Singapore’s status as a global business hub attracts entrepreneurs and companies from around the world. However, navigating the intricacies of hiring foreign workers in Singapore can be challenging for business owners. One crucial aspect that every business owner must understand is the calculation of the foreign worker quota and levy before applying for work passes. In this guide, we will delve into the intricacies of this calculation and provide essential insights for businesses operating in Singapore.
Understanding the Foreign Worker Quota
The Singaporean government imposes quotas on the employment of foreign workers to maintain a balance between local and foreign manpower. These quotas are designed to ensure that businesses prioritize the hiring of local talent while still allowing for the recruitment of foreign workers to fill specific skill gaps.
The primary quota that businesses need to be aware of is the Dependency Ratio Ceiling (DRC). The DRC sets the maximum ratio of foreign workers a company can employ relative to its total workforce. Additionally, within the DRC, there are sub-quotas for different sectors and types of foreign workers, such as skilled and unskilled labour.
The government utilises your company’s Central Provident Fund (CPF) account to assess your local employees and determine your Work Permit (WP) and S Pass quota. It is crucial to accurately and punctually declare their salaries and CPF contributions.
Local employees encompass Singaporean and Permanent Resident (PR) staff employed under a contract of service, including the company’s director. Certain local employees are excluded when calculating your quota:
- Business owners of sole proprietorships or partnerships.
- Employees receive salaries and CPF contributions from three or more employers.
The local qualifying salary (LQS) determines the number of local employees factored into your WP and S Pass quota entitlement. Consider the following classifications for Singaporean or Permanent Resident employees under a contract of service, including the company’s director:
- 1 local employee (1 LQS count) if they earn the LQS of at least $1,400 per month.
- 0.5 local employee (0.5 LQS count) if they earn half the LQS of at least $700 to below $1,400 per month.
To accommodate fluctuations in local employee numbers, the government averages the data from three months (salaries and CPF contributions) declared to CPF. The inclusion of months in the average calculation depends on the declaration timing. If declared by the 14th of the same month, it will affect the quota calculation for the following month.
Local employee numbers are updated weekly, with the quota balance accessible the following working day. Delayed or omitted CPF contributions and salary declarations affect your quota and may result in higher levy tiers for your workers. Even if arrears, late interests, or fines are settled, late CPF contributions and salary declarations may not be considered in calculations.
Quota and Levy Rates
Companies are constrained by a quota on the number of Work Permit (WP) and S Pass holders they can hire, which is coupled with a levy. Levy rates fluctuate across sectors and are structured in tiers. Essentially, this implies that as the number of WP and S Pass holders in your company increases, your levy rate escalates accordingly. Refer to the table below for details on the quota, levy rates, and tiers applicable to different sectors.
S Pass
| Sector | Tier | Percentage | Levy rate |
|---|---|---|---|
|
Construction, Manufacturing, Marine shipyard, Process (Quota: 15%) |
Basic/Tier 1 | ≤10% | $550 |
| Tier 2 | >10% ─ 15% | $650 | |
| Process
(Quota: 10%) |
Basic/Tier 1 |
≤10% |
$550 |
Work Permit
|
Sector |
Tier | Percentage |
Levy rate (Higher-skilled / Basic- skilled) |
| Manufacturing
(Quota: 60%) |
Basic/Tier 1 |
≤25% | $250 / $370 |
|
Tier 2 |
>25% ─ 50% | $350 / $470 | |
| Tier 3 | >50% ─ 60% |
$550 / $650 |
|
| Services
(Quota: 35%) |
Basic/Tier 1 |
≤10% | $300 / $450 |
|
Tier 2 |
>10% ─ 25% |
$400 / $600 |
|
| Tier 3 | >25% ─ 35% |
$600 / $800 |
|
| Construction
(Quota: 83.3%) |
Malaysians, North Asian Source (NAS), Peoples’ Republic of China (PRC) |
