Singapore – Budget 2020: Reduction Of The Foreign Worker Ratio In Construction, Marine Shipyard And Process Sectors.

Executive Summary

 

On 18 February 2020, it was announced in the Singapore Budget 2020 that the S Pass sub-Dependency Ratio Ceiling ("DRC") in the construction, marine shipyard and process sectors will be lowered. The reason for this change is to encourage employers to hire more Singaporean skilled workers and technicians. The ratio for the manufacturing sector remains unchanged.

 

Analysis

 

The government will tighten the foreign workforce quota in the construction, marine shipyard and process sectors by reducing the S Pass sub-DRC – the proportion of S Pass holders an employer can employ – in two steps as follows: 

 

	Current	1 January, 2021	1 January, 2023
S Pass sub-DRC	20% of total workforce	18% of total workforce	15% of total workforce

 

Total workforce in this instance consists of local employees (i.e. Local Qualifying Salary ("LQS") count, based on the average of 3 months' Central Provident Fund ("CPF") contributions), Work Permit Holders and S Pass holders. EP holders are not included in the total workforce calculation.

 

A Singapore citizen or Singapore Permanent Resident employed under a contract of service, included the firm's director, is considered as:

 

• 1 local employee (1 LQS count) if they earn the LQS of at least SGD 1,300 per month;

• 0.5 local employee (0.5 LQS) count if they earn half the LQS of at least SGD 650 to below SGD 1,300 per month.

   

The significance of this sub-DRC reduction is that employers will not be able to renew the S Passes of foreign workers in the event the number of S Pass holders exceed the revised sub-DRC. Employers can still retain such foreign labour up till the last day of their S Passes' validities to avoid any disruptions to existing operations as far as possible. 

Employers in these sectors are advised to review the number of foreigners who are currently employed on S Passes to ensure that they fall within the new S Pass sub-DRC. Some measures that can be taken by employers are:

 

• Renew the S Passes early before the changes to sub-DRC come into effect (i.e. S Passes can be renewed as early as 6 months prior to expiry);

• Consider locals or foreigners who qualify for EPs to replace existing S Pass holders;

• Consider if existing S Pass holders may qualify for EPs; and

• Hire more locals to increase the S Pass sub-DRC.

   

To check the quota entitlement when the new sub-DRC for the respective sectors take effect on 1 January 2021, an updated quota calculator will be made available on the MOM's website at a later date.

Employers that require assistance in sourcing for skilled locals (including local graduates, and mature professionals looking for new careers) may reach out to SkillsFuture Singapore and Workforce Singapore. Those with specific needs can also continue to apply for additional manpower flexibilities through initiatives such as the Lean Enterprise Development Scheme.

 

The S Pass sub-DRC for the manufacturing and services sectors will remain unchanged i.e. 20% and 13% respectively. Nevertheless, the S Pass sub-DRC for the services sector will be reduced from 13% to 10% in 1 January 2021, as announced in the Singapore Budget 2019.

 

Conclusion

 

Despite the fact that Singapore is already grappling with an economic slowdown largely due to external factors such as the outbreak of COVID-19, the fact that the Singapore government has nevertheless gone ahead with foreign manpower curbs demonstrates that the Singapore government is serious about reducing Singapore’s dependence on low-cost foreign workers. Employers have to accept that there is unlikely going to be a change in direction of this policy as such they would need to explore ways to reduce their dependence of low-cost foreign workers.