Extent of Quota Circumvention through Phantom Worker Arrangements

Mr Kenneth Tiong Boon Kiat asked the Minister for Manpower (a) whether the Ministry has assessed the extent of quota circumvention through phantom worker arrangements; (b) whether the Ministry will consider abolishing nationality-based quotas in favour of a flat per-worker tax channelled towards local upskilling; and (c) what evidence demonstrates that the quota system has preserved local employment in sectors where locals do not take up positions.

The Ministry of Manpower (MOM) investigates “phantom worker” arrangements based on complaints and proactive on-site checks on firms. From 2024 to 2025, these have led to enforcement actions against around 100 employers who inflated their foreign worker quota via fraudulent Central Provident Fund contributions.

MOM uses both levies and quotas or Dependency Ratio Ceilings (DRCs) to keep foreign workforce numbers manageable, given our infrastructural and social capacity, and to encourage firms who hire foreign workers to be more productive. Levies collected are used to fund Government initiatives including local upskilling and productivity measures.

Abolishing DRCs in favour of a purely price-based mechanism, such as a flat per-worker tax, is not viable for two reasons. First, it would not provide sufficient control over foreign workforce numbers. Reservation wages in neighbouring, labour-supplying economies are substantially lower than resident non-Professionals, Managers, Executives and Technicians (PMET) wages in Singapore. Without DRCs, we would need to raise levies significantly to manage reliance on foreign labour. This would have a major impact on business costs and Singapore’s overall cost-competitiveness.

Second, the DRC links a firm's entitlement to hire foreign workers to the number of local workers it employs. This ensures that firms maintain a local core to access foreign manpower while deploying foreign workers in positions that few locals will take up. It also enhances workforce resilience during disruptions, such as COVID-19.

Over the years, we have tightened DRCs to take into account the scope for automation and localisation across different sectors. This aims to nudge employers to reduce reliance on foreign manpower by increasing productivity and redesigning jobs to attract local workers. Overall, this approach has supported strong local employment outcomes. Over the past five years, median gross wages for resident full-time employed PMETs and non-PMETs have grown at 3.7% and 5.9% per annum. Resident unemployment has also remained below 3% post-COVID-19.