Foreign Workers Levy Scheme
This article intends to provide an outline of a legislation called Foreign Worker Levy. This is a law that regulates the influx of workers coming from abroad into Singapore. This article will give you insight into the levy rate that is used to calculate for foreign workers in addition to other important factors. Singapore is a developed but growing economy that requires a diverse workforce to remain in a top class condition. The population of Singapore is not growing at a pace that is required to fulfill the demands of various industries in the country. This is the reason why Singapore resorts to importing skilled and unskilled workforce from abroad to fill the void. However, to make sure that local workforce gets its due and employers do not indulge in unfair practices such as importing cheap labor from abroad, there are two mechanisms namely Dependency ratio Ceiling (DRC), and Foreign Worker Levy (FWL) in place. These legislations prevent inflow of foreign workers in very high numbers into the island nation.
FWL compels employers to pay a monthly sum to the government for every foreign worker that they employ in their companies. DRC is a ratio that forces employers not to hire any additional foreign worker beyond a specified ratio of foreign workers to the total number of workers in their company. This ratio is different in different industries. Government also forces the employers to contribute to the provident funds of their Singaporean employees. Thus the schemes of CPF contribution and FWL work as check and balance when it comes to hiring the services of foreign workers. Employers are forced to give priority to local talent and hire foreign workers only when it is difficult to find a suitable employee at the local level.
FWL scheme features
Holders of S pass and work permits come under the purview of FWL scheme. Another similar scheme is in place for foreign workers who work as domestic help. Levy rates for holders of work permits vary depending upon the industry in which they are working. This levy is also dependent upon the educational qualifications and the skill levels of the employees. There is a concession in the levy in the cases of workers who have certificates to prove their skill levels. MOM stipulates the monthly levy rates for foreign workers in different sectors. There is even a daily levy rate for foreign workers who are not employed for a full working month. With effect from January 1, 2011, the daily levy rate is calculated by multiplying the monthly levy rate by 12 and then dividing it by 365 days.
FWL in construction, marine, and processing sectors
The amount of levy is dependent upon the educational qualifications and the skill levels of the foreign workers. In the construction sector, this levy is applied on the basis of whether the worker has basic skill levels or higher skill levels. In other sectors, levy is decided on whether the worker is skilled or unskilled.
FWL in manufacturing and service sectors
In both these sectors, the amount of levy is dependent upon the level of qualification of the employee. It is also dependent upon DRC quota. There is a tier system in place to favor employers who hire lesser numbers of foreign nationals and force employers who hire close to the higher limit in the DRC.
Man Year Entitlement system
In 1998, government of Singapore introduced Man Year Entitlement (MYE) system while issuing work permits to foreign nationals. This was done to tackle workers coming from nontraditional source countries especially in the sectors of processing and construction. Depending upon the value of a project, the contractor is given certain man years and he has to manage the influx of foreign workers based upon his allocation of man years. This MYE is given by the contractor to subcontractors. However, this MYE is waived in the case of nontraditional source workers who may have an experience of up to 2 years of working previously in Singapore. Despite the waiver, the employer has to pay a high levy rate for such a foreign national. Any main contractor can request for MYE from the authorities in WPD. Workers coming from abroad and possessing academic and skill qualifications and certificates are treated as skilled workers.
Levy in the case of holders of S pass
S pass is a special pass that is issued to workers who possess skills and qualifications that are specified by the MOM. All S pass holders are treated as skilled workers and there is no category of unskilled workers for the determination of FWL. Monthly levy in all sectors where the quota has been set as 20% is S$200 in case where the (daily levy $6.58) ratio of foreign workers is less than 10% and S$320 (daily levy S$10.53) when this ratio is between 10 and 20%.
Levy for skill development
All employers in Singapore are expected to provide funds for skill development of their workforce. This Skill Development Levy is $2 per month for employees earning less than S$800 and goes up to S$11.25 when the employee is earning S$4500 or more. This SDL is payable even for employers employing foreign workers. SDL is collected by the members of CPF board on behalf of the government. This money goes to make the skill development fund that gives grants to companies who send their employees to foreign countries for training.