ENHANCEMENTS TO FOREIGN MANPOWER POLICY FOR QUALITY GROWTH AND HIGHER WAGES

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1 26 February 2013 ENHANCEMENTS TO FOREIGN MANPOWER POLICY FOR QUALITY GROWTH AND HIGHER WAGES As announced by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in the 2013 Budget Statement, the Ministry of Manpower (MOM) will tighten the eligibility requirements for S Pass holders in all sectors. Foreign worker levies (FWL) for S Pass Holders (SPHs) and Work Permit Holders (WPHs) will also continue to be increased up to Dependency Ratio Ceilings (DRCs) for the Marine and Services sectors will also be reduced. To further help Services sector companies progress towards higher productivity, the Job Flexibility Scheme will be introduced. 2 These measures, as well as others mentioned in the 2013 Budget Statement, are designed to spur the transformation of Singapore s economy, towards inclusive and sustainable growth, and higher wages for Singaporeans. While foreign manpower growth in 2012 moderated slightly, further moderation is necessary to reinforce the impetus to restructuring and productivity efforts, and to slow down labour force growth to 1-2% per annum for the rest of this decade. Key Changes 3 The key changes to the foreign manpower framework are: a. S Pass: i. S Pass Qualifying Salary Criteria raised from $2,000 to $2,200 and higher (to be effective from 1 July 2013 for all new applications) Older and more experienced S Pass applicants will need to qualify at higher salaries, commensurate with their work experience and the quality they bring. This is similar to changes made to the Employment Pass qualifying criteria which took effect from 1 January This will help ensure that the quality profile of S Pass applicants is raised concurrently as the demand for S Passes is moderated.

2 ii. Transition Measures for Existing S Pass holders (SPHs) Existing SPHs whose passes expire: o Before 1 July 2013: receive a one-time renewal based on the pre-july 2013 S Pass criteria. o Between 1 July 2013 and 31 December 2013: receive a onetime renewal of up to one year based on the pre-july 2013 S Pass criteria. o On or after 1 Jan 2014: The new S Pass criteria shall apply. Existing SPHs who change employers after 1 July 2013 will have their applications considered under the new S Pass criteria. b. Foreign Worker Levy (FWL) rates i. Increase in levies for both S Pass and Work Permit Holders for all sectors; to take effect from 1 July 2014 and 1 July 2015 respectively (please refer to Annex A); ii. Employers can expect the following average increases in the monthly levy per S Pass Holder/Work Permit holder by 1 July 2015, as compared to the current levy payable (at the end of the previously announced levy schedule which runs till 1 July 2013): S Pass (all sectors) - $90 per S Pass holder Manufacturing - $50 per Work Permit holder Services - $90 per Work Permit holder Construction- $160 per Work Permit holder c. Dependency Ratio Ceilings (DRC) reduced: Services sector (with effect from 1 July 2013 for all new applications): i. Services sector DRC to be lowered to 40%, from 45%; ii. S Pass sub-drc for Services sector will be lowered to 15%, from 20%; iii. The above DRC reductions do not immediately affect existing workers. Please refer to the tables below:

3 Table 1: Transition Timeline for Overall Services DRC Reduction Before 1 1 Jul 1 Jul 1 Jul 2015 July # 2014 # For new applications Company s DR: 40-45% X X X For renewal applications Company s DR: 45%-50%^ X* X Company s DR: 40-45% X # While renewal applications may be renewed for up to two years, companies will still be required to comply with the new DRC by 1 Jul ^: This was the earlier transition arrangement MOM had provided for companies affected by the Services DRC reduction from 50% to 45% in 1 July MOM will continue to honour this transition arrangement. *: This marks the end of the transition arrangement from the earlier Services DRC reduction from 50% to 45%. From 1 July 2014, companies will not be allowed to retain any foreign workers above 45% DR utilisation. Table 2: Transition Timeline for Services S Pass Sub-DRC Reduction Before 1 1 Jul 1 Jul 1 Jul 2015 July # 2014 # For new applications Company s Sub-DR: X X X 15%-20% For renewal applications Company s Sub-DR: X* X 20%-25%^ Company s Sub-DR: X 15%-20% # While renewal applications may be renewed for up to two years, companies will still be required to comply with the new DRC by 1 Jul ^: This was the earlier transition arrangement MOM had provided for companies affected by the S Pass Sub-DRC reduction from 25% to 20% in 1 July MOM will continue to honour this transition arrangement. *: This marks the end of the transition arrangement from the earlier S Pass Sub-DRC reduction from 25% to 20%. From 1 July 2014, companies will not be allowed to retain any S Pass holders above 20% Sub-DR utilisation. Marine Sector (to be phased in from ): i. Marine Sector DRC will be lowered from 1 local: 5 foreign workers (FWs) currently to 1: 4.5, with effect from 1 January 2016; ii. The DRC will be further lowered from 1: 4.5 to 1:3.5, with effect from 1 January 2018; iii. Companies are advised to make use of the lead time from now till to make the necessary adjustments to their business planning.

