To this end, the Special Employment Credit (SEC) has been enhanced.
Under the scheme, all employers will receive a monthly payout, or eight per cent of wages, for their Singaporean workers who are above 50 years old and earning up to S$3,000 a month.
For workers earning between S$3,000 and S$4,000, a lower SEC -- between zero and eight per cent of wages -- will be paid out.
The previous scheme last year was only applicable to older Singaporean workers who are covered by the Workfare scheme.
The scheme will be in place for the next five years, to allow employers to plan ahead in hiring older workers.
According to the government, the enhanced scheme will cover almost 350,000 workers, or four-fifths of older Singaporean workers.
"It will provide employers with benefits of about S$470 million per year - more than twice the increase in their wage bill of S$190 million as a result of higher employer CPF contribution rates for older workers," Mr Tharman said.
Short-term measures to help SMEs combat the higher business costs are being made available.
Mr Tharman said this is intended to "help companies offset higher business costs, which may persist in the business slowdown".
Companies will receive a one-off cash grant pegged at five per cent of their revenues in 2012, capped at a payout of S$5,000.
This grant is available to companies who have made CPF contributions to at least one employee.
The scheme will cost the government around S$320 million in 2012.
While increasing workforce participation of older workers may help to ease tightness in the labour market, Mr Tharman said "the only lasting solution for dealing with the labour shortage is to improve productivity".
As a result, the Productivity and Innovation Credit Scheme (PIC) will be further enhanced, while the National Productivity Fund (NPF) will receive S$2 billion.
Announced at last year's Budget, the PIC scheme has resulted in tax savings of S$650 million for companies in its first year.
According to the government, one in three small companies -- or companies with turnover of $10 million or less -- has used the PIC. They will see their taxes come down by 40 per cent, on average.
In this year's Budget, the PIC scheme will be tweaked, taking into account feedback from business groups.
Firstly, the cash payout will of companies' PIC expenditures -- capped at S$100,000 -- will be increased from 30 per cent to 60 per cent.
For example, this means a company which has invested S$10,000 in staff training will be eligible for a S$6,000 cash payout, compared to S$3,000 under the existing PIC scheme.
Mr Tharman said: "It is especially useful for companies with limited taxable income."
Secondly, companies applying to the PIC scheme will be able to obtain their cash payouts on a quarterly basis instead of having to wait till the end of the financial year.
And lastly, it will be easier for companies to claim in-house training costs.
Under the existing PIC scheme, claims for in-house training costs can only be made if these are certified by the Singapore Workforce Development Agency (WDA) or Institute of Technical Education (ITE).
From 2012, this requirement will be removed, and companies will be able to claim in-house training costs of up to S$10,000 per year.
Three enhancements to support worker training will be introduced.
Firstly, SMEs which upgrade their workers through all courses certified by WDA, and Academic Continued Education and Training (CET) programmes at the polytechnics and ITE will get a 90 per cent course subsidy.
Combined with the higher cash payout under the PIC, the subsidies will cover almost all the full cost of training for SME-sponsored employees.
The absentee payroll cap will be increased from S$4.50 to S$7.50 an hour to encourage more companies to send their employees for training.
This scheme will run for three years, and about 8,400 courses could potentially come under it.
Similar training benefits will also be extended to self-employed persons.
Secondly, Mr Tharman said the government will step up grants to help SMEs transform their operations and raise productivity.
Citing LS Construction as an example, he said the firm used a grant from the Productivity Improvement Project (PIP) scheme from the Building and Construction Authority to replace their current system of scaffoldings for high-rise construction, reducing 60 per cent of manpower previously required to construct the scaffold.
Thirdly, grants for capability development among SMEs will be increased from the current 50 per cent to a 70 per cent subsidy rate for the next three years.
These subsidies will come under schemes managed by SPRING and IE Singapore.
"This will provide a S$200 million boost over the next three years, which will help SMEs attract local talent and automate or upgrade," Mr Tharman said.
He added the support under the various schemes combined will amount to S$1.4 billion this year, which will more than offset the additional amount businesses -- including small businesses -- will pay due to increased foreign worker levies.
And to help businesses, particularly SMEs in the services industry renew and refresh their premises, the Renovation and Refurbishment Deduction Scheme in 2008 -- which is due to expire next year -- will be made a permanent feature of the Singapore tax system.
The amount of expenditure that may be claimed will be doubled, from S$150,000 to S$300,000.
Business efficiency achieved by mergers and acquisitions can also amount to productivity gains.
As a result, the Mergers & Acquisitions (M&A) allowance scheme was introduced in the last Budget to support this.
Mr Tharman said to provide further support to SMEs contemplating business consolidation, the government will grant a 200 per cent tax allowance on transaction costs incurred, such as legal and tax advisory fees.
This will be subject to an expenditure cap of S$100,000.
- CNA/wk
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