Govt acts to curb hiring of unskilled foreigners; Enhancements to Foreign Manpower Policy in Budget 2013

Levy on contractors who bust foreign worker quota to rise to $1,050 in 2015
By Toh Yong Chuan, The Straits Times, 27 Feb 2013

IN A move to curb contractors from hiring unskilled foreign workers beyond their quota, a hefty $950 monthly levy will be imposed on them from next year.

In 2015, it will cross the $1,000 psychological barrier, with the monthly rate set at $1,050, the Ministry of Manpower (MOM) announced yesterday.

Currently, contractors pay $650 for every unskilled foreigner they hire beyond the approved number for a building project.

These new rates are the most severe on the list of increased levies for various sectors as the construction industry is among the most dependent on foreign workers and the slowest to improve its productivity.

The list made public yesterday comes one day after Budget 2013 announced that levies for unskilled foreign workers will be raised to slow the inflow of foreigners and help lift productivity.

The service sector, also heavily reliant on foreign workers, will face higher levies too.

But the increase is less severe.

The levy for a restaurant hiring an unskilled foreign worker will be up to $700 next year and up to $800 in 2015. The maximum levy now is $550 a month.

The service sector, however, will face a double whammy because its foreign worker quota will be cut from July this year.

But firms in services and manufacturing that hire skilled foreign workers will not be subjected to higher levies from next year.

In explaining the new round of increases, Acting Manpower Minister Tan Chuan-Jin said it will drive Singapore towards a "manpower-lean" economy. "This goes beyond substituting foreign manpower with local labour," he added as he reiterated a point made by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in his Budget speech.

Mr Tharman had said the pace of growth of foreign workers must be slowed as the economy restructures.

Singapore has been gradually tightening the inflow of foreign workers since 2010, with reduced quota levels and increased levies.

Besides levies, two other measures that are expected to bring relief to firms were also announced.

One is for skilled foreigners who hold an S Pass, whose minimum salary eligibility has been raised from $2,000 to $2,200.

While the higher salary will kick in for new applicants from July, existing S Pass holders can renew their passes at the current $2,000 until the end of this year, but only if they stay with their present employer.

The other measure is an extension of a pilot scheme that allowed hotels to hire foreign workers to perform more than one job.

From July, all companies in the service sector will be allowed to do it. Currently, the worker must be hired for a specific job.

More details on it will be given during the debate on the ministry's budget next month, said MOM yesterday.

Mr Zainudin Nordin, who heads the Government Parliamentary Committee for Manpower, said companies have to tap schemes like the new Wage Credit Scheme to adjust and adapt.

But M-Luck Management, which provides hotels with chambermaids, said it will pass on the higher costs to customers.

Its chief executive Frederick Wong sees a crunch in 2015 as Singaporeans shun such work.

"With over 8,000 hotel rooms being built from now until 2015, that's another 800 housekeeping jobs. How are we going to find the 500 Singaporeans to do it if we tighten the tap on foreigners?"

Services firms can deploy workers in several roles
Companies given more flexibility as foreign worker curbs take hold
By Janice Heng, The Straits Times, 27 Feb 2013

A SCHEME to allow firms in the service sector to deploy foreign workers in multiple roles will begin on July 1, even as they get hit by a double whammy of higher worker levies and tighter quotas in the next few years.

To help them boost productivity and cope with reduced labour, the Jobs Flexibility Scheme for Productivity will let all services firms give foreign workers several different job scopes. This is not allowed now as work permits are for specific job roles.

Details of the scheme, which was mentioned in Monday's Budget statement, were given by the Ministry of Manpower (MOM) yesterday. It will consult the National Trades Union Congress and the Singapore National Employers Federation (SNEF) to draw up implementation guidelines for bosses. More details will be revealed in next month's Committee of Supply debate.

Yesterday, business groups welcomed the extension of the scheme - which was piloted in the hotel sector last October - to the whole services sector.

"This enables companies to use their manpower more efficiently instead of employing more foreign workers just to do a specific job," said SNEF executive director Koh Juan Kiat.

Association of Small and Medium Enterprises (Asme) president Chan Chong Beng, too, said the move will help firms boost productivity and give them flexibility.

The help is welcome, he added, given the harsh measures imposed on the services sector.

The sector's Dependency Ratio Ceiling - the maximum proportion of foreigners in a firm - will be cut from 45 per cent to 40 per cent on July 1.

The move will hit about 14,000 firms, or about 40 per cent of the industry, said MOM. But firms which are over the limit now can keep existing workers till 2015.

On Monday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam described the cut as a "painful but necessary step" for a sector which has seen continued growth in foreign-worker numbers, and lagging productivity levels.

Monthly levies will also rise: By 2015, services firms will have to pay $450 to $800 for each unskilled Work Permit holder.

The services sector is also the only one to face tighter S Pass quotas. Now, such mid-skilled employees can form 20 per cent of a firm's workforce. But from July, they can make up only 15 per cent of the headcount - though existing S Pass holders above this limit can be kept until 2015.

But the staggering of the implementation of these measures is cold comfort to bosses facing labour shortages.

"Whether it's now or by 2015, I think it's hurting firms," said Asme's Mr Chan.

The Restaurant Association of Singapore said the levy hikes and quota cuts will be devastating: "We envision that growth and expansion in the industry will slow down with more businesses closing down, especially for budding entrepreneurs who find it difficult to sustain their businesses."

Incentives not enough to offset increased levies: construction firms
By Wong Siew Ying, Channel NewsAsia, 26 Feb 2013

The government has further tightened foreign worker policies in the recent Budget announcement as Singapore continues to restructure its economy.

