Increasing the Foreigners Minimum Salary: How Will This Help Singaporeans?
Foreign Workforce in Singapore
Ever wondered how many Employment Passes (EP) and S Passes are there in Singapore?
|Total Foreign Workforce|
(excluding FDWs and construction)
To visualise it,
Employment Pass (EP) and S Pass Changes
In an attempt to encourage employment opportunities for Singaporeans, the minimum monthly salary of Employment Passes (EPs) for foreign professionals will be increased.
This will lead to an increment in the cost required for companies to hire foreign professionals, increasing the incentive of hiring a local.
|Type of Pass||Minimum Qualifying Salary|
|From 1 May 2020||From 1 September 2020|
(Candidates in their 40s)
|About double the minimum qualifying salary for the youngest applicants|
This is an attempt to slow down the growth of Employment Pass holders in Singapore.
This change in Employment Pass (EP) and S Pass has recently been heavily debated on the President’s Address.
Is This the Best Solution?
Is the increase in the minimum salary for Employment Pass holders the best strategy moving forward?
Workers’ Party MP Jamus Lim recently contended that the slowdown in terms of rate of EP and S Pass being issued can be subjective.
- He stated that the base effects of the rate need to be taken into account. Eg. A 20% increase of 50 is 10 people, whereas a 10% increase from 200 people is in fact, 20 people, which is larger in absolute terms.
- Jamus also mentioned that many positions are already being secured by foreign PMETs, which is why the slowing down of EP and S Pass being issued is just a natural process.
To which, Manpower Minister Josephine Teo emphasized that the Ministry of Manpower is always looking at the best way to help Singaporeans stay in employment, stay out of unemployment and over time, achieve income growth and retirement adequacy.
Who Would You Hire?
In order to find out the effectiveness of this policy, you may want to put on the thinking cap of a business and look at the cost of hiring a Singaporean and a foreign professional on Employment Pass.
Cost of Hiring Employees before their 40s
Here’s the monthly cost of hiring a Singaporean vs a foreign professional on employment pass:
How Much to Hire a Singaporean? How Much to Hire a foreign professional?
(On employment pass)
Base Salary Minimum monthly salary of Employment Passes (EPs)
Additional 17% of monthly wages
Example after 1 September
$3,846 + 17% CPF Contribution from employer = $4,449.82 $4,500
Example for finance sector after 1 September
$4,273.50 + 17% CPF Contribution from employer = $4,999.99 $5,000
Assuming a rather entry-level job:
Before 1 September 2020, hiring a Singaporean makes sense if the asking base salary is below $3,333 (excluding employer CPF contribution), given that the minimum salary of an employment pass is at $3,900.
With the latest update, hiring a Singaporean with asking salary of below $3,846 makes sense. For the finance sector, that number will be $4,273.50.
Cost of Hiring Employees after their 40s
Using the same logic, we can calculate the cost of hiring for more senior positions too, assuming the minimum qualifying salary of Employment Pass for candidates in their 40s to be exactly double.
Here’s the monthly cost of hiring a Singaporean vs a foreign professional on employment pass after 40 years old:
|How Much to Hire a Singaporean?|
|How Much to Hire a foreign professional?
(On employment pass, after 40)
|Base Salary||Minimum monthly salary of Employment Passes (EPs)|
|Additional 17% of monthly wages|
|Example after 1 September|
|$7,692.31 + 17% CPF Contribution from employer = $9,000||$9,000|
|Example for finance sector after 1 September|
|$8,547.01 + 17% CPF Contribution from employer = $10,000||$10,000|
From the looks of it, the increase in the minimum salary for Employment Pass (EP) can allow locals to be more competitive in terms of salary. More positions of various experience level will open up, now that it makes sense to hire local with this widen the salary range.
Are Singaporeans at a Disadvantage Compared To Foreign Hires?
When we look at the disadvantages that a Singaporean will face as compared to their foreign counterparts, we can only give a superficial answer due to the lack of hard data and surveys done on this issue.
Do note that these are some of the consensuses that were shared online and when we were discussing with our friends.
For Singaporean males, National Service (NS) liability can sometimes be a huge burden to the employee.
For a start, the National Service set the timeline of Singaporean males backwards by two years. This means that they enter their tertiary education later, and in turn, enter the workforce at an older age.
I am not sure how much this will impact hiring, but someone becoming a manager at 28 may appear more competent against someone who manages to do so at 30 years old for a start.
The need to clear their ICT every year can also be of concern to an employer, especially when the company is too small to have someone away, serving the nation for weeks.
Of course, the company will receive a reimbursement from the government when their employee is away from reservist. But realistically, this will boil down to how effective an employee is and how important he is to the growth of the company.
Worker A generates total revenue of 3 x his salary for his company.
When he is away for a 2-week reservist, the company receives 0.5 of his salary, but incur a drop in revenue of 1.5 times his salary.
It is also important that emphasize the importance of National Service and reservist in Singapore. Policies to instil such mentality in employers will also benefit everyone going forward.
Why Are Singaporeans Not as Welcoming to Foreign Talents/Workers?
Singaporeans are no longer as welcoming when it comes to foreign talents and workers. In the already competitive jobs market, Singaporeans many times find themselves unfairly pegged against their foreign competitor.
Imagine spending your life in Singapore, contributing to its growth and even serving the nation just to lose your dream job to someone who just arrived.
On top of that, the number at which immigrants are being accepted since the 2011 GE is enough to create a possible cultural impact on Singapore (foreigners keeping to their own cliques, foreigners implementing their work culture in the company).
Add social media into the mix that amplifies any xenophobic behaviour, such tension and penned up anger amongst Singaporeans now have an avenue to be released.
It doesn’t take much for one bad example from “team foreign talent” to kick start a whole other wave of toxicity in the community.
Remember Ramesh Erramalli?
The JP Morgan employee verbally abusing his condominium’s security guard over a parking saga had all his information dug out by Netizens and there were petitions calling for him to be fired.
Two Wrongs Don’t Make a Right
We know very well that, given our current ageing population and low birth rate, making Singapore a less desirable working environment for foreign professionals will do more harm than good in the long run.
We also need to identify that National Service is extremely important to our nation, and it should always be one of our top priority as Singaporean.
Lastly, there is no perfect policy. The implementation of a new policy will also take time, and an even longer time before we can experience and measure the impact of it.
If we can quote Senior Minister, Tharman Shamugaratnam,
” No one should assume he has a monopoly over compassion.”
I guess we all want the best for Singapore, and going on unnecessary negativity to affect someone else’s life is probably not the best way forward.
The change can first start with us.
- Engage in constructive feedback through a proper channel.
- Constantly upgrade ourselves to be more competitive in the jobs market.
- Be so good at your job and it is brainless to not give you a promotion.
We are currently in the midst of a crisis, and the only way forward is change (be it ourselves and policies).