What Is the Foreign Worker Levy in Singapore?

Uncover insights into Singapore's Foreign Worker Levy: Understanding regulations, costs, and implications for businesses. Stay compliant, optimize workforce management.

Foreign Worker Levy

What Is the Foreign Worker Levy in Singapore?

Singapore employers have a FWL- Foreign Worker Levy imposed when hiring foreign staff.  The intention is to manage foreign worker demand with the goal to encourage prioritising contracting with local talent.The government’s stance with the levy is to answer the employers’ needs while standing behind the local workforce’s interests. 

There are two primary categories that comprise the levy include the S Pass holders and Work Permit holders. The type the employee holds and the business industry will determine the levy rates.

  • S-Pass: Singapore foreign workers that have intermediate skills carry the S pass. The levy rates for these employees will vary based on the company sector and organised in different levels. 
  • Work Permit: This structure is also tiered considering, “quota, skillset, and sector.”

How To Pay The Foreign Worker Levy

In order to remain compliant and avoid penalties, the levy must be paid promptly according to MOM regulations. The guidelines on paying the foreign worker levy follow these stipulations:

  • Due:  The foreign worker levy comes due on the 17th of the next month. For instance, if you incurred the charges in September, the levy would be due on October 17th.
  • The payment method: There is a specific payment method that must be used when paying the foreign worker’s levy noted as GIRO- General Interbank Recurring Order. Employers should apply for this account if there’s an intention of hiring foreign workers.

What Penalties Apply When Paying Foreign Worker Levy Payments Late

When paying levy payments late, the effects can not only result in financial penalties but have serious consequences for your company including legal repercussions. These will include the following:

  • A 2 percent each month or $20 minimum late payment penalty (the highest of the two) is calculated but there is a cap of 30 percent of the missed amount.
  • Existing work permit will be cancelled
  • Renewing existing permits or applying for new one will be inaccessible
  • MOM can initiate legal actions for unpaid foreign worker levies, further complicating legal issues and financial liabilities.
  • It could result in business associates, partners, or others being restricted from gaining permits. Making the correct and on time payments is vital  to avoid legal repercussions and financial penalties but to ensure a compliant work atmosphere for the staff and management.

Can An Employer Apply For A Foreign Worker Levy Waiver

Employers can apply for a waiver for foreign work levies in certain circumstances. The waiver lets employers reduce or temporarily suspend the levy for foreign workers. Some reasons employers are eligible for the application and subsequent waiver include:

  • Overseas: If the foreign worker is on overseas leave for 7+ days consecutively with a cap of 60 days in a calendar year. The employer can apply for the waiver on the MOM site once the worker arrives in Singapore. Unless MOM requires it, no documentation is required.
  • Hospitilisation: A registered Singapore doctor from a local medical facility will issue this leave. Employers can apply on the MOM site with any of these records: hospital bills showing admission/discharge; medical certificate showing hospitalisation.

The waiver can offer temporary relief from the levy for the employer from making payments. When the eligibility criteria and proper application protocol is followed you will be able to accommodate the foreign workers levy for your company. You can check the MOM website for updates and changes regarding waivers and the levy overall.

Can The Foreign Worker Levy Be Deducted As a Business Expense

The Foreign Worker Levy is a business expense that can be deducted helping reduce a business’s taxable income and how much needs to be paid in taxes.

Final Thought

Singapore employers must become aware and remain compliant with the various regulations and levies imposed by MOM- Ministry of Manpower. This includes the FWL- Foreign Workers’ Levy, a levy imposed on companies who hire foreigners striving to find employment within the country.

Some can find what’s referenced as “Singapore’s foreign worker quota system” as somewhat complex. However, once you develop an adequate understanding of the guidelines, it’s relatively simple and straightforward to remain compliant as you work toward a productive and diverse company culture.

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