What is the change? In the 2021 Singapore budget presented on Feb. 16, the government announced that it intends to reduce the hiring quota of foreign workers that qualify for an S Pass in the manufacturing sector in a two-step process in 2022 and 2023.

What does the change mean? Under the current policy, the number of S Pass holders that a company in the manufacturing sector may hire is restricted to 20% of the company’s total workforce. As from Jan. 1, 2022, this cap would be reduced to 18%, with a further reduction to 15% as from Jan. 1, 2023.

  • Implementation time frame: The plan calls for a two-phase implementation on Jan. 1, 2022, and Jan. 1, 2023.
  • Visa/permit holders affected: S Pass holders and Employment Pass (EP) holders who may potentially be downgraded depending on their EP eligibility.
  • Business impact: Companies in the manufacturing sector should plan for the proposed changes, including potentially reducing their reliance on foreign workers and upskilling 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 subcategory of the overall DRC. The government’s aspiration is to balance the local and foreign manpower in various industry sectors by upskilling the local workforce and moderating the reliance on foreign labor. One of the consequences of the effects of the COVID-19 pandemic on Singapore’s economy is that the inflow of foreign workers needs to be carefully regulated to ensure that fair job opportunities continue to be created for Singaporeans.

Analysis & Comments: Following the announcement in the 2020 budget that the DRC in the manufacturing industry would be reviewed, this year’s announcement did not come as a surprise. Manufacturing continues to be a significant industry in Singapore and to sustain Singapore’s position as a global advanced manufacturing hub, companies must prioritize building a skilled local core of employees within their firms to reduce reliance on foreign workers. The S Pass category will be reviewed periodically and businesses should prepare for the possibility of it being abolished in the future.

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