The government has implemented the Foreign Worker Levy (FWL) and Dependency Ratio Limit to calibrate the admission of migrant workers.
The Singaporean government established the Dependency Ratio Ceiling (DRC) for businesses and the Foreign Worker Levy (FWL) to control the inflow of foreign workers.
The Dependency Ratio Ceiling is the maximum ratio of foreign employees that can be hired by a Singapore incorporated company. This percentage varies from industry to industry and is frequently dynamic.
Employers of WP holders must also pay the government a monthly foreign worker levy (FWL). The FWL is a form of checks and balances that forces businesses to pay precedence to the abilities, credentials, and experience of their prospective employees during the hiring process.
Both S Pass holders and WP Pass holders are entitled to the Foreign Worker Levy system. Also, there is a special levy program for foreign domestic workers (FDWs).
HOW IS THE LEVY CALCULATED IN SINGAPORE?
The sector the employer/company belongs to as well as the workers’ abilities and educational background determine the amount of levy that must be paid for each worker. Employees who possess the necessary credentials and certificates from skill-based tests will be categorised as skilled workers and granted a reduction in the worker’s levy.
To establish the various tiers of foreign workers, MOM employs the following priority order:
- S-Pass holders
- Workers who are skilled have the requisite academic or test-based qualifications
- unskilled workers
For Marine, Construction & Process Sectors
The worker’s training and abilities define the FWL. Workers in other sectors are categorized as skilled or unskilled, whereas the construction sector levies are based on higher or basic skill levels.
For Manufacturing & Service Sectors
The levy amount is determined by the worker’s qualification and the DRC for the industry. Because the levies are tier-based, firms that recruit almost as many people as the maximum limit will pay more in levies.
| Sector | Quota | Dependency Ceiling Segmentation | Monthly Levyin S$ | Daily Levyin S$1 | ||
| Skilled | Unskilled | Skilled | Unskilled | |||
| Manufacturing For up to 50% of their total staff, employers in this industry are eligible for skilled levy rates. | 60% | Basic Tier / Tier 1: Up to 25% of the total workforce | 250 | 350 | 8.22 | 11.51 |
| Tier 2: Above 25% to 50% of the total workforce | 350 | 450 | 11.51 | 14.80 | ||
| Tier 3: Above 50% to 60% of the total workforce | 550 | 18.09 | ||||
| ServicesFor up to 25% of their total staff, employers in this industry are eligible for skilled levy rates. | 45% | Basic Tier / Tier 1: Up to 15% of the total workforce | 300 | 400 | 9.87 | 13.16 |
| Tier 2: Above 15% to 25% of the total workforce | 400 | 500 | 13.16 | 16.44 | ||
| Tier 3: Above 25% to 45% of the total workforce | 600 | 19.73 | ||||
| Construction | on Man Year Entitlement (MYE) | 300 | 350 | 8.22 | 11.51 | |
| MYE Exempt | 500 | 11.51 | ||||
| Process | on Man Year Entitlement (MYE) | 210 | 310 | 6.91 | 10.2 | |
| MYE Exempt | 470 | 15.46 | ||||
| Marine | Basic | 210 | 310 | 6.91 | 10.2 | |
UNDERSTANDING MAN-YEAR ENTITLEMENT
For workers from Non-Traditional Source (NTS) nations employed in the construction and process industries, the Man-year entitlement (MYE) – Ministry of Manpower (MYE) system is a system for allocating Work Permits. According to the concept, “man-years” are allotted to the primary contractor based on the cost of his project.
The MYE is designed to give the main contractor a way to monitor and control the foreign worker allocation for his project. The MYEs are subsequently given to the principal contractor’s subcontractors. The MYEs will be converted into Work Permits that are valid for one or two years.
If a worker from NTS has total relevant experience of two years or more with any company in Singapore, MYE is waived for such worker. Nonetheless, the monthly levy rate for such a worker will be higher for the employer. A major contractor who has a legitimate construction contract may apply to the Work Pass Division for Man-Year Entitlements.
SKILLS DEVELOPMENT LEVY
Companies must pay into the Skills Development Fund, a fund that offers grants to companies that send employees to training. Any employees providing services entirely or partially in Singapore are subject to the Skills Development Levy (SDL). The SDL is capped at $11.25 for employees making more than $4,500 per month and starts at $2 for those making less than $800.
