Splitting local employees between companies to increase foreign worker quotas: Is it legal?

Splitting local employees between companies to increase foreign worker quotas: Is it legal?

It was announced in February 2021 that the Singapore government would be reducing the sub dependency ratio ceiling for S Pass holders in the manufacturing sector. The reduction is to take place over two steps in 2022 and 2023, with the ceiling ratio dropping from the current 20%, to 18% in Jan 2022 and 15% in January 2023.

The change was made to sustain the impetus for restructuring and improving manpower resilience in the manufacturing sector. In September last year the minimum qualifying salary for Employment Pass applications was raised, and as of 1 May 2021, accompanying spouses on Dependent’s passes will be required to obtain an applicable work pass to work, instead of a letter of consent.

The actions taken by the Ministry of Manpower (“MOM”) are reflective of its intention to restructure and grow sectors of the economy, as well as develop local skills and strengthen the Singaporean core in businesses. These efforts are in line with government efforts to combat unemployment rates that were exacerbated by the Covid-19 pandemic. Limiting the sub dependency ratio ceilings for work pass holders is one solution to incentivise businesses to employ more Singapore permanent residents and Singapore citizens, which is a method that the MOM is keen to use to boost employment rates amongst locals.

Presently, an employer calculates their quota entitlement for work permit or S pass holders with reference to a Local Qualifying Salary (“LQS”). A Singapore citizen or permanent resident who is employed under a contract of service (i.e. is an employee and not an independent contractor/freelancer) is counted as 1 local employee if they earn a LQS of at least S$1,400 per month. If the local employee earns between S$700 to S$1,399 per month, then they count as half (0.5) a local employee. There are no regulations that mandate that the employee must be a full-time employee. Part-time employees who earn enough may also be considered as part of the head count.

Given the general shift towards telecommuting and remote working over the past year and the general tightening of foreign employment regulations, it will be interesting to see if companies try to maximise the number of local employees by employing locals on a “shared basis”. It may be the case that the employee works for multiple employers, each earning a sufficient monthly salary  to contribute towards the employers foreign worker quota entitlement. If the past year has taught us anything, it is that work does not have to be centralised in one physical location, and that there is still much potential to be tapped upon with remote working or flexible working set ups.

While it is interesting to contemplate the theoretical possibilities of such a “shared employment”, it is unlikely that we will see such a practice form. Naturally such a practice would not be applicable to every sector, and even where possible it would require a general shift in mindset towards employment and the logistics of such employment would need to be resolved. Such a concept would also be out of line with the MOM’s push for a stronger Singaporean core, as employment of Singaporeans would not be boosted. For now, employers will need to look inward at cultivating and strengthening their Singaporean core to enable them to best utilise their foreign worker quota to suit their business.

Please feel free to contact Jennifer Chih and Hannah Heng if you require more information.