Levy for mid-level skilled foreign workers to reach peak in July 2012

SINGAPORE: The levy for mid-level skilled foreign workers will reach its peak in July 2012. For companies reliant on such workers, it means potentially having to fork out up to five times more to hire them.

Makino Asia, a precision engineering company, has found a way to cut its reliance on foreign manpower and also raise its productivity.

Through customisation, process change and skills upgrading, the company has almost tripled its production capacity with the same number of workers. It is now producing 120 machines with about 400 workers instead of just 50 six years ago.

The company has among its workforce some 30 Work Permit and six S-Pass holders, who are mainly technicians from Malaysia. Such workers feature strongly within the services and manufacturing sectors because of the lack of locals who can fill the available jobs.

The S Pass was introduced in 2004 to help companies hire mid-level skilled manpower. These are foreign workers with qualifications and earning at least S$1,800 a month. S Pass holders are capped at 25 per cent of a company's workforce.

Over the past six years, this group has grown exponentially. Over the past three years alone, the numbers have doubled to reach 82,000 as of December last year.

From July, there will be a two-tier levy for S Pass holders - Basic Tier and Tier 2. It is hoped that this will moderate the growth of such workers.

If a company has more than 20 per cent of S Pass holders in its workforce, it would have to pay more to hire such workers. The ceiling for the basic tier will be lowered in July 2012.

Levy rates will be adjusted every 6 months until July 2012. By then, companies could pay up to S$250 for each S Pass holder (for Tier 2).

In summary:

Levy tiers from July 2010

Basic: 0-20% of workforce

Tier 2: 20-25% of workforce

Levy tiers from July 2012

Basic: 0-15% of workforce

Tier 2: 15-25% of workforce

Levy rates from July 2010

Basic: up from S$50 to S$100

Tier 2: introduced, at S$120

Levy rates from July 2012

Basic: Gradually increase to reach S$150

Tier 2: Gradually increase to reach S$250

The higher costs may affect the bottom line of some companies, but observers say it will also force employers to think out of the box.

Stephen Lee, president of Singapore National Employers Federation, said: "Yes, indeed this is a concern for companies with many S Pass holders. It is primarily the company's responsibility to look at ways to increase productivity. We cannot push this to the workers."

Dr Moh Chong Tau, CEO of Makino Asia, said: "If you say we increase (the levy)to S$250 today, then it will be a great impact. The three years allow them to adjust, improve themselves and therefore reduce the cost of manufacturing.

"I can tell you that foreign workers from China are not getting cheaper either as it goes along. Therefore, it will come to a day when we cannot depend on foreign workers."

Even in the healthcare sector, the response seems to be optimistic.

Human resource director at the Singapore General Hospital, Esther Tan, said: "A small percentage of our total nursing manpower is made up of foreign nurses, who are mostly S Pass holders.

"With the adjustments in levy for S Pass holders, there will invariably be some increase in manpower cost but this will not be significant".

By Imelda Saad, Channel NewsAsia Posted: 23 February 2010 2359 hrs