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     FrontPage Edition: Sat 15 July 2006

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Foreign Worker Levy and S Pass quota to go up

Source: www.mom.gov.sg

Partial restoration of Foreign Worker Levy (FWL) cuts

Foreign Worker Levy to go up to moderate demand for foreign workers. Other changes to streamline Foreign Worker controls and make them more flexible.

The foreign worker levy (FWL) had been substantially reduced in 1998 and 1999 to help companies tide over the difficult economic environment.
Robust economic conditions over the past two years have resulted in healthy job growth and a rising demand for labour.
In 2005, the number of new foreign work permit holders increased by 43,000, the largest increase since 1997. As the economy has recovered and to moderate the strong industry demand for foreign workers, the Ministry of Manpower is partially restoring the levy cuts.
As of 1 January 2007, the skilled foreign worker levy will be raised from $100 to $150 for all sectors.
The Ministry of Manpower (MOM) is also making some adjustments to streamline FW controls and make them more flexible. These refinements are in response to feedback from various industry sectors.
The changes are as follows:
All sectors
(i) Partially restore the skilled foreign worker levy from $100 to $150 for all sectors with effect from 1 January 2007. (See Annex A for background of levy changes.)

(ii) Increase the S Pass quota for companies from 5% to 10% with effect from 1 October 2006.
Construction
(iii) Extend the waiver of Man-Year-Entitlement (MYE) requirement to Non-Traditional Source (NTS) workers who have worked with any employer for six or more years.  A levy of $300 will be imposed on these NTS construction workers who are exempted from MYE. The MYE allocation will also be reduced by 5%. These changes take effect from 1 January 2007.
Services and Manufacturing
(iv) Reduce the levy rate from $500 to $450 for hiring Work Permit holders up to 10% beyond the prevailing Dependency Ceiling (DC) in the Manufacturing and Services sectors with effect from 1 October 2006.

(v) Introduce a new DC tier of 30% to 35% for the Services sector from 1 January 2007.  All foreign workers (skilled or unskilled) employed within this new DC tier will attract a levy rate of $310. The reduced $450 levy rate will apply to the DC tier of 35% to 45% in the Services sector from 1 January 2007.  (See Annex B for summary of changes for the Services and Manufacturing sectors.)
The details of the above changes are elaborated in the following paragraphs.
Increase in S Pass Quota
The S Pass was introduced to help meet companies¡¯ needs for mid-skilled manpower.
To accord greater flexibility to companies and to facilitate the inflow of such manpower, the S Pass quota will be raised from 5% to 10% with effect from 1 October 2006.
This additional 5% will come from companies¡¯ existing Work Permit quota. This means that companies can employ more S Pass holders, in lieu of Work Permit holders, thereby improving the quality of their foreign workforce. The S Pass levy remains at $50.
Optimizing Manpower Usage for the Construction Sector
To encourage contractors to retain their experienced workers, MOM waived the Man-Year-Entitlement (MYE) requirement for NTS construction workers who have worked with the same employer for six continuous years.
To grant greater flexibility to the Construction sector, MOM will extend the MYE waiver to Non-Traditional Source (NTS) workers who have worked for six years with any employer with effect from 1 January 2007.
A levy of $300 will be imposed on these construction NTS workers hired outside the MYE system. The MYE allocation will correspondingly be reduced by 5%.
Increased Flexibility for the Manufacturing and Services Sectors
Since 1 July 2005, to allow companies greater flexibility to meet episodic surges in demand, companies may hire Work Permit holders up to 10% beyond the prevailing DC but at a higher levy of $500. With effect from 1 October 2006, this levy rate will be reduced to $450.
In addition, a new DC tier from 30% to 35% will be introduced for the Services sector from 1 January 2007. All foreign workers (skilled or unskilled) employed within this new DC tier will attract a levy rate of $310. The reduced $450 levy rate will then apply to the DC tier of 35% to 45% in the Services sector from 1 January 2007.
More..... (Annex)
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Glossary for Technical Terms
Dependency Ceiling (DC)
The DC stipulates the proportion of foreign workers a firm can hire. This prevents employers from relying too heavily on foreign workers at the expense of local employment.
Foreign Worker Levy
The levy puts a price on the employment of a foreign worker. The levy serves to moderate demand for foreign workers and to narrow the wage gap between local and foreign workers.
Man Year Entitlement (MYE) Allocation
The Man Year Entitlement allocation system for Non-Traditional Source construction workers was implemented in April 1998. Under this system, main contractors are allocated MYEs for Non-Traditional Source workers based on their project value. Over the years, MOM has made adjustments to the MYE allocation formula, including the most recent reduction in MYE allocation by 5%.
Skilled Worker
A skilled foreign worker is one who possesses at least a SPM qualification or its equivalent, or a NTC-3 (Practical) Trade Certificate [also known as ITE¡¯s Skills Evaluation Certificate (Level 1) from July 2002] that is relevant to the worker¡¯s occupation.

Source: www.mom.gov.sg Press Release 14 Jul 2006

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