change. In the face of all these rising costs, the service buyers must also ask themselves: if cleaning costs are so high, what can I do to clean after myself to avoid paying such high costs? How do I transform my facility to make it smarter and less reliant on labour
- A movement towards in-sourcing might be a trend for smaller spaces but facilities managers typically will have to deal with any absenteeism or the churn rate of any service workers they employ. It often causes high search costs and time-wasting. In considering operating a micro ‘cleaning company’ within your primary business, office managers will have to consider how ‘core’ this service is to your business. Often this is not the case.
- There will be a rise in Professionalism. 'Middle-mans' who add little value to the sourcing , hiring and management of cleaning crews and pros will become less and less relevant in a procurement decision.
At this point, the interested reader will likely to have such questions in their minds:
Is it still economical to outsource facility services? What are the pros and cons of in-sourcing versus outsourcing? How do I proceed when a strategic decision has been made on either choice?What are the risks and benefits of implementing either solution?
For a more detailed understanding of our model or our analysis, leave us a note and schedule a free first consultation today.