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Further Moderating Demand for Foreign Manpower

Foreign manpower

17 February 2012

  1. As announced by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in his Budget 2012 speech, the Government will introduce further measures to moderate the increasing dependence on foreign manpower which has grown by 7.5% per annum over the last two years.
  2. Specifically, the Ministry of Manpower (MOM) will reduce the Dependency Ratio Ceilings (DRCs) in the Manufacturing and Services sectors, as well as the S Pass sub-DRC in all sectors. The Construction sector, which employs more than one-third of all Work Permit holders, will also see further adjustments to moderate foreign manpower demand and raise productivity. These measures are directly targeted at companies that continue to rely heavily on foreign manpower.

    Key Features of the Changes
  3. The key changes are:

    a. DRC reductions:

    i. Services Sector Work Permit DRC will be reduced from 50% to 45%1;

    ii. Manufacturing Sector Work Permit DRC will be reduced from 65% to 60%; and

    iii. S Pass Sub-DRC for all sectors will be reduced from 25% to 20%.

    To give companies time to adjust their strategies, they will have up to 30 June 2014 to comply with the new DRCs in relation to their existing foreign workers. However, from 1 July 2012, companies which hire new foreign workers will not be allowed to exceed the new DRCs.

    To illustrate, a company in the Services sector which hires 10 local workers can currently hire up to 10 foreign workers. With the reduced DRC, if the company’s local workforce remains at 10, it would have to reduce its foreign workforce by 2 (see Annex A1). Similarly, while a company in the Manufacturing sector with 5 local workers can hire up to 9 foreign workers currently, the reduced quota would mean that, if the local workforce remains at 5, the company would have to reduce its foreign workforce by 2 foreign workers (see Annex A2).

    b. Construction Sector2:

    i. Further reductions in the Man-Year-Entitlement (MYE) by an additional 5% for new projects awarded with effect from 1 July 2012. This will bring cumulative MYE cuts to 45% by July 2013;

    ii. A higher Foreign Worker Levy (FWL) of $650 will be introduced for basic skilled Work Permit holders in the MYE-waiver category from 1 January 2013, and this will be raised to $750 in July 2013.
  4. Please refer to Annex A and Annex B for an overview of the changes.
  5. Companies can go online to the MOM website to calculate their new DRC/sub-DRC to see what the changes would mean specifically for them.

1 As a special concession, Services sector companies with only one local employee will be allowed to continue to employ one work permit holder.

2 In response to industry feedback, MND/BCA are currently exploring new upskilling pathways and schemes to recognise and retain experience among the construction foreign workforce, to support the construction productivity drive.

Annex A - Overview of Changes to be implemented from July 2012

Annex A1 - Impact of Measures (Services)

Annex A2 - Impact of Measures (Manufacturing)

Annex B - Revised foreign worker levy for basic skilled workers in the MYE-waiver category for the construction sector

Annex C - Glossary of Terms