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Singapore - Labour costs could soar by up to +20% in some sectors

03 January 2014

The increase in foreign worker levies and labour shortages could send costs in some sectors soaring by as much as +20% this year, according to business leaders in Singapore.

From 1 January, firms that want to hire foreign professionals on an Employment Pass (‘EP’) must pay them at least SGD 3,300 (USD 2,605) per month, up +10% from the previous threshold. This applies to young foreign graduates. Older and more experienced applicants must earn even more to get an EP.

From July, the monthly levies for foreign workers on work permits and S Passes (a visa for mid-level skilled workers such as technicians) will also increase in the service, manufacturing, construction, process and marine sectors. Employers of S Pass holders can expect an average increase of SGD 240 (USD 190) in the monthly levy between now and 2013. The current levy of between SGD 110 to SGD 150 (USD 87 to USD 119) will go up to SGD 300 to SGD 450 (USD 237 to USD 356) in two years.

“The tighter labour market and the full force of levy measures are going to make it a pressuring environment for companies,” said Kurt Wee, president of the Association of Small and Medium Enterprises.

Given the high proportion of foreign workers in the construction sector, business in the industry are bracing themselves for a substantial increase in labour costs. Or Toh Wat, managing director of construction firm OKP Holdings, described the increase as “an all-time high”, and firms that hire more lower-skilled construction workers will be harder hit. Or expects the company’s overall labour costs to go up by +10% to +20%. Service sector firms like restaurants will continue to face “a tremendous labour crunch”, warned DBS economist, Irvin Seah.

From August, employers will also face additional bureaucracy by having to firstly advertise job openings for 14 days on a new, free portal run by the Singapore Workforce Development Agency before they can turn to foreign EP holders. This “fair consideration framework” has been put in place by the Ministry of Manpower following rising numbers of complaints about hiring discrimination against local workers, particularly in the banking and IT sectors. The advertising rule will apply to companies with more than 25 workers and which are seeking foreign professionals, managers and executives for jobs paying up to SGD 12,000 (USD 9,475).

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