A Business Guide to the Foreign Worker Levy in Singapore

Singapore’s Foreign Worker Levy (FWL) is an important policy tool used to control the number of foreign workers in the country’s workforce. You should understand and manage this levy system to plan your workforce effectively and stay in line with government rules.

The Foreign Worker Levy

The Foreign Worker Levy (FWL) is a monthly fee that employers in Singapore must pay for every foreign worker they hire. Unlike a regular tax that simply generates revenue, the FWL is designed as a pricing tool to help control the number of foreign workers in Singapore and encourage businesses to hire local employees whenever possible.

Purpose and Function

The levy system plays several roles in the job market.

1. It helps keep a healthy balance between local and foreign workers in different industries.
2. It pushes businesses to invest in training and improving the skills of local staff.
3. Different levy rates show the government’s targeted approach for each sector, based on how much they depend on foreign workers.
4. More skilled foreign workers come with lower levy rates. This will encourage employers to bring in better-qualified talent from abroad.

Who is Subject to the Levy?

The levy only applies to the following permit holders.

• Foreign workers in lower-skilled jobs in sectors like manufacturing, construction, marine shipyard, process, and services. (Work Permit holders)
• Mid-level skilled foreign staff who meet the minimum qualifying monthly salary. (S Pass holders)

Dependency Ratio Ceiling (DRC)

The Dependency Ratio Ceiling (DRC) is a key part of Singapore’s system for managing its foreign workforce. It sets the maximum percentage of foreign workers (those with Work Permits and S Passes) that a company can hire compared to its total workforce.

This ratio changes depending on the industry and directly affects the levy rates businesses need to pay.

What is the DRC?

The DRC is shown as a percentage that tells you the highest ratio of foreign workers allowed in your workforce. For example, if your company is in the services sector where the DRC is 35%, the number of foreign workers cannot be more than 35% of your total staff.

DRC Limits

The Singapore government has set different DRC limits for each sector based on the unique needs and structure of each industry.

Sector	DRC Limit
Construction	83.3%
Process	83.3%
Marine Shipyard	77.8%
Manufacturing	60%
Services	35%

These percentages show how different industries rely on foreign workers. Sectors like construction have a higher DRC because of the type of work they do and their usual reliance on foreign labour, while the services sector has a lower limit to encourage more locals to join.

PRC Sub-Quota Restrictions

Besides the overall DRC, there are extra rules for hiring workers from the People’s Republic of China (PRC). Your company needs to follow these limits when employing PRC nationals.

1. Must not be more than 8% of your total workforce (services sector)
2. Must not be more than 25% of your total workforce (manufacturing sector)

Consequences of Exceeding the DRC

Going over your industry’s DRC limit has significant implications.

1. You will have to pay much higher levy fees for any workers above the quota.
2. It might be harder to renew existing Work Permits or S Passes.
3. The Ministry of Manpower may limit your ability to hire more foreign workers.

Calculating Your DRC Status

Your DRC status is checked by looking at:

• The number of local employees who meet the Local Qualifying Salary (LQS) requirement
• The total number of Work Permit and S Pass holders you employ

Local Qualifying Salary (LQS) and Quota Calculation

The Local Qualifying Salary (LQS) is the minimum pay a local employee (a Singaporean citizen or Permanent Resident) must receive to be counted as one full local worker when calculating your quota. Right now, the LQS is set at S$1,600 per month.

How Local Employees Are Counted

Not every local employee counts the same way towards your quota. The Ministry of Manpower follows these rules.

• Full Count (1 local employee): Singaporeans or PRs who earn at least the full LQS of S$1,600 per month
• Half Count (0.5 local employee): Singaporeans or PRs earning between S$800 and S$1,599 monthly
• No Count (0 local employee): Those earning less than S$800 per month are not counted at all for quota purposes

Calculating Your Foreign Worker Quota

Your foreign worker quota is worked out using the following formula:

Maximum number of foreign workers allowed = (Number of local employees x DRC) / (100% – DRC)

For example, if your company is in the manufacturing sector (with a 60% DRC) and you have 10 full-count local employees:

Maximum number of foreign workers allowed = (10 x 60%) / (100% – 60%) = 6 / 0.4 = 15 foreign workers

Quota Updates and Monitoring

The Ministry of Manpower updates your quota details every week:

• Your local employee count gets updated every Saturday
• You can see your new quota balance on the next working day
• Any changes in your local workforce will immediately affect your foreign worker quota

Levy Rates and Structure

There are three factors that affect how much levy your business will need to pay.

