Singapore’s Ministry of Manpower (MOM) clarified on 9 July 2024 through its website that Employers of Record (EORs) in Singapore cannot apply for work passes for foreigners to be based in Singapore while working for overseas companies that do not have a local presence, and EORs that do so would be committing an offence.
In addition, MOM issued a press release on 4 March 2024 announcing the increase of:
- Local Qualifying Salary (LQS), which is the minimum monthly salary that a local employee must earn for an employer to count them as a local worker in the calculation of foreign worker quotas, from 1 July 2024; and
- The minimum Employment Pass (EP) qualifying salary from 1 January 2025.
Background
EOR services have become a common solution for international businesses looking to hire employees in other countries without incurring the costs of setting up and maintaining local legal entities and human resources infrastructure. EORs may sometimes be used to sponsor work visas for individuals to be eligible to work in the relevant country.
Historically, this practice had been carried out in Singapore, where the EOR acted in the capacity of the sponsor for the work pass application and continued to act as the legal employer for the duration of the foreigner’s employment. Prior to its clarification, MOM had not expressly stated its position on the practice.
Key details
Prohibition on use of EORs to apply for foreign employees’ work passes
In its clarification, MOM has stated that work passes are for foreigners to work for Singaporean companies (employers that have a local presence in Singapore, whether as a Singapore representative office, subsidiary, or other legal form or entity). To be based in Singapore for an extended period, foreigners will need to be hired directly on a valid work pass by their employer that has a local presence in Singapore.
It is not legally compliant for non-Singaporean companies to use EOR services for hiring expatriate employees in Singapore. Non-Singaporean companies using EORs to sponsor work passes must switch to alternative options if they wish to retain their expatriate employees. When a foreign company does not have a local legal presence in Singapore, it may consider:
Setting up a representative office through Enterprise Singapore’s Representative Office scheme, or
Incorporating a company with the Accounting and Corporate Regulatory Authority.
MOM has also stated that if foreigners only wish to explore business opportunities in Singapore, they can apply for a Short-Term Visit Pass to attend company meetings, corporate retreats, or meetings with business partners for up to 90 days each year.
MOM’s clarification only affects the use of EOR services to hire foreigners and is silent on the use of such services to hire Singapore citizens or permanent residents.
EP qualifying salary increase
EPs are work passes for foreign professionals, managers, and executives. The benchmark for the EP qualifying salary is based on the top one-third of local PMET (Professionals, Managers, Executives, and Technicians) wages, to ensure that EP holders are of high quality.
From 1 January 2025, the EP qualifying salary for new applications will increase from at least SGD 5,000 to at least SGD 5,600 per month (increases progressively with age from age 23, up to SGD 10,700 at age 45 and above).
For the financial services sector, the EP qualifying salary for new applications will increase from at least SGD 5,500 to at least SGD 6,200 per month (increases progressively with age from age 23, up to SGD 11,800 at age 45 and above).
The revised EP qualifying salary will also apply to the renewal of EPs that are expiring from 1 January 2026.
LQS threshold increase
All companies hiring foreign workers in Singapore are required to pay all their local workers at least the LQS (or where applicable, Progressive Wage Model (PWM) wages, which apply for certain sectors and occupations) to ensure that local workers are employed meaningfully.
The number of local employees paid the LQS is used to calculate a firm’s Work Permit (work pass for skilled and semi-skilled migrant workers) and S Pass (work pass for skilled workers) quota entitlement.
The LQS for full-time local workers was previously SGD 1,400 per month and was raised to SGD 1,600 per month from 1 July 2024. Companies hiring foreign workers will have to pay all their local workers the LQS of:
At least SGD 1,600 per month for full-time local workers; or
At least SGD 10.50 per hour for part-time local workers.
A Singapore citizen or permanent resident employee employed under a contract of service, including the company's director, is now counted as:
1 local workforce if they are paid the LQS of at least SGD 1,600 per month; or
0.5 local workforce if they are paid at least SGD 800 but less than SGD 1,600 per month.
The Dependency Ratio Ceiling or quota, which is the maximum ratio of foreign workers to the total workforce that a company in a given sector can employ, has remain unchanged with the new LQS requirement.
Lockton comments
Overseas companies with foreign employees hired through EORs in Singapore with no local presence in Singapore should take immediate action to comply with the clarification and consider alternative solutions such as setting up a representative office or incorporating a local entity to hire affected employees directly. The local representative office or entity could then apply for work passes for the employees, keeping in mind the eligibility requirements for such work passes and any applicable foreign worker quotas.
Under such alternative solutions, a transfer of employment from the EOR may be necessary and would impact the benefits applicable to the affected employees. If businesses need to apply for new work passes for affected employees, they may also need to consider the expected increase in EP qualifying salary and the recent increase in LQS threshold.
Please contact your Lockton Global People Solutions team if you wish to discuss the changes or the potential impact on your employees’ benefits.
TO INCLUDE
Clarification on use of EORs by overseas companies for foreign employees:
Press release on updates in EP qualifying salary and Local Qualifying Salary:
COS Foreign Workforce Policy Factsheet (mom.gov.sg) (opens a new window)
Work passes in Singapore:
Work passes (mom.gov.sg) (opens a new window)
Foreign worker quotas:
Foreign worker quota and levy requirements (mom.gov.sg) (opens a new window)