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Foreign Worker Levy

Explains the levy system imposed on employers hiring foreign workers to regulate the workforce composition.

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Comprehensive Guide to the Foreign Worker Levy in Singapore

The Foreign Worker Levy (FWL) is a pricing mechanism implemented by the Singapore government to regulate the number of foreign workers in the country. It is a monthly fee that employers must pay for each foreign worker they employ, and it applies to workers holding Work Permits or S Passes. The levy system is designed to encourage employers to hire local workers and reduce reliance on foreign labor, while still allowing businesses to access foreign manpower when necessary.

Below is a detailed breakdown of the Foreign Worker Levy, including regulations, costs, procedures, and key considerations.

1. Overview of the Foreign Worker Levy

  • The FWL is not a tax on the worker; it is paid entirely by the employer.
  • It applies to foreign workers on Work Permits and S Passes, but not to those on Employment Passes (EP) or Dependant Passes.
  • The levy amount depends on:
    • The sector in which the employer operates.
    • The worker's qualifications (e.g., skilled or unskilled).
    • The employer's compliance with the Dependency Ratio Ceiling (DRC), which limits the proportion of foreign workers in a company.

2. Dependency Ratio Ceiling (DRC)

The DRC is the maximum permitted ratio of foreign workers to the total workforce in a company. It varies by sector:

| Sector | DRC (as of 2023) | Sub-DRC for S Pass Holders | |---------------------------|----------------------|--------------------------------| | Manufacturing | 60% | 18% | | Construction | 87.5% | N/A | | Process (e.g., petrochemical) | 87.5% | N/A | | Services | 35% | 10% | | Marine Shipyard | 77.8% | N/A |

  • Employers exceeding the DRC will not be allowed to hire additional foreign workers.
  • The government encourages hiring higher-skilled workers by offering lower levy rates for skilled workers.

3. Levy Tiers and Rates

The levy rates are determined by the worker's skill level and the employer's compliance with the DRC. Workers are classified as either Basic Skilled (R2) or Higher Skilled (R1).

General Levy Rates (as of 2023)

| Sector | Skilled (R1) | Unskilled (R2) | Tier 1 (Below DRC) | Tier 2 (Above DRC) | |---------------------------|------------------|---------------------|-------------------------|-------------------------| | Manufacturing | $300 | $450 | Tier 1: $300/$450 | Tier 2: $400/$600 | | Construction | $300 | $700 | Tier 1: $300/$700 | Tier 2: $400/$950 | | Services | $300 | $450 | Tier 1: $300/$450 | Tier 2: $400/$600 | | Marine Shipyard | $300 | $450 | Tier 1: $300/$450 | Tier 2: $400/$600 | | Process | $300 | $450 | Tier 1: $300/$450 | Tier 2: $400/$600 |

  • Tier 1 applies to workers within the DRC limit.
  • Tier 2 applies to workers exceeding the DRC limit but within allowable quotas.

Skilled vs. Unskilled Workers

  • Higher Skilled (R1): Workers with relevant qualifications or certifications (e.g., trade tests, academic qualifications).
  • Basic Skilled (R2): Workers without recognized qualifications.

Employers are encouraged to upskill their workers to qualify for the lower levy rates.

4. Levy Payment Procedures

Employers must follow these steps to manage the Foreign Worker Levy:

Step 1: Register for a GIRO Account

  • Employers must pay the levy via GIRO (General Interbank Recurring Order).
  • The GIRO account must be set up with the Central Provident Fund (CPF) Board.

Step 2: Monthly Levy Payment

  • The levy is deducted automatically from the employer’s GIRO account on the 17th of each month.
  • If the 17th falls on a weekend or public holiday, the deduction will occur on the next working day.

Step 3: Monitor Levy Bills

  • Employers can view their monthly levy bills via the myTax Portal or the Work Permit Online (WPOL) system.
  • It is the employer’s responsibility to ensure sufficient funds are available in the GIRO account.

Step 4: Late Payment Penalties

  • If the levy is not paid on time, a 2% late payment penalty (minimum $20, maximum $100) will be imposed.
  • Persistent non-payment may result in the suspension of work pass privileges.

5. Exemptions and Waivers

In certain situations, employers may qualify for levy waivers. Common scenarios include:

  • Worker on overseas leave: If the worker is on leave for at least 7 consecutive days, the levy may be waived for the duration of the leave.
  • Worker hospitalized: If the worker is hospitalized for at least 7 consecutive days, the levy may be waived for the hospitalization period.
  • Worker awaiting repatriation: If the worker’s Work Permit has been cancelled and they are awaiting repatriation, the levy may be waived.

Employers must apply for waivers through the Ministry of Manpower (MOM).

6. Sector-Specific Considerations

Construction Sector

  • Employers in the construction sector must meet Man-Year Entitlement (MYE) requirements to hire foreign workers.
  • The MYE framework allocates a quota of foreign workers based on the value and scope of construction projects.

Marine and Process Sectors

  • These sectors have higher DRC limits due to their reliance on foreign labor.
  • Workers in these sectors often require specialized skills, and employers are encouraged to hire skilled workers to reduce levy costs.

Services Sector

  • The services sector has the lowest DRC (35%), reflecting the government’s push to prioritize local employment in this area.
  • Employers in this sector must carefully manage their foreign worker quotas to avoid exceeding the DRC.

7. Key Guidelines for Employers

  • Compliance with MOM Regulations: Employers must comply with all Ministry of Manpower (MOM) regulations, including proper documentation and timely payment of levies.
  • Quota Management: Employers should monitor their foreign worker quotas to avoid exceeding the DRC.
  • Upskilling Workers: Employers are encouraged to send workers for training and certification to qualify for the lower levy rates.
  • Renewal and Cancellation: Employers must ensure that Work Permits are renewed or cancelled on time to avoid unnecessary levy charges.

8. Penalties for Non-Compliance

Employers who fail to comply with levy regulations may face:

  • Fines: Up to $10,000 for each offense.
  • Work Pass Suspension: MOM may suspend the employer’s ability to hire foreign workers.
  • Legal Action: Severe cases may result in prosecution.

9. Resources for Employers

  • Ministry of Manpower (MOM): www.mom.gov.sg
  • Work Permit Online (WPOL): For managing Work Permits and levy payments.
  • myTax Portal: For viewing levy bills and payment history.

10. Conclusion

The Foreign Worker Levy is a critical component of Singapore’s labor policy, balancing the need for foreign manpower with the goal of protecting local employment opportunities. Employers must understand the levy framework, comply with regulations, and manage their workforce effectively to avoid penalties and optimize costs. By upskilling workers and adhering to quotas, businesses can reduce levy expenses while contributing to Singapore’s economic growth.