Asia Tighter labour rules to reduce number of foreign workers in 2020

Tighter labour rules to reduce number of foreign workers in 2020

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Several S-pass overseas services holders in Singapore are expected to be jobless by the early part of 2020.

This is part of the country’s reduction scheme announced by Finance Minister Heng Swee Keat in his recent budget address.

Heng noted the foreign workers exceeded their five-year high S-Pass growth quota in 2018.

The government is set to minimise the dependency ratio ceiling (DRC) for this industry from 40% to 38% in January 2020. This will continue to decrease to 35% by the following year.

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From the existing 15%, the S-Pass sub-DRC for the services sector will be lowered to 13% by Jan 1, 2020. This will decline to 10% starting Jan 1, 2021.

In a previous report, when DRC hit 45% in 2013, a company hiring 20 full-time locals (citizens or permanent residents) was allowed to recruit 16 overseas workers.

Two years later, the ratio was decreased to 40%. From the 20 locals hired, three foreigners had to be removed.

The current plan to continue reducing the DRC will be 35% in 2021. This means two more foreigners will have to go whilst maintaining the same count of 20 Singaporean locals. More locals will be hired to meet labour demands.

For Filipino workers in Singapore alone, there are around 160,000 overseas workers in the services sector that have to be reduced by 2020.

A lean business strategy
For global analysts, the reduction plan was expected with the government’s move to adopt a stricter foreign worker policy.

The scheme was brought by economic restructuring approach to moderate the country’s GDP percentage.

Zac Su, Morgan Stanley’s economist, noted the trend of eliminating low-skilled foreign workers was seen amid the aggressive immigration regulations prior to the global financial meltdown. These caused some supply-side shortages, asset price inflation, and political modifications.

Based on the Ministry of Manpower data, the total foreign labour force has grown steadily from 1.32 million in 2013 to 1.37 million in 2018.

Jefferies Singapore, a financial services firm, cited the services sector drives the net employment in the country for the past three years. S-Pass and work permit holders have increased 3% each year compared to the 0.6% annual increase in the total labour force.

S-Pass holders receive a minimum monthly payment of $2,300. The average basic salaries for the entire services sector are between $2,000 and $4,000.

The tighter regulations of overseas workers are expected to be a huge lash to several labour-intensive service firms such as Sheng Siong, Jumbo, Raffles Medical, SMG, HMI, ComfortDelGro, Singapore Post, and SATS.

In these companies, labour cost is a huge consideration, which accounts for about 20% to 50% of their total revenues, according to reported estimates.

With the anticipated increased total expenses that will be incurred in hiring a local staff of about 20% compared to a recruiting a foreign worker, Singapore is planning to expand technology use to remedy the chronic lack of skilled workers.

Also, Minister Heng noted the application of the Automation Support Package in a couple of years to support companies by using robotics and IoT technologies as some of the initiatives of local workforce upskilling.

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