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SINGAPORE FOREIGN WORKER LEVY SCHEME

Singapore, as a developed country and an economy with relatively steady growth requires a strong workforce to keep the systems and processes in top-notch condition. However the local population that is growing at a slower pace is not sufficient to meet the labour demands of the various industries. Thus the country imports labour in the form of foreign skilled and unskilled workers to fill the gap. In order to ensure that the local workforce gets the first priority in the job market and to prevent employers from engaging in unscrupulous practices to exploit cheap foreign labour the government has a Foreign Worker Levy (FWL) scheme and Dependency Ratio Ceiling (DRC) system in order to calibrate the intake of foreign workers by employers.

Under the FWL scheme employers of foreign workers are required to pay a monthly levy to the government. DRC refers to the maximum permitted ratio of foreign workers to the total workforce that a company is allowed to hire. DRC varies cross sectors. Incidentally, employers are also required to contribute to the Central provident Fund of their local employees.

In a way the CPF scheme and the levy scheme is a form of checks and balance, which requires employers to give priority to the skills, qualification and experience of their potential employees at the time of recruitment. The following is an overview of the Foreign Worker Levy scheme.

SCOPE OF THE SCHEME

The scheme is applicable to work permit holders and S pass holders. There is also a separate levy scheme applicable for foreign domestic workers.

Levy for Work permit holders

The levy rate for Foreign Workers varies across different sectors. The amount of levy to be paid for each worker is basically determined by the sector to which the employer/company belongs and the educational qualification and skills possessed by the workers. Workers with relevant qualifications and skill-based test certificates will be classified as skilled workers and will be entitled to a concession in the worker’s levy.

Monthly levy rates have been stipulated for the sectors by MOM and for work permit holders who are not employed for a full calendar month a daily levy rate applies.

From 1 January 2011, the daily levy rate is computed based on the following formula:

FOR MARINE, CONSTRUCTION & PROCESS SECTOR

Foreign workers levy is determined by the worker’s qualification and skills. The construction sector workers levy is charged on the basis of higher or basic-skilled workers whereas for other sectors the workers are classified as skilled or unskilled.

FOR MANUFACTURING & SERVICE SECTOR

The worker’s qualification and the DRC quota for the sector together determine the levy amount. It must be noted that the rates are tiered so that employers who hire close to the maximum quota will incur higher levy bill.

Sector Quota Dependency Celling Segmentation Monthly Levy in S$ Daily Levy in S$1
Skilled Unskilled Skilled Unskilled
Manufacturing Employers in this sector are entitled to skilled levy rates for their foreign workers, up to 50% of the total workforce. 60% Basic Tier / Tier 1: Up to 25% of the total workforce 210 310 6.91 10.2
Tier 2: Above 25% to 50% of the total workforce 300 400 9.87 13.16
Tier 3: Above 50% to 60% of the total workforce 470 15.46
Services Employers in this sector are entitled to skilled levy rates for their foreign workers, up to 25% of the total workforce. 45% Basic Tier / Tier 1: Up to 15% of the total workforce 240 340 7.9 11.18
Tier 2: Above 15% to 25% of the total workforce 360 460 11.84 15.13
Tier 3: Above 25% to 45% of the total workforce 500 16.44
Construction* 87.50% on Man Year Entitlement (MYE) 250 350 8.22 11.51
MYE Exempt 500 11.51
Process 87.50% on Man Year Entitlement (MYE) 210 310 6.91 10.2
MYE Exempt 470 15.46
Marine 83.30% Basic 210 310 6.91 10.2

*For the purpose levy workers in the construction sector are classified into

  • Higher skilled workers
  • Basic Skilled workers

Note
MOM uses the following order of priority to determine the respective tiers of the foreign workers

  • S Pass holders
  • Skilled workers
  • Unskilled workers

The Man-Year Entitlement (MYE) system is a Work Permit allocation system introduced in April 1998 for workers from Non-Traditional Source (NTS) countries deployed in the Construction and Process sectors. Under the system the main contractor is allocated “man-years” based on the value of his project. The purpose of the MYE is to provide a means for the main contractor to control and manage the foreign worker allocation for his project. The main contractor then distributes the MYEs to his sub-contractors. The MYEs will be converted into either one-year or two-year Work Permits.

MYE is waived / exempted for workers from NTS if the worker has relevant experience of cumulative period of two or more years with any employer in Singapore. However, the employer will have to pay a higher monthly levy rate for such a worker. A main contractor with a valid construction contract can apply for Man-Year Entitlements (MYE) from the Work Pass Division (WPD).

Key Consideration for workers classification based on Skills
Workers, who possess relevant academic or skills-based test qualifications and certificates, will be classified as skilled workers.

Levy for S pass Holders

Sector Quota Dependency Ceiling Segmentation Skilled worker Levy in S$1
Monthly Daily
All Sectors 20% Basic Tier / Tier 1: Up to 10% of the total workforce 200 6.58
Tier 2: Above 10% to 20% of the total workforce 320 10.53

S pass is a work pass given to workers with specialized skills and meet the required educational qualification and have significant experience and meet the salary stipulations set by MOM. Therefore there is no unskilled category here.

Skill Development Levy

Employers are required to contribute to Skills Development Fund. Skill development levy is applicable for all employees rendering services wholly or partly in Singapore. The SDL is set at a minimum of $2 (for an employee earning less than $800 a month) and capped at $11.25 (for an employee earning more than $4,500 a month).

Employers employing foreign workers are required to pay SDL in addition to the Foreign Workers Levy (FWL).

The CPF Board collects the Skills Development Levy on behalf of the Singapore Workforce Development Agency. The levy collected is channelled into the Skills Development Fund (SDF), which provide grants to companies that send their workers for training.

Should you have any queries, send an email to us @ [email protected] or contact us at 6272 0820.