Qualifying Salary of Local Employees for Quota Calculation Set to Increase

The situation

The Ministry of Manpower (MOM) in Singapore recently announced that the qualifying salary of local employees included in calculating the quota available for hiring foreign nationals under the S Pass and Work Permit categories will increase starting July 2019.

A closer look

• SGD 100 increase. Starting July 2019, only local employees earning at least SGD 1,300 can be included in computing an employer’s foreign worker quota allocation, a SGD 100 increase from the current salary threshold of SGD 1,200.
• Foreign worker quota. 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.

 

Impact

• Automatic decrease in foreign worker quota. Once this rule is implemented, a company’s foreign worker quota may automatically decrease, which may mean that it would 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.
• Future sponsorship of foreign workers. Companies planning to sponsor foreign workers under the S Pass or Work Permit categories after July 2019 will need to plan to ensure that they still have the capacity to do so even after the changes are in place.
• Employment Pass holders unaffected. Foreign nationals on Employment Passes (EPs) are not counted for purposes of the quota requirements, therefore companies sponsoring foreign nationals under the EP category will not be affected by this requirement.
• Impact on the services sector. This development will especially affect employers in the services sector given the recent announcement on the upcoming DRC and S Pass sub-DRC reductions for this industry. The services sector includes industries such as business management and consultancy services, engineering activities, information and communications activities, accommodation and accounting services, among others. This is in line with the government’s push to reduce the reliance on foreign manpower for this sector.

 

Background

The qualifying salary has been regularly adjusted by the government to line up with current income trends. The previous increases were made in two stages – from SGD 1,000 to SGD 1,100 in July 2017, and from SGD 1,100 to SGD 1,200 in July 2018.

This latest adjustment follows the Minister of Finance’s recent announcement to cut the quota for foreign workers in the services sector on January 1, 2020 and January 1, 2021. The government has also announced that there will be no further changes to quotas in other sectors and levies this year.

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.

Looking ahead

The adjustment is part of the Singaporean government’s continuing effort to increase productivity and ensure that local workers remain competitive compared to other labor markets. When considered together with past regulatory measures, it indicates a more restrictive approach toward immigration that targets semi- and low-skilled workers in favor of highly-skilled foreign nationals.

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].