10 May, 2019
In this issue:
- Singapore: Reduction of the foreign worker ratio in the services sector: How will this affect your organization?
On 18 February 2019, it was announced in the 2019 Singapore Budget that the foreign worker ratio in the services sector will be lowered. This change seeks to reduce Singapore's dependence on foreign labor in the services sector. The ratio for the other sectors (construction, manufacturing, marine shipyard and process) will not be changed.
Accordingly, employers will need to be even more mindful of the number of foreign nationals they hire compared to locals. The tightening of foreign labour in favor of a local Singaporean core has been in place since 2014 and this trend is likely to continue . As such, employers may wish to explore the methods suggested below to ensure their population of foreign national workers does not become disproportionately large.
Analysis
The government will tighten the foreign workforce quota in the services sector1 by reducing the Dependency Ratio Ceiling ("DRC")2 and S Pass Sub-DRC in two steps, as follows:
| Current | 1 January 2020 | 1 January 2021 | |
| DRC | 40% | 38% | 35% |
| S Pass Sub-DRC | 15% | 13% | 10% |
The significance of this DRC or sub-DRC reduction is that employers will not be able to renew the S Passes and Work Permits of foreign workers in the event the number of S Passes and Work Permit holders at the employer has exceeded that which is stated in the revised DRC or sub-DRC. Nevertheless, in the event the number of S Passes and Work Permit holders at the employers exceeds that stated in the revised DRC or sub-DRC, employers can still retain such the foreign national workers up until their S Passes or Work Permits expire to avoid any disruptions to existing operations.
Suggested methods to manage the impact of the changes
Employers are advised to review the number of foreign nationals who are currently employed on S Passes and Work Permits to ensure that they fall within the new DRC and S Pass sub-DRC. Some measures that can be taken are as follows:
- Renew the S Passes and Work Permits early (e.g., S Passes can be renewed as early as six months prior to expiry) before the changes to DRC or sub-DRC come into effect.
- Consider locals or foreign nationals who qualify for Employment Passes to replace existing S Pass or Work Permit holders.
- Hire more locals to affect the ratio in regards to foreign nationals on S Passes and Work Permits as per the new quota.
To check the quota entitlement when the new DRC for the services sector takes effect on 1 January 2020 and 1 January 2021, a dedicated quota calculator will be made available on the Ministry of Manpower website at a later date.
1 A company can be considered to be in the services sector if it has registered any of the following as its principal business activity:
- Financial, insurance, real estate and business services
- Transport, storage and communications services
- Commerce (retail and wholesale trade)
- Community, social and personal services (excluding domestic workers)
- Hotels
- Restaurants, coffee shops, food courts and other approved food establishments (excluding food stalls or hawker stalls)
2 The DRC is the maximum ratio of foreign workers to the total workforce that a company in a given sector can employ.
- Vietnam: Global immigration update
The long-awaited Decree No. 143/2018/ND-CP providing detailed guidance on compulsory social insurance applicable to foreign employees working in Vietnam ("Decree No. 143") was issued on 15 October 2018 and took effect on 1 December 2018. Contribution and entitlement of each benefit regime will come into effect on different dates as summarized below.
Scope of application
Foreign employees who satisfy both following conditions the will be subject to compulsory social insurance:
- Working in Vietnam under indefinite-term labor contracts, or definite-term labor contracts with a term of at least one full year with employers based in Vietnam; and
- Having been granted with either (i) a work permit , (ii) practicing certificate , or (iii) practicing license.
Notwithstanding the above, the following foreign employees are not subject to compulsory social insurance:
- Intra-corporate transferees in accordance with Article 3.1 of Decree No. 11/2016/ND-CP detailing regulations of Labor Code for foreign employees working in Vietnam.; and
- Employees who have reached the statutory retirement age, as prescribed under Article 187.1 of the Labor Code, which is 60 years old for males and 55 years old for females.
Applicable benefit regimes
Decree No. 143 stipulates that foreign employees will be covered for all five compulsory social insurance regimes, which are currently applicable to Vietnamese employees. These include benefit regimes for: (i) illness, (ii) maternity, (iii) labor accidents and occupational diseases, (iv) retirement, and (v) survivorship. However, the application of the five regimes to foreign employees will be phased differently as follows:
- The short-term benefit regimes for (i) illness, (ii) maternity, and (iii) labor accidents and occupational diseases has applied from 1 December 2018; and
- The long-term benefit regimes for (iv) retirement and (v) survivorship will apply from
1 January 2022.
Contribution rates
The contribution rates imposed on both employers and foreign employees will be the same as those applicable to Vietnamese employees, i.e., 8% from employees and 17.5% from employers, based on the salary used to contribute compulsory social insurance which is capped at 20 times the applicable general minimum salary as provided by the Government.
