Salary threshold for local workers to be raised

VALERIE KOH

MARCH 7, 2017

SINGAPORE — The threshold of the full-time equivalent (FTE) salary — used to determine the number of local workers a company has, and to calculate their foreign worker quota — will be raised by S$200 to S$1,200 in two phases from July 1.

This is to ensure that local workers are employed meaningfully, instead of being hired on token salaries to allow the employer access to foreign workers.

“We review this salary threshold regularly to stay in line with income trends. If not, it means that we are gradually loosening our foreign worker controls simply due to rising nominal wages,” said Minister of State (Manpower) Sam Tan in Parliament yesterday.

[Although the govt has always rejected nominally the idea of minimum wage, we do have de facto minimum wages (such as this), that gives "incentives" to Employers to meet these "minimum wages". These may work better in practice. Of course because it is not nominally "minimum wage", it is not compulsory, and so not universal.]



Under current manpower rules, employers can hire foreign workers based on the number of FTE local workers they have, up to the Dependency Ratio Ceiling. For instance, the manufacturing sector has a ceiling of 60 per cent, which means that companies can hire six foreign workers for every four equivalent local full-timers they have.

The salary threshold will be increased to S$1,100 this July, and to S$1,200 in July 2018. Low-wage workers’ incomes are expected to adjust in line with the increment, said Mr Tan.

The last review took place in July 2013, when the salary threshold was raised from S$850 to S$1,000. The 10th percentile income then was already S$1,200, and rose to S$1,300 in 2015.

Mr Tan said: “If we do not update the salary threshold now, it will mean having to make an even larger increase in future.”