4 Job Flexibility for Services Sector 4 On 1 October 2012, the Government introduced the Jobs Flexibility Scheme for Productivity for the Hotel sector. With effect from 1 July 2013, we will extend job flexibility to the entire Services sector. We will allow Services WPHs to multi-task to raise productivity, and help companies cope with labour constraints. i. MOM will consult the National Trades Union Congress and Singapore National Employers Federation to draw up a set of implementation guidelines, setting out expectations for employers implementing job flexibility, so that all employees are well-trained, and given fair opportunities to benefit. ii. Further details on the policy will be announced during MOM s Committee of Supply debate Please refer to Annexes B1 and B2 for an overview of the changes. Affected Services companies can go online to the MOM website ( to calculate their new DRCs to see what the changes would mean specifically for them. 6 All employers are encouraged to use the Self Assessment Tool (SAT) available on the MOM website, before sending in S Pass applications, both for new hires as well as for renewals of existing SPHs. The SAT provides employers with a good indication of whether the candidate will qualify for an S Pass, hence giving businesses predictability on their application outcomes. The SAT can be found online at End of Release For media queries, please contact: Hoi Wan Theng (Ms) Head, Communications (Joint Ops) Corporate Communications Department Tel: HP: hoi_wan_theng@mom.gov.sg Tan Yong Kiang (Mr) Senior Assistant Director Corporate Communications Department Tel: HP: tan_yong_kiang@mom.gov.sg

5 ANNEX A OVERVIEW OF FOREIGN WORKER LEVY CHANGES TILL JUL 2015 SERVICES SECTOR: Current 1-Jul-13 1-Jul-14 1-Jul-15 DR Skilled/Unskilled DR Skilled/Unskilled DR Skilled/Unskilled DR Skilled/Unskilled S Pass Work Permit Tier 10% % % % 330 Tier % % % % 650 Tier 15% 270/370 10% 300/400 10% 300/420 10% 300/450 Tier % 380/ % 400/ % 400/ % 400/600 Tier % % % 600/ % 600/800 Note: Items in red wordings and shaded reflect changes to the levy rates.

6 ANNEX A OVERVIEW OF FOREIGN WORKER LEVY CHANGES TILL JUL 2015 ALL OTHER SECTORS (MANUFACTURING, CONSTRUCTION, PROCESS, MARINE) Current 1-Jul-13 1-Jul-14 1-Jul-15 DR Skilled/Unskilled DR Skilled/Unskilled DR Skilled/Unskilled DR Skilled/Unskilled S Pass Manufacturi ng Marine Constructio n Process Tier 10% % % % 330 Tier % % % % 650 Tier 25% 230/330 25% 250/350 25% 250/370 25% 250/400 Tier % 330/ % 350/ % 350/ % 350/500 Tier % % % 550/ % 550/700 Tier 83.3% 230/ % 250/ % 300/ % 350/500 Tier 87.5% 280/ % 300/ % 300/ % 300/600 MYEwaiver 550/ / / /1050 Tier 87.5% 230/ % 250/ % 300/ % 300/500 MYEwaiver / /800 Note: Items in red wordings and shaded reflect changes to the levy rates.

7 ANNEX B1 Impact Services company currently operating with 20 Full Time Locals and 16 Foreigners (under max DRC) 16 Foreigners Services Sector Reduction of Dependency Ratio Ceilings 13 Foreigners Legend -3 S Pass (no change to WPHs ) S Pass Work Permit (WPH) Current DRC - Overall 45% (16 Foreigners) -S Pass Sub DRC 20% (7 S Pass holders) Note: This illustration assumes that the size of the company s local workforce remains the same. New DRC (by 1 Jul 2013 for new applications and 1 Jul 2015 for existing foreign workers) - Overall 40% (13 Foreigners) -S Pass Sub DRC 15% (4 S Pass holders)

8 Impact Marine Sector Progressive Reduction of Dependency Ratio Ceiling Marine company currently operating with 3 Full Time Locals and 15 Foreign Workers (FWs) (under max DRC) 15 FWs 13 FWs 10 FWs ANNEX B Current DRC 1 local : 5 foreign workers DRC by Jan local : 4.5 foreign workers DRC by Jan local : 3.5 foreign workers Note: This illustration assumes that the size of the company s local workforce remains the same.

9 ANNEX C Glossary of Terms Dependency Ratio Ceiling Dependency Ratio Ceiling (DRC) refers to the maximum permitted ratio of foreign workers to the total workforce that a company in the stipulated sector is allowed to hire. For example, the Dependency Ratio Ceiling in the Manufacturing sector is 60%. Hence, up to 60% of a Manufacturing company s total workforce (sum of local workers, S Pass and Work Permit holders) may consist of S Pass and Work Permit holders. Foreign Worker Levy (FWL) Foreign worker levy is the levy that a company pays to the Government for each S Pass or Work Permit holder it hires. It is a pricing mechanism to regulate the number of foreign workers in Singapore. S Pass An S Pass allows mid-skilled foreigners to work in Singapore. S Pass applications are assessed on multiple criteria, including salary, education qualification, skills, job type and work experience. The minimum qualifying salary for S Pass applicants has been revised to $2,200. Work Permit A Work Permit is generally issued to lower-skilled foreigners with a monthly fixed salary of not more than $2,000.

Guidelines for employers of foreign workers HOW TO CALCULATE YOUR QUOTA AND LEVY BILL

Guidelines for employers of foreign workers HOW TO CALCULATE YOUR QUOTA AND LEVY BILL HOW TO CALCULATE YOUR QUOTA AND LEVY BILL About this booklet You can use MOM s online tool to calculate your quota instantly by clicking here. This booklet is designed to help you estimate levy payments