Singapore continues to stand out as an ideal gateway for companies expanding into Asia due to its stable regulatory environment, clarity in governance, and strategic location. However, new entrants frequently confront major hurdles such as:
Each of these factors influences how companies establish themselves in Singapore, but challenges around workforce and HR matters are often the most immediate and visible. From managing manpower costs to navigating evolving employment pass requirements, workforce strategy sits at the centre of many expansion decisions.
Labour or manpower costs often represent one of the largest operating cost expenses in any business. In many industries globally, payroll and associated benefits may consume 15% to 30% of gross revenue. In some U.S. benchmarks, labour costs are cited as absorbing up to 70% of total business expense. At the same time, employment passes are becoming harder to secure, with stricter salary thresholds, new evaluation frameworks, and closer scrutiny of employers.
Against this background, regulation administration of measures like the Foreign Worker Levy (FWL) and varying requirements for the Employment Pass (EP) are essential to workforce strategy and a decisive influence on recruitment decisions for foreign businesses moving to Singapore.
The Foreign Worker Levy (FWL) in Singapore serves as a policy instrument aimed at governing the employment of non-resident laborers, thereby maintaining a balanced workforce that emphasises local talent while also meeting the requirements of sectors dependent on foreign workers. This levy is applicable to holders of Work Permits and S Passes, whereas holders of Employment Passes are excluded from its provisions.
The FWL functions through a tier structure of levies linked to the Dependency Ratio Ceiling (DRC). The DRC is the maximum level of foreign workers a firm is limited to employing relative to Singaporeans as stipulated by the government. Staying below the level of DRC means firms pay standard levy rates, but working above the level of DRC means payment of significantly higher charges. This offers a financial disincentive which balances workforce composition and ensures controlled foreign labor use.
|
Construction |
83.3% |
|
Process |
83.3% |
|
Marine Shipyard |
77.8% |
|
Manufacturing |
60% |
|
Services |
35% |
Staying compliant with these thresholds is imperative for workforce planning, as exceeding them quickly increases costs.
Beyond the DRC, levy rates differ across sectors and skill levels. These costs, which typically range from a few hundred dollars per worker each month, directly influence hiring decisions and workforce mix. For instance, basic-skilled workers in sectors such as construction or services may attract levies of over SGD 600 per month, while higher-skilled workers are levied at lower rates.
Businesses expanding into Singapore often face challenges in managing Singapore’s Foreign Worker Levy due to the complexity of the process. The structure of the regulations includes tiered levy charges; dependency ratio ceilings (DRCs); and industry-based quotas, which quickly becomes burdensome for companies without dedicated compliance departments.
The financial risk for this is significant - by going over DRC thresholds or engaging a disproportionate share of basic-skilled workers, the company may bring about a drastic increase in monthly costs, thus reducing their margin of profit. Beyond these financial factors, companies also need a strategic take on workforce planning. Balancing foreign employment optimally against local recruitment often proves problematic, particularly for sectors with a local talent gap.
As an added challenge, the levy rates as well as the quotas get revised and updated periodically by government bodies, requiring companies to stay adaptable and active in monitoring change so as not to incur penalties or go over budget.
Beyond levy compliance, foreign entities also face growing hurdles in securing Employment Passes (EPs) for their skilled professionals. Singapore continues to welcome global talent, but the standards have risen considerably in recent years.
The Employment Pass (EP) is the primary work visa for foreign professionals, managers, and executives who want to work in Singapore. It allows companies to bring in skilled talent to support operations, but it is tightly regulated to balance foreign participation with local workforce development.
Applicants must meet criteria such as a minimum qualifying salary and acceptable qualifications, while employers must show fair hiring practices. Unlike the Foreign Worker Levy, which applies to Work Permit and S Pass holders, the EP focuses more on individual eligibility and company track record.
These changes mean foreign companies can no longer treat the EP as a routine administrative step. Instead, careful planning and compliance with frameworks such as Singapore’s Fair Consideration Framework are essential. Employers that fail to obtain the proper passes risk penalties, reputational damage, and even restrictions on future hiring.
While manpower costs and employment pass regulations may seem complex, they do not have to be barriers to growth. Many foreign companies begin their Singapore journey gradually, starting with project-based engagements or pilot teams before deciding on a permanent setup.
To support this, our team offers practical options to support businesses at every stage of their journey
This integrated approach means that foreign companies can focus on growth while having confidence that their workforce, regulatory, and structural needs are aligned from the start.
Expanding into Singapore involves managing a combination of workforce laws, corporate governance, and market conditions. By tackling labor expenses, employment visa regulations, and overall organisational and tax factors, companies can progress with certainty and assurance.
At RSM, our goal goes beyond delivering services. We serve as business advisors to growing businesses —giving perspective, insight, and solutions that correspond to the stage each business is in its growth journey. Leveraging regional expertise and a cohesive advisory structure, our specialists assist foreign invested enterprises in transforming challenges into opportunities and establishing a strong base for long-term success in Singapore and beyond.
Learn more about our Asia Experts Global Expansion Services.