Techblog
Employing staff on foreign work visas: a right move for your business?
If you’re facing a skills shortage you may be considering hiring talent from abroad. If you’re looking beyond Singapore for employees here’s what you need to keep in mind.
Getting the right people on board is crucial to a company’s success, especially if your industry is facing a skills shortage or high employee turnover. Many Small and Medium Enterprise (SME) owners turn to foreign talent to address their manpower needs.
However, the Singapore government has been tightening hiring quotas and raising the cost of recruiting foreign workers over the past few years. Employers need to adhere to the latest legal protocols and pay the relevant fees when hiring a foreign employee.
How many foreign employees are you allowed to hire?
Before you start the process, it’s important to find out how many foreign employees, and at which skill level, you’re actually allowed to hire. Each skill level requires a particular work visa.
According to the quota system (or dependency ratio ceiling also called DRC) you can’t employ more than the permitted number of foreign workers. Quotas differ depending on the industry but also on the number of your local workforce and salary levels.
To start the process, declare your business activity to the Ministry of Manpower (MOM). They’ll review your business activity and classify you in the most relevant industry.
Once you know your industry, use this free quota calculator to determine the latest number of pass holders you’re allowed to hire.
Keep in mind that quotas can change depending on government policies and the economic situation. For example, from 1 January 2018, the DRC for Marine Shipyard Sector’s Work Permit holders will be reduced from 81.8% to 77.8%. If you’re in that sector, use the interim quota calculator to plan for next year.
Can you afford it?
Hiring a new team member from abroad is a big commitment. It also involves additional costs for employers.
Minimum salary
It starts with the level of salary you pay your local employees. Since July 2017, companies have to pay their local workers at least S$1,100 a month (an increase of $100) in order for the employee to be included in the ratio for hiring foreign workers. That threshold will rise to $1,200 by July 2018.
On top of that, you have to pay a minimum salary to foreign employees to meet one of the important work pass requirements. From January 2017, for example, the Singapore government raised the salary qualifying criteria for Employment Pass (EP) applications from $3,300 to $3,600.
Application fees
Other costs include application and pass issuing fees of between $30 and $150, depending on the type of pass you’re applying for.
The process of applying for a Work Permit can take anywhere from several days up to three weeks. You can easily apply online. Take some time researching the type of work pass you can apply for, the eligibility criteria (including minimum salary and skill level) and fees you must pay.
Foreign worker levy
Once hired, you don’t have to pay CPF contributions for foreign workers. However you will be required to pay the foreign worker levy (FWL) for your Work Permit and S Pass holders every month. (The S Pass allows mid-level skilled staff who earn at least $2,200 a month and have the relevant qualifications and experience to work in Singapore).
The amount of FWL to be paid for each employee will depend on the sector your company belongs to. That could vary from $250 (manufacturing) to $700 (construction). Educational qualifications and skills of the workers will also play a role in the calculation.
The amount of the FWL will also depend on other external factors. For instance the marine and process as well as manufacturing sectors were spared from levy increases in 2017. However, things could change in mid-2018.
Meanwhile the government will increase the levy for construction firms. From July 2017 to 30 June 2019 the levy rates for some workers will increase from $650 now to $700. Check out the MOM’s guide on levy rates for your sector.
Are you ready to manage a diverse workforce?
You may be already embracing the benefits of a diverse domestic workforce thanks to Singapore’s multicultural society. Hiring foreign talent will only increase the cultural diversity in your workplace. This could be a first step for your businesses to be competitive on an international scale.
Cultural competence can also boost effective performance in other areas of your business and diverse cultures can suggest different approaches to things such as communication, team building or even time management. The MOM offers a great toolkit for organisations managing workplace diversity.
If managed properly, a diverse workforce can be a great asset and drive business growth. You’ll be able to draw from a culturally diverse talent pool, allowing you to attract and retain the best talent. Insights from a variety of people could even enable you to undertake higher quality and better targeted marketing, by using your teams wider knowledge and experience.
Summary
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How many foreign employees are you allowed to hire will depend on dependency ratio ceiling also called DRC for your industry
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Consider costs such as minimum salaries for your local as well as foreign employees.
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Other costs include application and pass issuing fees as well as the foreign worker levy (FWL) for your Work Permit and S Pass holders every month.
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Hiring foreign talent will increase the cultural diversity in your workplace.