Foreign Worker Quota to be Reduced in Services Sector

The situation

The government has announced plans to reduce the quotas for S Pass and Work Permit holders in the services sector (which includes industries such as business management and consultancy services, engineering activities, information and communications activities, accommodation and accounting services, among others) in the next two years.

A closer look

To achieve this reduction, the Ministry of Manpower will reduce the Dependency Ratio Ceiling (DRC) (which sets out the maximum permitted ratio of foreign workers to the total workforce that a company is allowed to hire), and S Pass sub-DRC as follows:

• Dependency Ratio Ceiling (DRC) reduction. The DRC will be reduced from 40 percent to 38 percent starting January 1, 2020, and further to 35 percent starting January 1, 2021. The DRC for all other sectors will remain unchanged.
• S Pass Sub-DRC reduction. The DRC for the S Pass category will also be reduced from the current 15 percent to 13 percent starting January 1, 2020, and further to 10 percent on January 1, 2021.

 

Impact

• Foreign worker limits for service sector companies. A lower DRC and S Pass sub-DRC will mean that companies in the services sector will be further limited in the number of foreign nationals under S Pass and Work Permits they can hire. Companies that exceed their S Pass quota due to the lower DRC will need to either hire more locals or reduce the number of their S Pass holders.
• Monitoring of Employment Pass holders. Although Employment Pass (EP) holders are not subject to quota requirements, companies should also monitor borderline Employment Pass holders who may potentially be downgraded to an S Pass to ensure that they have sufficient S Pass quota to continue sponsoring these employees.

 

Background

Singapore imposes quotas that restrict the number of foreign workers an employer may hire under the S Pass and Work Permit categories. The S Pass quota has been progressively reduced since July 2012 when it was reduced from 25 percent to 20 percent (for all sectors) and then again in July 2013 from 20 percent to 15 percent (for the services sector only).

Quotas and ratios are effective tools used by governments worldwide in regulating the intake of foreign workers. Some recent examples of this are in Indonesia, Saudi Arabia, Switzerland and the United Kingdom.

Looking ahead

The quota reduction was announced by the Minister of Finance during the annual Budget speech and was intended as a calibrated response to slow down the number of S Pass and Work Permit holders in the service sector over the past three years. The move reflects a continuing government policy of ensuring that local workers have access to highly-skilled jobs. Such regulatory measures may have an adverse impact on companies with large skilled labour workforces.

This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to [email protected].