The contribution is implemented as below:
- From 1 December 2018 to 31 December 2021:
- Employer: 3.5%, including 3% for the fund of illness and maternity; and 0.5% for the fund of labor accidents and occupational diseases;
- Employee: Not applicable;
- From 1 January 2022 onwards:
- Employer: 17,5%, including 3% for the fund of illness and maternity, 0.5% for the fund of labor accidents and occupational diseases and 14% for the fund of retirement and survivorship;
- Employee: 8% for the fund of retirement and survivorship;
Other relevant regulations
- With respect to foreign national employees who have multiple labor contracts with many employers and are subject to compulsory social insurance, contribution is only applied for the first labor contract, except that the contribution for labor accidents and occupational diseases benefits must be made by each employer in each labor contract.
- Lump-sum pay-out of retirement benefit: From 1 January 2022 onwards, foreign national employees are entitled to claim a lump-sum pay-out of retirement benefit if satisfying one of the following requirements:
- reaching retirement age but having not contributed to social insurance for 20 years in full;
- having terminal illnesses as prescribed by law;
- being eligible to receive monthly retirement allowances but no longer residing in Vietnam;
- having labor contracts terminated or having expired practice licenses and work permits without extension.
Amendments to the Regulations Related to Work Permit/Certificate of Work Permit Exemption for Foreigners Working In Vietnam.
On 8 October 2018, Vietnamese Government issued Decree No. 140/2018/ND-CP amending decrees related to investment and business conditions and administrative procedures within the scope of management of the Ministry of Labor, Invalids and Social Affairs which takes effect on the same date. Among the amendments, Decree No. 140 has revised some of the current provisions applicable to work permit/certificate of work permit exemption for foreigners working in Vietnam. Below are some notable changes:
- With respect to the foreign labor usage plan:
- The written request for approval of foreign labor usage plan must be submitted to the provincial-level People’s Committee, instead of the President of provincial-level People’s Committee as previously prescribed by Decree No. 11/2016/ND-CP;
- If the foreign employee is (i) chief representative of a representative office or head of a project office of an international organization or a non-governmental organization; or (ii) relative of members of foreign diplomatic missions in Vietnam who are permitted to work according to international treaties to which the Socialist Republic of Vietnam is a signatory, then the employer is not required to request for the approval of a foreign labor usage plan.
- With respect to certificate of work permit exemption:
- A foreign individual in charge of establishing a commercial presence in Vietnam will be exempted from obtaining a work permit, but will still be required to apply for a certificate of work permit exemption;
- Relative(s) of members of foreign diplomatic missions in Vietnam, who are permitted to work according to international treaties to which the Socialist Republic of Vietnam is a signatory, is not required to apply for a certificate of work permit exemption;
- With respect to work permit application:
- The copy of the employee's passport or a substitute for passport or other valid licenses for international travel is no longer required to be notarized;
- A work permit will be granted within the duration of five working days since the receipt of the full application, instead of seven working days as previously stipulated in Decree No. 11; and
- The employer having the head office in a province / city but having representative offices or branches at another province /city is entitled to file the application at the Ministry of Labor, War Invalids and Social Affairs.
The Pilot Program on Electronic Visa for Foreigners to be Extended for 2 Years until 1 February 2021
Following the pilot program on electronic visa for foreign nationals launched on 1 February 2017, Vietnamese Government issued Decree No. 17/2019/ND-CP dated on 1 February 2019, amending Decree No. 07/2017/ND-CP dated 25 January 2017 on the pilot program on e-visa to foreigners entering Vietnam ("Decree No. 17"). Accordingly, the pilot program has been extended for two more years, with its effectiveness to be until 1 February 2021.
Apart from this extension, Decree No. 17 also replace the list of countries whose nationals can visit with e-visas under the old decree by a new list of 35 countries. This list includes: Austria, Iceland, Austria, Iceland, Belgium, Portugal, Bosnia and Herzegovina, Brazil, Qatar, Andorra, Liechtenstein, Monaco, Croatia, Estonia, Fiji, Georgia, Latvia, Lithuania, Malta, Macedonia, Micronesia, Mexico, Moldova, Montenegro, Nauru, Palau, Papua New Guinea, Marshall Islands, Salomon Islands, San Marino, Cyprus, Switzerland, China (including Hong Kong SAR and Macau SAR passport holders; not apply to Chinese e-passport holders), Vanuatu, Western Samoa, Serbia and Slovenia.
Furthermore, Decree No. 17 also adds three (3) international land border gates and two (2) sea border gates to the list of border gates where entering by e-visas is permissible. Up to now, foreigners with e-visas can enter into Vietnam through eight international airports, nine sea boarder gates and 16 international land border gates.
For further information, please contact:
Kelvin Poa, Principal, Baker & McKenzie.Wong & Leow
kelvin.poa@bakermckenzie.com
