What is the change? The Singaporean government will reduce the ratio of foreign workers in the service sector in 2020 and 2021, according to the new budget.

What does the change mean? Beginning Jan. 1, 2020, companies in the service industry will only be permitted to employ foreign workers (work permit holders) up to a cap of 38 percent of their total workforce and starting Jan. 1, 2021 the cap will drop to 35 percent. The current cap is 40 percent.

For companies in the service sector sponsoring S-Pass holders, the percentage will also be reduced—to 13 percent starting Jan. 1, 2020 and to 10 percent starting Jan. 1, 2021. The current cap on S Pass holders is 15 percent of a company’s workforce.

For companies in the marine shipyard and processing industries, foreign worker levies that were expected to take effect this year will be deferred to 2020.

  • Implementation time frame: Implementation will be in two phases, the first starting Jan. 1, 2020 and the second on Jan. 1, 2021.
  • Visas/permits affected: S Passes; Employment Pass (EP) holders who may potentially be downgraded, depending on their Employment Pass eligibility.
  • Business impact: Companies in the service sector should plan for the changes and be prepared to reduce their reliance on foreign workers and upskill their Singaporean workforce.

Background: The allowable percentage of foreign workers to Singaporean workers is expressed as the Dependency Ratio Ceiling, or DRC. The following chart shows the adjustment to the DRC in coming years for the service sector only. The DRC in other sectors will remain at their current rates (60 percent for manufacturing, 87.5 percent for construction and processing and 77.8 percent for the marine shipyard sector).

Type Current DRC DRC in 2020 DRC in 2021
All work passes in services sector 40 percent 38 percent 35 percent
S Passes in service sector 15 percent 13 percent 10 percent

Analysis & Comments: The government has made consistent efforts to focus on strengthening the Singaporean core and improve efficiency through the deployment of technology to innovate and automate. Therefore, the announcement on tightening the foreign workforce quota in the services sector is not unexpected. In addition, the reduction in the DRC is aimed at encouraging employers in the services sector to enhance their Singaporean workforce by hiring and training more Singaporean workers with skills transfers from foreign employees.

Source: Deloitte LLP. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 1 New Street Square, London EC4A 3HQ, United Kingdom.