Impact of Tightened Foreign Workers Inflow on SMEs

Dr Janil Puthucheary asked the Acting Minister for Manpower (a) to date, how many SMEs have submitted appeals to retain their foreign staff whose work passes are not approved for renewal due to the tightening control on the number of foreigners working in Singapore; (b) whether there are plans to introduce a scheme to allow foreigners who have good track records and sustained work experience in local SMEs to be retained as staff under a special category pass with a longer duration, especially in industries that face difficulties attracting Singaporean workers; and (c) how many SMEs have to close down their businesses or downsize as a result of the inability to have a sustainable number of workers due to foreign staff not being able to have their passes renewed.

Since 2010, the Government has introduced policies to restructure our economy to be more manpower-lean, including tightening of foreign workforce controls. Since then, we have received about 19,000 appeals related to S Pass and Work Permit renewals from SMEs.3 About 48% of these cases were considered favourably. These were mostly temporary concessions to help companies in their transition.

We recognise that SMEs face rising business costs and tighter foreign worker restrictions. SMEs are a vital part of the economy – they make up 99% of enterprises, contribute to about 45% of GDP and 70% of employment in Singapore. That is why we have been actively engaging SMEs over the last few years, to gather feedback and understand their manpower challenges.

Another common appeal from SMEs is to be able to retain experienced staff for longer periods. They may have been unable to do so because they could not obtain the skilled R1 status for their experienced Work Permit Holders (WPHs), which would have allowed them to stay longer. This is why we introduced the market-based skills framework in July 2013 to allow Services WPHs to attain skilled status if they earn at least $1,600 and have four years of working experience in Singapore, even if there was no training course for that occupation. Employers can then retain these skilled WPHs for up to 18 years, up from the maximum of 10 years for unskilled WPHs. Employers will also enjoy levy savings, as the levy for skilled WPHs is lower than that of unskilled WPHs.

The number of companies that have ceased operations has remained steady over the past two years, with firm creation still strong.4 It is often hard

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to tell the specific reasons for firms closing. I acknowledge the underlying point that the shortage of manpower and cost pressures could tip some companies over. That is why we tighten foreign workforce controls gradually, provide transition time for existing foreign workers, and ensure that businesses have other channels of support, such as the Productivity and Innovation Credit (PIC), to help companies manage the change.5