Singapore – Upcoming Tightening of Foreign Worker Quota Rules
The Singapore Ministry of Manpower has announced planned changes to the foreign worker quota rules, which may make it harder for companies to employ foreign workers.
Local Qualifying Salary Increase
Effective July 1, 2019, the Local Qualifying Salary (LQS) will increase by SGD 100 per month, for companies in any sector.
From July 1, 2019, a Singaporean or Permanent Resident employee employed under a contract of service, including the company’s director, is counted as:
- 1 local employee if they earn the LQS of at least SGD 1300 per month.
- 0.5 local employee if they earn half the LQS of at least SGD 650 to below SGD 1300 per month.
The Local Qualifying Salary (LQS) determines the number of local employees who can be used to calculate a company’s Work Permit and S Pass quota entitlement. The LQS was previously known as the Full-Time Equivalent salary.
Dependency Ratio Ceiling Decrease
Effective January 1, 2020, the Dependency Ratio Ceiling (DRC) and S Pass Sub-DRC for companies in the services sector, which is the percentage of foreign workers (Work Permit and S Pass holders) that a company can hire, will be lowered.
The services DRC for Work Permit holders, currently 40%, will decrease to 38% from January 1, 2020 and to 35% from January 1, 2021.
The services sub-DRC for S Pass holders, currently 15%, will decrease to 13% from January 1, 2020 and to 10% from January 1, 2021.
Impact
Companies in all sectors seeking to hire foreign nationals in the S Pass and Work Permit categories from July 1, 2019 may have to raise the salaries of affected local employees to allow more foreign national workers.
In the services sector, employers will need to either remove Work Permit and S Pass holders or hire more locals. After January 1, 2020 and January 1, 2021, employers in the services sector who exceed the new DRC or sub-DRC will be allowed to retain their excess Work Permit and S Pass holders until pass expiry, to avoid business disruption. However, they will not be allowed to hire new Work Permit and S Pass holders, or renew their existing Work Permit and S Pass holders, until they come within the new DRC or sub-DRC.
Quota requirements in other sectors are unchanged. The government has announced that there will be no further changes to quotas in other sectors this year. Companies sponsoring Employment Pass holders will also not be affected, as Employment Passes continue to be excluded in the calculation of foreign worker quota.
In Singapore, the services sector encompasses businesses who engage in financial, commercial, communications, IT, professional and other services.
Action Items
- Companies in all sectors seeking to hire foreign nationals in the S Pass and Work Permit categories from July 1, 2019 should review their workforce as soon as possible, and may have to raise the salaries of affected local employees to allow more foreign national workers.
- In the services sector, employers who wish to maintain or increase the foreign national percentage of their workforce beyond current pass expiry will need to either remove Work Permit and S Pass holders or hire more locals.