Minimum Salary Level for Employment Pass to Increase

The situation

Effective May 1, 2020, the minimum qualifying monthly salary for Employment Passes (EP) in Singapore will increase to SGD 3,900, up 8.34% from the current amount. The job advertising requirement and qualifying salary for locals to be counted toward the S Pass quota will also increase on that date. The exchange rate at the time of the publication of this alert is 1 SGD to .72 USD.

A closer look

CHANGE	DETAILS	IMPACT
Initial EP applications	On or after May 1, 2020, employers of foreign nationals applying to work in Singapore under an EP will be required to pay the new amount of SGD 3,900 in order to comply with the new rule.	Employers of foreign workers in Singapore will need to review their employees’ salaries to ensure they meet the new minimum amounts.
Renewal applications	Employers of foreign nationals seeking to renew an EP will only be subject to the new amount starting May 1, 2021. Immigration applications that do not meet the minimum salary may be downgraded to an S Pass, which will result in increased costs to the company and a requirement to pay a monthly levy for each S Pass holder.	Once the MOM’s online assessment tool is updated with the new amounts. Employers should review the salaries of the EP holders who may be downgraded to an S Pass at the time of their EP renewal. It is not clear when the tool will be updated.
Local Qualifying Salary (LQS) increase	The qualifying salary for local workers to be counted toward the S Pass quota will increase on July 1, 2020, from SGD 1,300 to SGD 1,400.   Background. A company’s foreign worker quota is calculated by taking into account the number of local employees (Singapore citizens and permanent residents) and foreign employees (S Pass and Work Permit) and the Dependency Ratio Ceiling (DRC) for the particular sector. Employers with more local workers in their workforce are generally granted higher quotas to sponsor foreign nationals.	Affected employers may need to raise the salaries of affected local employees. Companies unwilling to do so may need to reduce their foreign workforce to comply with the lower quota.
Older and experienced EP applicants	The minimum salary for older and more experienced applicants will increase depending on the foreign national’s age at the time of application. For example, an EP applicant in their early 40s will need to earn around double the new minimum qualifying salary of SGD 3,900.	It will be more difficult for employers to hire experienced workers. Employers should be prepared for increased costs in order to qualify for an EP.
Job advertising	The advertising requirement for EPs will be expanded on May 1, 2020 to include jobs paying up to SGD 20,000 per month, up from SGD 15,000.	Employers will need to post more jobs to ensure that the advertising requirements line up with income changes and that the local workforce continues to be fairly considered.

 

Reminders on other requirements

• Benefits and allowances. As before, benefits and allowances may only be included in the minimum salary calculation if they are specified in the employment contract, guaranteed and fixed, and are not paid in kind. Holiday allowance cannot be included in the minimum salary calculation.
• Currency. As before, employers are required to guarantee the salary in SGD regardless of payroll location and/or exchange rate fluctuations.

 

Background

• Regular adjustments to minimum salary. The EP qualifying salary has been regularly adjusted by the government to line up with current income trends. The previous increase was made in 2017 – from SGD 3,300 to SGD 3,600 per month. The local qualifying salary has also been regularly adjusted, previously increased in July 2019 – from SGD 1,200 to SGD 1,300. This latest adjustment follows the Manpower Minister’s announcement that the increase is in line with improving wages of graduates from local universities.
• Tools to regulate foreign workers. Quotas and ratios are effective tools used by governments worldwide in regulating the intake of foreign workers. Recent examples include Indonesia, Saudi Arabia, Switzerland and the United Kingdom. Job advertising is another effective method of protecting local labor, while preventing unfair hiring practices. Since introducing the job advertising requirement in 2016, a total of 3,000 EP applications have been rejected, withheld or withdrawn in Singapore after the government identified that they did not meet the requirements.

 

Looking ahead

The adjustment is part of the government’s continuing effort to protect the local labor market, while also increasing the minimum wages to align with income trends and cost of living. It is likely that increases to minimum salary amounts and market testing requirements will continue to change on a regular basis.

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].