While there are incentives to help businesses, some construction firms say it is not sufficient to fully offset the increase in foreign worker levies.

The Singapore Contractors Association warns that the move will drive up cost and the manpower crunch could result in project delays.

Construction demand is expected to remain strong in the coming years, with a steady pipeline of infrastructure developments ahead, including housing and MRT projects.

But the Singapore Contractors Association says the industry may not be able to cope with more projects amid labour shortage.

It could even put some small contractors out of business and the association estimated that at least 10 per cent of firms in the industry are struggling.

It adds that the move to increase foreign worker levies in 2014 and 2015, coupled with more expensive raw materials, will increase cost further.

Industry players say construction cost has risen by 5 to 10 per cent in recent years. The construction industry currently hires some 270,000 foreign workers.

Dr Ho Nyok Yong, president of Singapore Contractors Association, said: "For projects already secured, normally projects will last two, three years; some of the bigger ones will last four, five years. For those projects, we didn't count in the extra levies, so we will incur extra cost. All the contractors' profit margins will get eroded - now it is a very competitive market."

Meanwhile, Lian Beng Construction expects about a third of its projects to be affected by the tighter foreign worker policies.

Lian Beng employs about 600 foreign workers at 14 of its work sites.

As a result of the manpower crunch, Lian Beng says it will be more selective when it comes to taking on new projects, favouring those with better margins.

The firm has taken steps to raise productivity, but it says the government can also help, including easing queue times at the dumping ground in Changi, where excavated materials from construction sites are disposed of.

Jeffrey Teo, construction director at Lian Beng Construction, said: "We only have one for the whole private sector, the queueing time can be as good as three hours. My poor drivers have to wait for three hours. Out of eight trips previously, now they can only do three or four trips."

Meanwhile, some operators in the services industry are taking the cut in dependency ratio ceiling in their stride.

Sakae Holdings, for instance, will install a new "self-serve second-tier belt" at all its 50 dining outlets in Singapore to cut manpower needs.

The new system, which costs about S$250,000, will deliver customers' orders to their table. 

In 1999, the restaurant chain introduced the interactive menu at its outlets, which resulted in a 30 per cent reduction in headcount.

Douglas Foo, CEO of Sakae Holdings, said: "We utilised the interactive menu because we foresee that in a developed economies, this will be a real challenge.

"Singapore, having gone through various phases, has come to the phase where we need to change some business models, on how we are going to approach or run a business. When we go and dine in a restaurant, there may be changes. For example, in Japan, you have to do a lot of things by yourself."

Industry players say other ways to boost productivity in the food and beverage sector include redesigning jobs, encouraging staff to multi-task, as well as streamlining kitchen functions and work processes.

Squeeze on 70,000 mid-skilled foreigners
About one in two S Pass holders will be affected by new approval system
By Janice Heng, The Straits Times, 28 Feb 2013

ABOUT 70,000 foreign workers are at risk of not having their S Passes renewed when they expire.

This is because a new tiered system for approving S Passes is being introduced, which stipulates more experienced pass holders have to be employed at higher pay to continue working here.

The policy, said experts, is aimed at levelling the playing field for Singaporean workers, who may be losing out to foreign counterparts with the same qualifications and experience because the latter command lower pay.

The Ministry of Manpower (MOM) said about one in two S Pass holders will be affected by the new system.

There were 142,400 S Pass holders here as at the end of last year. S Pass holders are mid- skilled foreign workers who earn at least $2,000 a month. This will be raised to $2,200 from July.

The new tiered system will also kick in from the same date.

Older applicants who have better qualifications and more years of experience will now need to be employed at higher minimum pay in order to secure their S Passes.

Exactly how much higher will, however, not be known because MOM will not be giving details of these salary tiers.

The ministry said the tougher requirements are meant to "level the playing field for locals" and encourage employers to bring in "higher calibre S Pass holders".

Mr Zainudin Nordin, who chairs the Government Parliamentary Committee for Manpower, said it is about making firms pay the true value of S Pass holders, and "to be fair to our locals".

Employers told The Straits Times yesterday that the changes will force them to relook the pay of their mid-skilled foreign workers. Some prefer to hold on to experienced S Pass holders instead of finding local replacements, and would raise pay if need be.

Many such workers at construction firm HSL Constructor already earn $2,400 to $2,500, which managing director Lim Choo Leng hopes will be high enough for their passes to be safe.

But he is open to raising their pay, adding: "We are so short of people already. If they are good, we will try to keep them."

The story is similar in the food and beverage industry, where S Pass holders tend to be managers.

As many firms there hire experienced S Pass workers at low salaries, "a large jump" in pay might be needed just to keep them, said Fish & Co deputy managing director Hoo Hoe Keat.

Bringing in young foreigners on minimum S Pass pay is not preferred, as they will have to be trained from scratch, he added.

OCBC economist Selena Ling expects the "wage shock" to be significant, especially for industries where local replacements are hard to get.

Bosses said they hoped for more clarity on the salary tiers. Though the MOM is unlikely to set out explicit criteria, its online Self Assessment Tool will be updated in a few months, letting bosses assess the eligibility of workers under the new criteria.

Uncertainty, however, is no stranger to S Pass holders such as Ms Luningning Estabillo, 32.

The Filipino assistant restaurant manager at Fish & Co had her S Pass renewed last month, but some of her friends have not been as lucky. Some on three-year contracts could not get a renewal after the two-year term. "You're thinking you still have one more year to work, but then you have to go home, unprepared," she said.