Singapore Budget: Foreign worker DRC to be cut by 5% to 35% by 2021; foreign levy rates unchanged.
Government plans to restructure Singapore’s economy to boost productivity and raise income in the lower and middle strata will proceed without change. Foreign worker levy rate will also remain the same (including S Pass levy and Work Permit Levy), and transitional support measures to aid local firms adjust to minor new changes in foreign workforce policy.
The Singapore Budget will remain largely unchanged moving into the 2019, with exceptions to cuts in foreign worker quotas for the services sector.
Starting next year, the current DRC ratio (i.e. ratio of foreign to local workers) of 40% will be cut by 5% by 2021, from an initial 38% (effective 1 January 2020) to 35% (effective 1 January 2021).
S Pass sub-DRC ratios will also be cut from 15% to 13% effective 1 January 2020 and to 10% on 1 January 2021. No changes are planned for all other sectors, which will hold steady at 20%.
In addition, the decision also acts to counterbalance the increase of S Pass holders participating in the economy. From 2017 to 2018 alone, this number has risen by 2.79% – a trend that has held steady since 2013 and is predicted to continue
DRC for other sectors unchanged
Dependency Ratio Ceiling (DRC)
|Services||40%||Cut to 38% (on 1 Jan 2020) and to 35% (on 1 Jan 2021)|
|Marine Shipyard||77.8%||No change|
S Pass sub-DRC
|Services||15%||Cut to 13% and 10% on 1 Jan 2020 and 1 Jan 2021 respectively|
|Other sectors||20%||No change|
Foreign worker quotas for all other sectors will remain unaffected for the rest of the year, with the ratios for manufacturing, construction, process and marine shipyard sectors standing at 60%, 87.5%, 87.5% and 77.8% respectively.
For existing workers, the new DRC policy will only apply once permit renewals are made.
Marine sector breathes sigh of relief, F&B sector expected to be hit hardest by squeeze
The decision to retain the DRC at current levels is greeted enthusiastically by the Marine sector which is seeing a reversal from prolonged depressed oil prices.
The planned reduction in foreign worker dependency will hit heavy players in the F&B sector most, putting a squeeze on access to foreign workers, both skilled and unskilled. Despite the squeeze put on foreign manpower, economists are optimistic that the newest changes should be “manageable” when compared to readjustments that were needed in between 2010 and 2015.
Some experts have also expressed concern that the planned use of technological solutions in place of human workers will degrade the industry’s experiential value, taking away the unique customer experiences that come with real-life interactions.
Foreign Worker Levy rate 2019 to remain unchanged, proposed increments to Marine and Processes sector deferred to 2020
Foreign Worker Levy rates for 2019 will remain unchanged, as per the Budget of 2019.
Rates for the work permit levy will depend a worker’s qualifications and total number of Work Permit or S Pass holders currently in employ. Workers that fall into the category of higher-skilled worker carry a lower levy.
S Pass levy rates for the services sector is set as S$330/month (at tier 1, i.e. <= 10% of total workforce) and S$650/month (at tier 2, i.e. >10% and <= 15% of total workforce). For all other sectors, tier 1 charges are the same while tier 2 charges will be made when total workforce is > 10% and <= 20%.
Proposed levy increments for the Marine Shipyard and Process sectors have been deferred to 2020, much to the relief of the sectors involved.
Levy Rate for Malaysian Work Permit exempt from MYE
Man-year Entitlement (MYE) is excluded when calculating the Levy Rate for Malaysian Work Permit. Non-Malaysian workers withMYE-waiver costs more to hire, with the levy for higher-skilled workers priced at S$600/month and basic-skilled workers at S$950/month (S$19.73/day and S$31.24/day respectively).
Introduction of Transitional Support Measures to help firms weather policy changes
To help firms absorb the changes in the upcoming foreign workforce policy, Transitional Support Measures in the form of the Enterprise Development Grant (EDG) will take effect by 1 January 2020.
The EDG will comprise a holistic grant scheme that will provide SMEs up to 70% government funding and 50% government funding for non-SMEs for the purpose of improving their business, operational and international capabilities.
A statement by Mr Seah as provided to The Business Times, says, “Companies are given more time to adjust. Moreover, there is a whole slew of policy measures to help enhance their technologies, redesign jobs and processes, or hire more elderly workers.”
In another message, Minister Heng Swee Keat stated in Parliament that the government needed to “act decisively” to manage the manpower growth in the services sectors and to encourage companies in Singapore to revamp work processes, redesign jobs and reskill and upgrade workers.
Introduction of Hiring Support Programmes
The government will also introduce a new Professional Conversion Programmes this year to encourage growth in the areas of prefabrication, embedded software and blockchain.
The Professional Conversion Programme will primarily target professional managers, executives and technicians looking to switch into sectors that are higher demand.
To encourage employers to hire retrenched or unemployed workers, the government will also introduce the Career Support Programme that provides employers with a short-term wage subsidy for hiring of any employee of this group.