Foreign worker hiring ratio to be cut in 3 sectors starting in 2021

IMPACT – HIGH

What is the change? Singapore will reduce the ratio of foreign workers in the construction, marine shipyard and process sectors in a two-step process beginning in 2021, according to the new budget.

What does the change mean? Beginning Jan. 1, 2021, companies in the construction, marine shipyard and process industries will only be permitted to employ S Pass holders as 18% of their total workforce, and the cap will drop again to 15% on Jan. 1, 2023. The current permissible percentage is 20% for these industries. For companies in the manufacturing industry, the ratio for S Passes will be reviewed at a later date because of economic uncertainty.

• Implementation time frame: The two-phase implementation will take place on Jan. 1, 2021 and Jan. 1, 2023.
• Visas/permits affected: S Pass; Employment Pass (EP) holders who may potentially be downgraded depending on their EP eligibility.
• Business impact: Companies in the construction, marine shipyard and process sectors should plan for the changes and may need to reduce their reliance on foreign workers and upskill their Singaporean workforce.

Background: The allowable percentage of foreign workers to Singaporean workers is referred to as the Dependency Ratio Ceiling (DRC), and S Passes are a sub category of the overall DRC. The government has observed an increase in the number of S Pass holders in the construction, manufacturing, marine shipyard and process sectors, and these numbers are expected to increase further over the next several years. Nevertheless, S Pass holder growth must be sustainable. The government is already working closely with enterprises to grow local manpower, including mid-career workers. The manufacturing industry will be reviewed in the future and may undergo similar sub-DRC reductions.

The following chart shows the changes to the DRC and sub-DRC in all sectors in the coming years.

Analysis & Comments: Following last year’s announcement during the budget on cutting dependency on the DRC and S Pass sub-DRC thresholds in the services sector, this announcement on tightening the foreign workforce quota in three additional sectors comes as no surprise. The reduction in the sub-DRC is aimed at encouraging employers in the construction, marine shipyard and process sectors to enhance their Singaporean workforce by hiring and training more Singaporean workers and transferring skills from their foreign employees to the local workforce.

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