As you probably already know, things are not what they used to be when it comes to foreign workforce in Singapore. The Singapore government has been reducing both the DRC (Dependency Ratio Ceiling) and the S Pass sub-DRC since 2020. The reason why lies in the fact that the Government wants to encourage employers to deploy their human resources more efficiently, as well as to manage the growth of manpower in the service sector.
The service sector saw a 2% cut (from 40% to 38%) on January 1, 2020, and an additional 3% cut (from 38% to 35%) occurred on January 1, 2021. The share of S Pass saw a 2% cut (from 15% to 13%) on January 1, 2020, and an additional 3% cut (from 13% to 10%) on January 1, 2021. Both the DRC and the S Pass quota remain unchanged for all other sectors.
What do recent Quota Reductions mean for Businesses in Singapore?
Before these recent quota reductions happened, the DRC stood at an astonishing 45% back in 2013. This meant that companies with 20 full-time locals (whether it be citizens or PRs of Singapore) could hire up to 16 foreigners. However, the reduction in DRC means that the number of foreigners that those same 20 full-time locals could hire has been reduced.
Many service sector employers are surprised by the new threshold in foreign manpower as many of them rely on foreign workers to keep their businesses up and running. The Government has stated that the tightened policy encourages firms to revise and improve their work processes, as well as to upgrade the skills of their staff members and remake their existing jobs. When it comes to companies whose workers have exceeded the new thresholds, the DRC applies whenever these companies apply for their permit renewals.
Calculating Foreign Worker Quota
Calculating local employees
The Local Qualifying Salary (LQS) is one of the most important factors. If you want to count one of your local employees towards your quota entitlement, that employee’s LQS must be at least $1,200.
An employee who is working under a contract of service and who is either a citizen or PR of Singapore is counted as:
- 1 local employee if his/her monthly LQS is at least $1,300
- 1/2 of a local employee if his/her monthly LQS is anywhere from $650 to just under $1,200
❓ When is the right time to start hiring? Read our guide on hiring tips for business.
Calculating foreign worker quota
A company’s foreign worker quota is based on the company’s CPF account. The employer’s CPF contribution indicates the local workforce hired in the business activity.
Every local staff member who is working as a full-time staff member (or 2 part-time local workers) for a period of one calendar month counts as one headcount for the local workforce. After excluding both the current and the preceding month, a 3-month contribution period will be taken into account. The local manpower can be calculated using the following formula:
Maximum number of foreign workers = (DRC% x local manpower) / (100% – DRC%)
Keep in mind that the maximum number of foreign workers is inclusive of both work permit holders and S Pass holders.
Calculating quota with quota calculator
Employers can go online and use the quota calculator to determine the number of work permits and S Passes that they can apply for. The number of passes allowed based on both the workforce and sector.
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