SINGAPORE - From Jan 1 next year, firms in the manufacturing sector can have only up to 18 per cent of their workforce be foreign workers on S Passes.

This quota will be further cut to 15 per cent from Jan 1, 2023. It is currently 20 per cent.

When the new quotas take effect, firms will not need to immediately sack their excess foreign workers, but can retain them until their S Passes expire.

The overall quota - comprising workers on work permits and S Passes - for manufacturing will remain at 60 per cent.

Workers on S Passes must earn a fixed monthly salary of at least $2,500 and are typically degree or diploma holders, such as technicians.

The move is part of the Government's efforts to moderate Singapore's reliance on foreign labour where it must, said Deputy Prime Minister Heng Swee Keat in his Budget speech on Tuesday (Feb 16).

At the same time, the Government will support the employment of Singaporeans and the deepening of their capabilities while promoting the transfer of capabilities from foreigners to locals, said Mr Heng, who is also Finance Minister.

He acknowledged that some Singaporeans are concerned about the nation's reliance on foreigners and competition from them. But at the same time, many businesses and trade associations have said that it is difficult to hire locals, and asked for foreign worker quotas not to be tightened further so that they can remain globally competitive.

"The way forward is neither to have few or no foreign workers, nor to have a big inflow. We have to accept what this little island can accommodate," said Mr Heng.

"To strike a balance, we must focus on enhancing the complementarity of local and foreign manpower, and step up on industry transformation."

One of the levers the Government uses to manage the size of the foreign workforce here is the S Pass quota, or sub-dependency ratio ceiling, which is the proportion of S Pass holders a firm can employ.

Mr Heng said in the Unity Budget last February that the manufacturing S Pass quota would be cut when conditions allow. The move has been carefully calibrated to give firms a year to adjust, he said on Tuesday.

The manufacturing sector employs about 450,000 workers, or about 12 per cent of the workforce, with median wages about 10 per cent higher than the economy-wide median.

The S Pass quota for construction, process and marine shipyard firms was lowered to 18 per cent on Jan 1 this year, and will be cut further to 15 per cent from Jan 1 in 2023, as announced in the Budget last year.

The Ministry of Manpower also raised the S Pass minimum qualifying salary twice last year, and extended the Fair Consideration Framework advertising requirement to cover S Passes.

Mr Heng said the Government will continue to review the S Pass framework, including the qualifying salary and levies, to maintain the complementarity of locals and foreigners in the workforce.

Foreign worker levy rates will remain unchanged for all sectors, with earlier-announced levy rate increases for the marine shipyard and process sectors deferred for another year.

To promote employment of Singaporeans, the Wage Credit Scheme will be extended for a year, providing co-funding of 15 per cent for qualifying wage increases given this year. The scheme co-funds wage increases of at least $50 for Singaporean employees, up to a gross monthly wage ceiling of $5,000.

The Capability Transfer Programme will also be extended up to end-September 2024 to boost Singaporeans' skills. It provides up to 90 per cent funding for company or industry projects to bring in foreign specialists to train locals or send local workers for overseas training attachments, in areas where Singapore lacks expertise.

As at the end of last year, more than 140 companies and over 970 Singaporeans and permanent residents have benefited, or are expected to benefit, from 40 projects under the scheme, which was launched in 2017.

Mr Heng highlighted the experience of Mr Mohamad Zaini Selamat, 41, a Singaporean technical officer at energy utilities provider SP Group.

After joining the firm's Capability Transfer Programme project in 2019, he went for an attachment in the United States and learnt skills including network support for the roll-out of smart electricity meters, as well as design and optimisation, and can now do work previously done by foreign vendors.

Mr Heng said that in sectors - especially new growth areas - where Singapore may be short of skills, expatriates with the right expertise are welcome, as they complement Singaporeans and help build capabilities here.

"This will allow us to add vibrancy to our local market, better serve international and regional markets, and enhance Singapore's attractiveness to global investors," he said.

The Singapore Manufacturing Federation said on Tuesday evening that it was not surprised by the quota cut although there is some concern among members. It asked for a “flexible, progressive and careful implementation of the reduction”.

“The SMF understands that there is a need to build a strong Singaporean core which is sustainable for our manufacturing future,” its president Douglas Foo said in a statement.

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