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SINGAPORE BUDGET 2019

Singapore Budget 2019: Foreign workers quota cut for services sector

Move intended to encourage companies to revamp work processes, redesign jobs and reskill workers

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In a surprise move, the government will tighten the foreign workforce quota for the services sector by reducing the dependency ratio ceiling (DRC) and S Pass sub-DRC in two steps starting next year.

Singapore

IN A surprise move, the government will tighten the foreign workforce quota for the services sector by reducing the dependency ratio ceiling (DRC) and S Pass sub-DRC in two steps starting next year.

From Jan 1, 2020, the DRC for the services sector will be reduced to 38 per cent from the current 40 per cent, and cut further to 35 per cent from Jan 1, 2021. The DRC refers to the maximum permitted ratio of foreign workers to the total workforce that a company is allowed to hire.

However, DRCs will remain unchanged for all other sectors. In addition, the S Pass sub-DRC for the services sector will also come down, from 15 per cent currently to 13 per cent on Jan 1, 2020, and to 10 per cent from Jan 1, 2021.

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This comes as growth in S Pass and Work Permit holders in the services sector has been on the rise, climbing 3 per cent per year in the last three years. Meanwhile, growth for S Pass holders in the services sector is at a five-year high.

Finance Minister Heng Swee Keat said in Parliament on Monday: "We need to act decisively to manage the manpower growth in Services, and encourage our companies to revamp work processes, redesign jobs and reskill our workers. Our workforce growth is tapering, and if we do not use this narrow window to double down on restructuring, our companies will find it even harder in the future."

He added: "What we need is to have a sustainable inflow of foreign workers to complement our workforce, while we upgrade our Singaporean workers and build deep enterprise capabilities in these sectors. We must enhance the complementarities of our local and foreign workers."

For companies whose existing workers are in excess of the new limits, the DRC will apply once these firms apply for permit renewals.

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The announcement of the tightening of foreign manpower in the sector seemed to come as a surprise, although DBS senior economist Irvin Seah described the latest round as "more palatable" than the previous round between 2010-2015. Mr Seah said: "Companies are given more time to adjust. Moreover, there is a whole slew of policy measures to help companies enhance their technologies, redesign jobs and processes, or hire more elderly workers."

Describing the move as unanticipated, the Singapore Business Federation suggested some flexibility in implementing changes to the DRC, flagging that some services in the sector boast higher productivity and are facing local skill shortages.

Director of Empire Eats Group Howard Lo said: "The number one challenge for the food & beverage industry is access to manpower, especially skilled and dedicated manpower. What's going to happen is that concepts and offerings will be standardised around technology and you'll end up with cookie-cutter experiences."

In particular, higher-end establishments will likely suffer more from the tighter foreign worker quotas, he added. The group runs 12 F&B outlets including Standing Sushi Bar.

Meanwhile, in his speech, Mr Heng also said that previously announced increases in the foreign worker levy rates that were due to kick in from July 1 for the marine shipyard and process sectors would be deferred for another year. Foreign worker levy rates will remain unchanged for all sectors.

Lintech Engineering's general manager Lim Yu Jey welcomed the move, pointing out that the marine sector has just started to see a slow recovery after facing a prolonged downturn in recent years due to depressed oil prices. At the same time, the deferrment is a short-term measure, he noted. "In the long-term, we still need to improve our productivity."


Key points

  • Services sector DRC will be cut to 38% from Jan 1, 2020, and again to 35% from Jan 1, 2021
  • The S Pass Sub-DRC for the services sector will be reduced to 13% on Jan 1, 2020, and to 10% from Jan 1, 2021
  • Previously announced hike in Foreign Worker Levy rates for the marine shipyard and process sectors will be deferred

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