New scheme promotes restructuring of companies with foreign workers

IMPACT – LOW

What is the change? The Ministry of Manpower has announced a temporary program to give small- and medium-sized companies some flexibility in their foreign workforce if they restructure and strengthen their core of Singaporean workers.

What does the change mean? The government is continuing its efforts to encourage all employers to develop a strong core of Singaporean workers and is providing tools for small- and medium-sized enterprises (SMEs) to adjust to the tight labor market.

• Implementation time frame: The two-year pilot program begins Oct. 1.
• Visas/permits affected: Employment passes and S passes.
• Who is affected: SMEs must apply to participate in the scheme.
• Business impact: The scheme encourages firms to eventually reduce their numbers of foreign workers. The results of this pilot scheme may influence whether the ministry will continue its current policy of tightened immigration standards, which affects employers’ ability to hire foreign workers.

Background: The ministry announced the Lean Enterprise Development (LED) Scheme as a two-year initiative to help SMEs increase productivity and innovation, and use a leaner workforce in the face of local manpower and skills shortages. The scheme focuses on giving SMEs tools to achieve the necessary restructuring and skills training. The goal is to create business growth and better job opportunities and careers to Singaporeans.

The scheme’s temporary foreign manpower adjustments include the following:

• Companies may reduce the number of work permit holders without reducing their existing quota for S Pass holders.
• Companies may employ temporary foreign workers while recruiting and training locals to take on better jobs when the restructured business stabilizes.
• Companies may pool foreign sources of expertise, such as master craftsmen, at the industry level in order to help transfer know-how to the local workforce.

Any transitional adjustments allowed will be reviewed on a yearly basis and will be renewable for a maximum of three years.

BAL Analysis: The scheme is a temporary measure and does not change the quotas or ratios required of companies employing foreign workers. Singapore continues to promote localization of its workforce, evidenced by recent data indicating a steep drop in the growth rate of employment of foreign workers. The LED Scheme is the latest in the government’s overall campaign to bolster training and skills acquisition by Singapore’s citizens in order to address current and future projections of manpower and skills shortages.

This alert has been provided by the BAL Global Practice group in Singapore. For additional information, please contact singapore@bal.com.

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