1. Higher-skilled workers usually come with lower levy rates compared to basic-skilled workers.
2. Different industries have their own levy rate structures depending on how much they rely on foreign workers.
3. Whether your company is staying within or going over the DRC affects your levy rate.

Tiered Pricing System

The levy uses a tiered structure to encourage businesses to manage their foreign workforce properly.

Tier 1 (Basic Tier)

• For companies that hire foreign workers within their DRC limit
• Lower levy rates as a reward for sticking to the quota
• Promotes responsible management of foreign staff

Tier 2 (Higher Tier)

• For companies that go over their DRC limit
• Much higher levy rates as a penalty for exceeding the quota
• A financial push to prevent over-reliance on foreign labour

Levy Rates Per Sector

Work Permit Holders

Sector	Skill Level	Tier 1 (Within DRC)	Tier 2 (Exceeding DRC)
Construction	Basic-skilled	S$ 750 (US$560)	Higher rates apply
Construction	Higher-skilled	S$ 950 (US$709)	Higher rates apply
Manufacturing	Basic-skilled	S$ 330 (US$246)	S$ 650 (US$485)
Manufacturing	Higher-skilled	S$650 (US$485)	S$ 950 (US$709)
Services	Basic-skilled	S$ 450 (US$336)	S$ 650 (US$485)
Services	Higher-skilled	S$ 650 (US$485)	S$ 950 (US$709)

S Pass Holders

Sector	Tier 1 (Within DRC)	Tier 2 (Exceeding DRC)
Services	S$ 650 (US$485)	S$ 650 (US$485)
Manufacuring	S$ 650 (US$485)	S$ 650 (US$485)
Construction	S$ 650 (US$485)	S$ 650 (US$485)
Marine Shipyard	S$ 650 (US$485)	S$ 650 (US$485)
Process	S$ 650 (US$485)	S$ 650 (US$485)

Levy Liability Period

Your responsibility to pay the levy starts the day a Work Permit (or Temporary Work Permit) is issued and continues until it is cancelled or expires. This means:

• You will pay for part of a month on a pro-rated basis if applicable.
• There’s no grace period. Levy payment starts right from the issuance of permit.
• You are still liable for the levy even if the worker is on leave unless you qualify for a special waiver.

Levy Concessions and Waivers

Employers can apply for a levy waiver to reduce costs when their foreign workers are temporarily unable to work.

When You Can Get a Levy Waiver

MOM offers levy waivers in the following situations:

• Overseas Leave

1. 1. The worker must be away from Singapore for at least 7 consecutive days
   2. Waiver is allowed for up to 60 days per calendar year
   3. Applies only for the time the worker is outside Singapore

• Hospitalisation Leave

1. 1. Must be certified by a Singapore-registered doctor
   2. Covers both hospital stays and outpatient medical leave
   3. Limited to 60 days per calendar year

• Onboard Program Attendance

1. 1. For workers attending the mandatory Onboard program
   2. Processed automatically (no need to apply)

• Other Special Situations

1. 1. The worker is in custody of police or an embassy
   2. The worker passes away
   3. Malaysian workers serving National Service back home
   4. Industry-specific cases (e.g., harbor-craft workers leaving Singapore’s port for 3 or more consecutive days)

Document You’ll Need

Here’s what you need when applying for different waiver types.

Levy Waiver Types	Required Documents
Overseas Leave	No documents; apply after the worker returns
Hospitalisation Leave	Medical certificate with worker’s name, FIN, hospital/clinic name, doctor’s name, and MC number
Police/Embassy Custody	A letter from the authority stating the custody period
Death	Copy of death certificate
Malaysian National Service	Letter from Malaysian authority + completion certificate
Harbor-craft Industry	Declaration form signed by vessel captain (from Maritime Authority)

How to Apply and Timeline

Follow these steps when applying for a levy waiver.

1. When to Apply: Starting from the 1st of the month after you receive the levy bill
2. Deadline: Must apply within 1 year from the date on the levy bill
3. Processing Time: About 12 working days (longer if they ask for more details)
4. Notification: MOM will email you the outcome summary for all workers in your application

Conclusion

The Foreign Worker Levy is not another expense. It is a part of your overall workforce planning. Your business will have a strong, cost-effective workforce when you fully understand all the rules and concepts around FWL and apply them accordingly. Plus, the expertise and assistance of a corporate secretary are welcome additions so that your company stays compliant with foreign worker regulations.

For more information on corporate secretarial services in Singapore and other corporate services, check this page.