CXC GlobalContact us Connect with us
CXC Global
EnglishCXC Global
CXC Global

Foreign Worker Levy: What is it?

Compliance & Contractor Classification
Industry Resources & Trends
CXC Global5 min read
CXC GlobalApril 10, 2023
CXC Global

Being one of the most developed economies in Asia, it is no surprise that Singapore attracts talents across the region – or across the world, for that matter. To regulate the number of foreign workers in Singapore, the Singaporean government utilises foreign worker quota restrictions and imposes a foreign worker levy. What exactly is a foreign worker levy and what does this scheme encompass?

In this article, we will address your questions about the foreign worker levy (FWL), how it is calculated, what the scheme is all about, and the adjustments made by the Singapore government to help businesses tide over the challenges caused by COVID-19.

What is a foreign worker levy?

Simply put, Singapore-registered businesses that hire foreign workers under S Pass or work permits are required to pay a monthly levy to the government. While companies are required to contribute to the Central Provident Fund (CPF) of Singapore residents, these CPF contributions are not required for foreign workers.

Once a foreign worker becomes a permanent resident, they will be under the CPF scheme, and the employer will cease to pay the monthly foreign worker levy. Businesses start paying the levy from the day the work permit or S Pass is issued and ends once the permit is cancelled or has reached its expiration.

What is the dependency ratio ceiling?

To understand how the foreign worker levy is calculated, we also need to understand what the dependency ratio ceiling (DRC) is. The DRC, or quota, is the maximum ratio of foreign workers to the total workforce that a Singapore-registered company in a given sector is legally allowed to employ.

CXC Consulting Service

How is the levy rate calculated?

The Ministry of Manpower (MOM) has stipulated the monthly levy rates for different sectors. If the work permit holder is not employed for a full calendar month, that is when the daily levy rate applies. To check the foreign worker levy you need to pay, businesses must be aware of two factors: first, the foreign worker quota or the number of S Pass and work permit holders hired; and second, the foreign worker’s educational qualifications and skills.

The levy rate for foreign workers in Singapore will also depend on the sector in which the employing company operates. The current monthly levy requirements per sector are as follows:

  1. Construction. Under this sector, the levy is determined by the foreign worker’s qualification and skills and is thus charged based on whether the foreign worker is higher-skilled or basic-skilled.
Malaysians and NAS1 – Higher-Skilled$300$9.87
Malaysians and NAS – Basic-Skilled$700$23.02
NTS2 and People’s Republic of China (PRC) – Higher-Skilled, on MYE3$300$9.87
NTS and PRC – Basic-Skilled, on MYE$700$23.02
NTS and PRC – Higher-Skilled, MYE waiver$600$19.73
NTS and PRC – Basic-Skilled, MYE waiver$950$31.24

1NAS = North Asian sources (NAS), or those coming from Hong Kong (HKSAR passport), Macau, South Korea, and Taiwan.

2NTS = Non-traditional sources (NTS), or foreign workers coming from India, Sri Lanka, Thailand, Bangladesh, Myanmar, and the Philippines.

3MYE = man-year entitlement (MYE) is a work permit allocation system for workers from NTS countries and PRC.

  1. Manufacturing. The foreign worker’s qualification and the DRC or quota collectively determine the levy amount.
QuotaBasic-skilled – monthlyBasic-skilled – dailyHigher-skilled – monthlyHigher-skilled – daily
Basic Tier/Tier 1:Up to 25% of the total workforce$370$12.17$250$8.22
Tier 2:Above 25% to 50% of the total workforce$470$15.46$350$11.51
Tier 3:Above 50% to 60% of the total workforce$650$21.37$550$18.09
  1. Marine Shipyard. Like the construction sector, the levy is determined by the worker’s qualifications and skills.
CategoryMonthly levy rateDaily levy rate
  1. Process. Like the construction and marine shipyard sector, the levy is determined by the worker’s qualifications and skills.
Higher-skilled, on MYE$300$9.87
Basic-skilled, on MYE$450$14.80
Higher-skilled, on MYE waiver$600$19.73
Basic-skilled, on MYE waiver$750$24.66
  1. Service. Like the manufacturing sector, the foreign worker’s qualification and the quota together determine the levy amount.
QuotaBasic-skilled – monthlyBasic-skilled – dailyHigher-skilled – monthlyHigher-skilled – daily
Basic Tier/Tier 1:Up to 10% of the total workforce$450$14.80$300$9.87
Tier 2:Above 10% to 25% of the total workforce$600$19.73$400$13.16
Tier 3:Above 25% to 35% of the total workforce$800$26.31$600$19.73

Levy rates are not fixed; they are regularly reviewed and adjusted. MOM has shared the upcoming levy rates for two sectors, the construction and process sectors, that will be effective from 1 January 2024.

The foreign worker levy rebate

In 2020, the Singapore government announced a $250 foreign worker levy rebate for all work permit holders across the construction, marine shipyard, and process sectors. Initially set to expire in December 2021, the rebate was introduced to help the aforementioned sectors overcome the challenges brought about by COVID-19. Among the challenges faced by these sectors are increased cost, and manpower shortages.

The foreign worker levy rebate has been useful in retaining existing workers and bringing in new work permit holders from lower-risk countries.

The good news is that MOM has announced a foreign worker levy rebate extension until March 2022. MOM is yet to announce if it has determined the need to further extend the rebate. The existing waiver of foreign worker levy for all foreign workers has also been extended until December 2022. The levy is waived while the foreign worker is serving his stay-home notice or is under the residential onboarding programme at migrant worker onboarding centres.

Hiring foreign employees in Singapore

An Employer of Record (EOR) is a quick and reliable solution for complying with the regulatory requirements that are essentially part of hiring foreign workers in Singapore – including the foreign worker levy.

An EOR is a specialised workforce management firm that assesses, complies, and manages all the legal responsibilities of hiring and managing staff on behalf of your business. Working with an EOR will ensure that the foreign worker complies with the right to work assessments and handle the proper work authorisation to get them started.

CXC EOR AOR Case Study

If you hire foreign workers through an EOR, the worker is registered as an employee of the EOR, yet they carry out their work duties as if they are registered under your organisation.

An EOR is an ideal solution if you want to hire foreign workers in Singapore and have not yet set up a local entity for your business, or if you are merely testing out the market, and if you consider compliance and cost as major factors for your internal human resource (HR) strategy.

CXC is a global HR outsourcing organisation with more than 30 years of experience in workforce management. Our innovative and cost-effective solutions help companies gain a competitive advantage by improving efficiency while reducing risks.

Contact CXC today to start enabling your future workforce.

Share to: CXC GlobalCXC GlobalCXC Global
ShareCXC Global

About CXC

At CXC, we want to help you grow your business with flexible, contingent talent. But we also understand that managing a contingent workforce can be complicated, costly and time-consuming. Through our MSP solution, we can help you to fulfil all of your contingent hiring needs, including temp employees, independent contractors and SOW workers. And if your needs change? No problem. Our flexible solution is designed to scale up and down to match our clients’ requirements.

CXC Global