Use the money that companies pay in foreign worker levies for automation, training or welfare services instead.
This is one of the suggestions made by businesses and associations, a month after Senior Minister of State for Manpower Teo Ser Luck said the Government will look into a levy review. It is part of how the ministry is always reviewing policies based on ground feedback, and not a commitment to a policy change, he added.
In June this year, Manpower Minister Lim Swee Say said in an interview that he would not lower the levies as it is a key policy tool to keep the inflow of foreign workers manageable.
It's like a cumbersome tax. The money could have been spent on machines, raising productivity.
MR JOSEPH ONG, managing director of lifestyle company One Rochester Group, on the foreign worker levy hindering the productivity of companies
Companies, however, have complained that the levy hinders productivity. "It's like a cumbersome tax," said lifestyle company One Rochester Group's managing director Joseph Ong.
"The money could have been spent on machines, raising productivity," he added, noting that salaries - including levies - make up his company's biggest costs.
A construction worker from India, for instance, can cost $550 in levy each month.
Mr Kenneth Loo, president of The Singapore Contractors Association, said increasing levels of levies lower productivity because tenders are set years before a project starts. This means companies have to work with a tighter budget, which may reduce the number of workers they can hire.
If employers could use the money meant for levies for training instead, workers can upgrade their skills, Mr Loo added. "They can qualify for lower levies, according to the current system."
Companies pay a lower levy for skilled foreign workers.
At Poh Tiong Choon Logistics, employee compensation rose 12 per cent in the second quarter of 2013 over a year ago due to the "impact of the increased foreign worker levy", as stated in its financial statements.
The Government announced levy increases for S Pass and work permit holders this year. But these will be deferred to give firms time to get used to "the new normal of a permanently tight labour market", said Deputy Prime Minister Tharman Shanmugaratnam earlier this year.
Besides reviewing the levy, companies hoped the Government could relax the foreign worker quota in more industries shunned by Singaporeans.
Environmental Management Association of Singapore president Milton Ng said: "I have not heard of any of my cleaners complaining about foreign workers taking over their jobs."
Firms now have a quota or dependency ratio ceiling that determines the number of foreigners they can hire, depending on sector.
For example, the construction sector can hire up to seven work permit holders for every full-time local employee while the marine sector can hire only five.
The existing quota, which already regulates the number of foreign workers, raises questions about the need for levies, said Mr Ho Meng Kit, chief executive officer of Singapore Business Federation.
More than 70 per cent of small and medium-sized enterprises here hire foreign manpower, he added. "There have been clamours... to review these levers including whether there is a need to have two of them."
Employers also want more say in the countries they can recruit from. Companies in the service industry can now hire work permit holders only from specific countries such as Malaysia, South Korea and China.
Mr Anthony Gan, executive director of Singapore Retailers' Association, said he has "long hoped that foreigners could... be chosen by the retailers themselves".
Mr Ong agrees. "An Italian restaurant can brand itself better with staff from Italy," he said. "It adds to the concept's authenticity, which can raise competitiveness."