In the bustling metropolis of Singapore, the influx of foreign workers plays a crucial role in driving economic growth and sustaining various industries. But to maintain a balance between local and foreign labor participation, Singapore employs a system of work permit quotas.
If you are an employer in Singapore and currently looking to hire foreign workers, this article will provide you with essential insight to ensure compliance.
What is the Foreign Worker Quota?
The foreign worker quota, also referred to as the dependency ratio ceiling, establishes the maximum proportion of foreign employees that a company can employ. Its purpose is to manage the number of foreign workers in Singapore and maintain a balance with the local workforce.
The inception of the foreign worker quota in Singapore can be attributed to the country’s formative years after gaining independence. During the 1970S, Singapore underwent significant economic expansion, leading to an increased demand for foreign labor. Acknowledging the necessity for systematic management of this growing influx of foreign workers, the government took proactive measures to protect the welfare of its citizens.
It's crucial to grasp the basics of the Foreign Worker Quota system including the categories of foreign workers, which serves as the cornerstone of workforce management in the Lion City.
Categories of Foreign Workers
- S Pass: This pass is geared towards mid-skilled professionals such as information technology sectors, healthcare, and engineering.
- Work Permit: Encompassing both skilled and unskilled labor. This permit is aimed at construction workers, domestic helpers, or other people who contribute to the workforce of Singapore.
- Employment Pass: Reserved for professionals, managers, executives, and specialists with advanced qualifications and expertise. To learn more about Employment Passes in Singapore, check out this article.
What is the Foreign Worker Eligibility?
To qualify for employment as a foreign worker in Singapore, the individual must meet specific criteria and skill level requirements. These criteria are essential to ensure that foreign workers can contribute effectively to the workforce and meet the needs of employees.
Qualifying Criteria
The Ministry of Manpower (MOM) establishes precise eligibility criteria for foreigners seeking employment opportunities in Singapore. These criteria encompass factors such as minimum age, educational or professional qualifications, relevant work experience, and clean record devoid of any criminal convictions. It’s crucial to emphasize that eligibility criteria can vary across different sectors, with each sector having its specific requirements.
Skill Levels
MOM also classifies foreign workers into distinct skill levels based on educational background, work experience, and job responsibility. These skill levels range from highly skilled, mid-skilled, and semi-skilled or unskilled individuals. This skill level will be the one that helps determine individual eligibility for different types of work passes.
- Highly Skilled: This category typically includes professionals, managers, executives, and specialists who are eligible for the Employment Pass (EP). These individuals have advanced qualifications, special experience, and substantial experience which is highly relevant in their field.
- Mid-skilled: Individuals under these categories have moderate qualifications and experience for their roles. Their job might require specialized skills, but not at the level expected for EP. Workers under this category are eligible for the S Pass.
- Semi-skilled & unskilled: Foreign workers in this category are eligible for Work Permits (WP). Primarily they are employed in sectors like construction or services. They are required to have basic qualifications or vocational training in their job fields, but typically they won't need any specialized skills or extensive experience.
Employers must ensure compliance with these qualifying criteria and skill level requirements when recruiting foreign employees to work in Singapore.
The Core System of Foreign Worker Quota
Quota and Dependency Ratio Ceiling (DRC)
The quota and dependency ratio ceiling (DRC) are crucial parameters for regulating the maximum number of foreign workers a company can hire, based on its size and industry. It is important to note that quotas and DRCs are different across industries, some sectors might have higher thresholds and some might have it lower.
Monthly Levies
Paying monthly levies is also a must-do for employers who opt to hire a foreign worker for their company. The levy itself is calculated based on the ratio of local to foreign employees within the company. Every employee should always pay the full levy on time, or else they will need to face penalties such as listed down below:
- Late payment fee of either 2% per month or $20, whichever is greater with a maximum penalty of 30% of the outstanding levy.
- Cancellation of current work permits.
- Ineligibility to apply for, issue, or renew Work Permits.
- Potential legal measure to recoup the unpaid levy.
- Restriction on other companies associated with you, your partner, or directors when applying for Work Permits.
Special Passes and Exceptional Circumstances
Despite restrictions on recruiting foreign workers, MOM offers flexibility through different programs such as Dependency Ratio Ceiling Exemptions and Sectoral Manpower Plans. This program is created to support Singaporean business-specific needs, while still being able to maintain overall control over the labor.
How is the Foreign Worker Quota Determined?
To decide the foreign worker quota in your company, the Ministry of Manpower (MOM) utilizes data from your company's Central Provident Fund (CPF) account to assess the number of local employees in your organization. Your local workforce contributes to your quota entitlement if they meet specific criteria:
- A Singaporean or Permanent Resident employee earning the Local Qualifying Salary (LQS) of at least $1,400 per month (considered as 1 local employee)
- A Singaporean or Permanent Resident employee earning half the LQS, which amounts to at least $700 but below $1,400 per month (considered as 0.5 local employees)
Employees earning less than $700 per month, as well as business owners of sole proprietorships or partnerships, are excluded from the quota calculation. Additionally, individuals receiving salaries and CPF contributions from three or more employers are also not counted towards the quota.
How to Calculate Your Total Workforce?
After determining the number of local employees, employers will be able to calculate their total workforce. The company's foreign worker quota depends on a percentage of the total workforce. Here’s how to calculate the total workforce:
- Count Local Employees
- Count Work Permit Holders
- Count S Pass Holders
This total represents your company's workforce, which is used to determine the foreign worker quota. But once again, MOM establishes the foreign worker quota on a sector-by-sector basis. This ensures that everything is tailored to suit different industries.
Conclusion
Understanding Singapore’s Foreign Worker Quota system can do wonders to help employers better navigate hiring practices and ensure compliance with regulations. With a comprehensive understanding, you can create a harmonious balance when opting to hire both local employees and foreign workers for your company's success!
More importantly, WealthBridge offers support to streamline all the compliances. Our corporate secretarial services ensure you meet regulatory requirements, while our accounting services help manage employee levies and tax obligations. For businesses seeking a smooth process, WealthBridge also provides incorporation and nominee director services, ensuring all administrative bases are covered.