Employers who hire migrant workers must pay both the SDL and the Foreign Workers Levy (FWL).
WHEN AND WHAT ARE THE REQUIREMENTS FOR A LEVY WAIVER?
| If the worker | You need |
| attended the Onboard center's onboarding program | No paperwork is required.The waiver of the levy will be handled automatically |
| went on a trip abroad for at least seven days straight.There is a maximum of 60 days in a calendar year. | Unless otherwise requested, no documentation are required.After the migrant worker returns to Singapore, request the waiver. |
| Before you submit an application for a waiver, terminate the Work Permit if the employee decides not to return from their abroad absence | |
| was granted hospitalization leave by a doctor from a nearby medical center who is registered in Singapore. There is a maximum of 60 days in a calendar year. | Any of the following:Medical certificate showing the period of hospitalisation leave |
| Hospital bills which reflect the admission and discharge dates | |
| was kept by the police or the embassy | a letter outlining the length of custody, issued by the appropriate organization. |
| Has passed away | A copy of the death certificate. |
| Became a Singapore permanent resident | Any of the following:A copy of the NRIC |
| Approval letter from the Immigration & Checkpoints Authority (ICA) | |
| resides aboard a ship leaving the port of Singapore for more than three days in a row (for harbour-craft industry) | a declaration document from the Maritime and Port Authority of Singapore (MPA) detailing the time the employee spent on board the ship and being signed by the captain |
| Is a Malaysian serving National Service in home country/region (usually for 3 months) | All of the following:A letter from the Malaysia Authority stating the period worker is required to do National Service |
| A copy of the National Service certificate of completion |
WHEN TO APPLY FOR FWL
Only after the levy has been assessed and within one year after the levy bill, may one submit an application for the levy waiver.
HOW TO APPLY FOR FWL
One can apply for a levy waiver online if the worker went on overseas leave.
Please make sure that the requested levy waiver end date for many workers in the same application falls in the same month to facilitate processing more quickly.
If the last day of the waiver period falls on a different day of the month, they can only begin processing the application on the 21st of the month after the most recent proposed end date for the levy waiver.
If the applicant submits the application after the 21st of the month after the latest desired levy waiver termination date, the processing time is 12 working days. After they have processed each worker in the application, they will email the results of the levy waiver request.
PENALTY FOR NOT PAYING THE FWL
If an employer doesn’t pay the FWL, they could be fined in the following ways:
- 2% of the outstanding balance per month or $20, whichever is higher, as a late payment fee. The total late payment fine is limited to 30% of the unpaid levy.
- The termination of the current work permits.
- The unpaid charge will potentially be recovered through litigation.
- A refusal to grant an application for a new work permit, issue one, or renew an existing one.
- A prohibition on you, your partners, and directors seeking for work permits if you are in charge of other businesses.
For more information reach out to us at Relin Consultants – Leading Global Business Set Up Partners for more information.
FAQs
What is a foreign worker levy?
A foreign worker levy is a fee paid by employers in Singapore for each foreign worker they employ. The levy is designed to regulate the number of foreign workers in Singapore and encourage employers to hire local workers.
Who is required to pay the foreign worker levy?
Employers in Singapore who hire foreign workers are required to pay the foreign worker levy.
How much is the foreign worker levy?
The amount of the foreign worker levy depends on the sector and skill level of the foreign worker. Generally, the levy ranges from S$300 to S$950 per month.
How is the foreign worker levy paid?
The foreign worker levy is paid electronically through the Ministry of Manpower’s (MOM) online portal or by GIRO.
Are there any exemptions or rebates for the foreign worker levy?
Yes, there are exemptions and rebates for certain types of foreign workers, such as those in the construction or marine sectors. There are also rebates available for employers who hire older workers or workers with disabilities.
What happens if an employer does not pay the foreign worker levy?
If an employer fails to pay the foreign worker levy, they may be fined or face legal action. MOM may also revoke their work permit privileges.
Can the foreign worker levy be passed on to the foreign worker?
No, the foreign worker levy cannot be passed on to the foreign worker. It is the responsibility of the employer to pay the levy.
Can an employer get a refund for the foreign worker levy if the foreign worker leaves Singapore?
Yes, employers may apply for a refund of the foreign worker levy if the foreign worker has left Singapore and their work permit has been cancelled. The refund will be prorated based on the number of days remaining on the worker’s work permit.
