Effect of New Regulation on Existing DP Holders
From May 1, 2021, foreigners staying in Singapore on Dependant’s Passes shall need a work pass to work here instead of a Letter of Consent (LOC) issued from the Ministry of Manpower (MOM).
This new rule will need the employers of DP holders to apply for either an Employment Pass (EP) or S Pass or work permit for them as the case may be, subject to similar requirements applicable to other foreigners as relevant qualifying salary, dependency ratio ceiling and levies. For spouses and family members already working in Singapore, this new rule of work pass requirement will come into force once their current letter of consent expires. On the expiration of LOC, employers of DP holders must apply for an applicable work pass if they wish to continue hiring them.
Reasons for Introducing New Regulation
Manpower Minister Josephine Teo announced the change on Wednesday, 3rd March 2021 during the parliamentary debate on her ministry’s budget, saying that it is “for consistency with recent work pass moves” facilitating the transition to work pass and alignment with other foreign workers. The move is intended to bring consistency to the work pass framework, said the ministry.
Mrs. Teo also set out her ministry’s priorities in managing the foreign workforce and balancing the need for foreigners in some sectors while strengthening the Singaporean core, which several MPs had asked about. The Local Qualifying Salary used by MOM is aimed at determining if local workers are meaningfully employed and not just given token salaries and allow the employer to hire foreign workers.
She said: “Our fundamental objective is always to serve the interests of Singaporean workers. Access to foreign workers is meant to help grow a larger economic pie than we otherwise can. Therefore, the foreign workforce must act as a complement to our local workforce.”
Minister Josephine Teo noted, “We will provide sufficient time for existing DP holders working on a LOC, as well as their employers, to transit to this new arrangement. Most of them meet prevailing work pass criteria. Those that do not will have to cease working in Singapore.” She also highlighted that most of the DP holders do not work during their stay in Singapore and represent only about 1 percent of all work pass holders.
As for skilled foreigners on Employment Passes, MOM aims to ensure.
- Foreign professionals complement locals, and
- Employers practice fair hiring and improve the diversity of their foreign professionals, managers, executives, and technicians.
Existing Regulation
An Employment Pass or S Pass holder must earn a fixed monthly salary of at least SGD 6,000 to bring their spouse or unmarried children under 21 years old to Singapore on Dependant’s Passes.
Presently, dependents of S Pass holders only need to apply for a relevant work pass if they want to work in Singapore, while dependents of skilled foreign professionals or entrepreneurs on Employment Passes, EntrePasses, or Personalised Employment Passes can apply for a LOC.
Effect of New Regulation on Existing DP Business Owners
With this new rule coming into force, only DP holders belonging to the ‘business owners category’ can work using a LOC, and only if.
- They own at least 30 percent of the company shares as a sole proprietor, partner, or company director and
- Their business creates local employment. They must employ at least one Singaporean or permanent resident earning at least the prevailing local qualifying salary of SGD 1,400 and make contributions to the employee’s Central Provident Fund accounts for at least three months.
Effect on ‘Would Be’ Business Owners
Applying for an Employment Pass (EP)
Applying and receiving an EP pass to work in Singapore include the following.
- You need to secure a job offer first
- The employer puts an application online on behalf of you for the EP with supporting documents
- Approval and Issuance of EP in your name
- Renewal of EP after 2 years for the first time and then subsequent renewals every 3 years
Increased Salary Requirements for EP
The salary requirements for Employment Pass holders were raised two times last year, from SGD 3900 to 4500 and at least SGD 5000 for individuals working in the financial sector in a bid to tighten the framework. The S Pass qualifying salaries were also raised.
The qualifying salaries for older and experienced EP applicants in the age bracket of 40 years and above were also raised to almost double the minimum qualifying salaries of younger EP applicants.
The MOM has also tightened other rules on family members of foreigners discouraging them to come to Singapore on DPs or long-term visit passes, according to Straits Times.
The S Pass policy has been tightened in the previous two years with sectoral quotas being curtailed and the qualifying salary raised twice last year.
The qualifying salary for EP holders was raised twice during last year, and the ministry will explore possible refinements, Mrs.Teo added.
Enhancement of Capability Transfer Programme to further boost Skill Transfer to Locals
An extension of the Capability Transfer Programme has been planned for another three years, until end-September 2024, to ensure effective skills transfer to locals.
The program was originally launched in 2017 and provides up to 90 percent funding for a company or industry projects to bring in foreign specialists to train locals or send local workers on overseas training attachments especially in the areas Singapore doesn’t have much expertise.
About SGD 5 million has been budgeted so far to support projects in 20 sectors, noted Mrs. Teo, also adding that the program remains a useful complement to other schemes that support company transformation and the development of local Singaporeans.
In his last month’s Budget speech, DPM Heng announced this extension of the capability transfer program. He highlighted that as at the end of last year, more than 140 companies and over 970 Singaporeans and permanent residents have benefited, or are expected to benefit, from 40 projects under this scheme.
Mrs. Teo also said that the purpose of this program extension is to encourage greater take-up of the program however adding that the Government reviews all of its business support schemes from time to time to streamline them.
Likely Modifications to S Pass and Employment Pass in Recent Future
For the S Pass holders earning a fixed monthly salary of at least SGD 2,500, the employers should expect further changes to rules over this decade, said Mrs. Teo.
S Pass policy has been tightened over the last two years, with sector quotas being cut and the qualifying salary being raised twice last year. Deputy Prime Minister Heng Swee Keat declared a cut in the manufacturing sector S Pass quota from 20 percent to 15 percent by 2023 in the Budget speech last month.
She said that MOM will focus instead on helping companies become more manpower-lean while strengthening their Singaporean core.
She remarked that periodic adjustments will continue to be made to the local qualifying salary, as the minimum salary for locals to count towards a firm’s headcount in calculating the work permit and S Pass quota, to ensure locals are not hired on a token salary. It will not be increased this year to give firms time to recover from the impact of the Covid-19 pandemic.
The salary threshold is by no means a perfect gatekeeper of quality, but it is easy to understand and administer,” she said.
She explained that this method is favored over an EP quota, which would limit Singapore’s ability to compete for the most cutting-edge investments amid the worldwide shortage of tech and digital skills, hurting Singaporeans’ longer-term career prospects.
She added that implementing levy charges for EP holders, as Non-Constituency MP Leong Mun Wai of the Progress Singapore Party called for last week, may not be useful either since companies can employ overseas knowledge workers remotely.
Mr. Leong asked during the budget session whether Singaporean workers have been disadvantaged because foreigners do not have to make Central Provident Fund contributions, and there is no requirement for succession planning when firms apply for grants.
Mrs. Teo replied that last year, amid the pandemic, the foreign workforce contracted by over 180,000 in number and the local workforce grew modestly.