≤83.3% | $300 / $700 |
|
Non-Traditional Source (NTS) |
$500 / $900 |
||
| Off-site |
$250 / $370 |
||
| Process
(Quota: 83.3%) |
Malaysia, NAS, PRC |
≤83.3% | $200 / $450 |
| NTS |
$300 / $650 |
||
|
Marine shipyard (Quota: 77.8%) |
Basic tier | ≤77.8% |
$300 / $400 |
Calculating the Foreign Worker Quota
To calculate the foreign worker quota and levy for your business, you need to follow these steps:
Step 1: Calculate the maximum number of migrant workers (MWs) you can hire
To determine the maximum number of migrant workers (both Work Permit and S Pass holders) your company can hire, you need to calculate the Local Qualifying Salary (LQS) count, which is based on the average of three months’ declared salaries and CPF contributions. The formula for calculating the maximum number of MWs varies depending on the sector:
|
Sector |
Quota |
Max no. of MWs = 𝑳𝑸𝑺 𝒄𝒐𝒖𝒏𝒕 × 𝑸𝒖𝒐𝒕𝒂 / (𝟏𝟎𝟎% − 𝑸𝒖𝒐𝒕𝒂) |
| Construction |
83.3% |
LQS count × 5 |
| Process |
83.3% |
LQS count × 5 |
| Marine shipyard |
77.8% |
LQS count × 3.5 |
|
Manufacturing |
60% |
LQS count × 1.5 |
|
Services |
35% |
LQS count × 0.538462 |
Note: Round down the figures to the nearest whole number.
Step 2: Calculate your total workforce
The total workforce includes the LQS count, WP holders, and S Pass holders. Exclude Employment Pass (EP) holders from this calculation.
Step 3: Calculate the number of S Pass holders you can hire
The S Pass quota is 10% for the services sector and 15% for other sectors. This percentage refers to the portion of your total workforce that can be S Pass holders and counts towards your maximum quota for migrant workers.
Step 4: Calculate the number of PRC and/or Non-Traditional Sources (NTS) Occupation List (NTS-OL) WP holders you can hire (For manufacturing and services sectors only)
For the manufacturing and services sectors, calculate the quota for workers from the People’s Republic of China (PRC) and Non-Traditional Sources (NTS) based on the specified percentages of your total workforce.
|
Quota |
Manufacturing sector |
Services sector |
| PRC |
25% x (total workforce + 1) |
8% x (total workforce + 1) |
| NTS-OL |
8% x (total workforce + 1) |
|
Step 5: Calculate the number of MWs under each levy tier (For manufacturing and services sectors only)
Refer to the provided table to calculate the number of MWs under each levy tier, considering the proportions specified for each sector. Levy tiers are not applicable to the construction, process, and marine shipyard sectors.
|
Levy tiers |
Manufacturing sector |
Services sector |
| Tier 1 |
T1 = 25% x total workforce |
T1 = 10% x total workforce |
| Tier 2 |
T2 = (50% x total workforce) – T1 |
T2 = (25% x total workforce) – T1 |
| Tier 3 |
T3 = No. of MWs – T1 – T2 |
T3 = No. of MWs – T1 – T2 |
The MWs are assigned in the various tiers based on the below order:
- 1st: S Pass holders
- 2nd: Higher-skilled WP holders
- 3rd: Basic-skilled WP holders
Step 6: Calculate your levy bill
Multiply the number of workers in each tier by the corresponding levy rate to determine the levy for each tier. Then, sum up the levy for all tiers to obtain your total levy bill. Take into account any migrant workers employed for less than a month, adjusting the levy accordingly based on their duration of employment.
Conclusion
Navigating the foreign worker quota system in Singapore is essential for businesses looking to hire foreign talent while staying compliant with regulations. By understanding the calculation methodology and considering various factors that can affect your quota requirements, business owners can effectively manage their manpower needs and contribute to Singapore’s vibrant economy.
Additionally, engaging with a reputable immigration agency in Singapore can provide invaluable assistance in navigating the complexities of the foreign worker quota system. These agencies have expertise in immigration laws and regulations, ensuring that businesses adhere to all requirements while efficiently managing their workforce. Stay informed, plan strategically, and leverage local and foreign talent with the support of an immigration agency to drive your business success in Singapore.
