Assessing the Impact of the Recent Increase in Minimum Qualifying Salaries for Foreign Employees on the Singapore Hiring Market

By Seow Hui Goh, Natasha Cheng

09-2020

It was announced on 27 August 2020 that w.e.f. 1 September 2020, the minimum qualifying salary for new Employment Pass (EP) applications will be raised to S$4,500 (from the existing S$3,900), with a further increase to S$5,000 for new EP applications in the Financial Services sector w.e.f 1 December 2020. W.e.f 1 October 2020, the minimum qualifying salary for new S-Pass applications will be raised to S$2,500 (from the existing S$2,400). The qualifying salaries for older and more experienced foreign applicants will be adjusted upwards (amount unspecified).

Hiring choices and the candidate selection process will also come under greater government scrutiny. Previously, there was no job advertisement requirement as a prerequisite to S-Pass applications; w.e.f. 1 October 2020, a company seeking to make an S-Pass application must show that it has advertised the role on the MyCareersFuture.sg portal for 28 days. As a prerequisite to EP applications, companies must show that they have advertised the role on the MyCareersFuture.sg portal for at least 28 days (double of the existing 14 days). The thought process behind a decision to hire a foreign applicant (especially where there are local applicants for the role) is very likely to be tested.

These measures have added to the complexities of HR practice in Singapore.

In the short term, companies will experience a modest to sharp increase in their salary cost, depending to the extent of their reliance on foreign employees. Such costs may be managed by reducing the foreign employee headcount, or where this is not possible, reducing overall salaries – or possibly downsizing, restructuring and retrenchment, as a measure of last resort.

In the medium to long term, companies may start to find the following alternative options attractive:

  1. overseas remote working, to the extent commercially feasible;

  2. segregate/outsource more functions;

  3. engage employers-on-record;

  4. engage individuals on a contractor or "gig" basis;

  5. increased reliance in AI and technology.

Each option should be weighed carefully before implementation. For example, in the case of overseas remote working, apart from practical and commercial considerations, companies and employees need to consider the implications from a personal taxation and employment law viewpoint – in particular, the position under the laws of the country in which the individual is physically located. By way of another example, engaging employees on a contractor basis may not be a panacea, given the risk that these employees may be classified as de facto employees, depending on the level of control exerted over them. The "employee-contractor" debate is likely to gain prominence in Singapore with the rise of the gig economy. The risk of a foreign individual being held to be a company's de facto employee could lead to penalties under the Employment of Foreign Manpower Act of a fine not less than S$5,000 and not more than S$30,000 or to imprisonment for a term not exceeding 12 months or to both on first conviction of the employment of a foreign employee without a valid work pass.

To avoid any pitfalls arising from the advertising requirements, the need to maintain pre-hiring documentation cannot be over-emphasised.

The conversation in Parliament on foreign employees is an evolving one with a profound impact on HR practice in Singapore. The Bird & Bird Singapore Employment team would be glad to discuss / develop your HR strategies to navigate the stricter regulatory landscape.

This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. Please note that the information in this article is accurate as at 3 September 2020. We will continue to monitor the situation and provide updates on any changes as soon as these are communicated to us. Please contact our lawyers if you have any specific queries.