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According to the announcement by the Ministry of Manpower early this week, foreign worker levies (FWL) will be increased by S$50 to S$160 monthly per worker with effect from 1 July 2014. The measure aims to compel employers in the construction, services, manufacturing, process and marine sectors to think twice before employing basic-skilled workers beyond their quota.

Singapore company registration specialist Rikvin notes that industries that hire the highest number of foreign workers and demonstrate the lowest productivity will bear the brunt of the measures.

To that end, the construction sector will see the biggest hike in levies among industries. Along with it, the FWL will rise by S$160 over the coming two years. The levy for an unskilled construction worker holding a Work Permit will go up from S$750 on 1 July 2013, to S$950 on 1 July 2014, and to S$1,050 on 1 July 2015. As a result, the monthly levy of a basic skilled Work Permit holder in the construction sector will cross the S$1,000 mark for the first time.

In the services sector, the levy will rise by an average of S$90 per work permit holder. This signifies a rise to S$700 in 2014 and up to S$800 in 2015. On top of that, the services sector will also be subject to lower DRCs come 1 July 2013.

  In short, the policy is a harbinger that the days of cheap foreign labour are numbered; payroll costs will rise and eat into some companies’ bottom line. However, the next alternative or aim for firms is not to reinvent the wheel with Singaporean workers. Rather, they are to adjust to a new phase of development that involves working smarter.”

S Pass holders from all sectors will also be charged an FWL of S$90 per month. By July 2015, the FWL will range between S$330 and S$650. The lowest increase i.e. S$50, lies in the manufacturing sector. By July 2015, the FWL will range between S$250 and S$700 per worker.

Analysis by Rikvin shows that new players in these sectors may be less inclined to opt for Singapore company formation. Although the move seeks to compel industries to limit their reliance on basic-skilled workers, it would inevitably be painful for companies in the near term.

Commenting on the measures, Ms. Christine Lim, General Manager of Rikvin, said, “Although higher levies have been introduced last year, this year’s move is driving the nail further. In short, the policy is a harbinger that the days of cheap foreign labour are numbered; payroll costs will rise and eat into some companies’ bottom line. However, the next alternative or aim for firms is not to reinvent the wheel with Singaporean workers. Rather, they are to adjust to a new phase of development that involves working smarter.”

To that end, and understanding that the levies will be painful for the affected sectors, the government has also announced that the Jobs Flexibility Scheme for Productivity for hotels would be extended to the entire services sector with effect from 1 July 2013.

The scheme, which was introduced for the hotel industry in 2012, has proven to be beneficial to hotels when they were facing manpower issues. It has allowed hotels to assign Work Permit holders to more job functions, which in turn raise their productivity and wage.

“On the surface, this idea sounds good. However, it could be, in practice, abused by errant employers. Last year, the government has enhanced the Employment of Foreign Manpower Act, to ensure fairer working practices are employed by Singaporean firms when dealing with their foreign employers. It is our sincere hope that as more tasks are assigned to workers, they will be compensated fairly as well,” added Ms. Lim.

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