Thursday, February 11, 2016

Singapore - Migrant Worker Employer Pay Levy, Quotas, Increased levy as you increase percentage of MW? Protection of local workers?

Migrant workers in Malaysia - it may be interesting to consider what is happening in Singapore.

The primary concern of local workers, especially at this time, when there are so many losing jobs by reason of factory closures and retrenchment (or VSS/MSS schemes).

In Singapore, like Malaysia, Employers of migrant workers do not have to pay into the Employees Provident Fund (EPF/KWSP). In Malaysia, for local workers earning RM1,000 per month, employers will have to contribute a further 13% - as such the local workers get RM1,000 + RM130(the employer's contribution for EPF) - making local workers pay per hour of work higher, in comparison to migrant workers.{ see also earlier post For local workers, employers pay extra 13% above their income to EPF - not so for migrant workers?]

As an employer, you don't have to pay Central Provident Fund (CPF) contributions for foreign workers. However, you must a pay monthly levy for Work Permit holders.

To balance, this off, the LEVY comes in - so for migrant workers, the Employer pays LEVY to the government.

What should be the amount payable? Maybe, it should be a fixed rate of RM2,500, but maybe a fixed 13% of the total income of the worker. By total income, it will include basic wage, overtime payments, work on rest day/public holiday payments, shift allowances, etc. 

If it does not include total income, but just based on 'basic wage' - employers may just make migrant workers work maximum hours just to reduce the labour cost per worker per hour. If this happens, then local workers once again becomes more expensive.

What about the other costs for migrant workers - recruitment cost, accommodation, travel to and from country of origin, medical testing, etc..? If the levy rate is fixed at 13% of total income, then all we have is making the cost per worker per hour for both migrant and local worker equal. The additional expenses in employing migrant workers would be the DETERENCE - and, if you choose to hire migrant workers rather than local workers, that is the additional burden that employers will have to bear. 

QUOTAS - Levy Rates Increase as you take in more migrant workers

What is interesting in Singapore, is that there are quotas for migrant workers in a workplace - in Malaysia, at present, there is no quotas - so, the employer can simply use 99% migrant workers.

in Singapore, we find that there are higher LEVY rates when the employer wants to use more than 25% migrant workers in his/her labour force.

[In fact for Malaysia, we need quotas to also protect Regular Employment Until Retirement - as more and more employers are resorting to precarious forms/practices of employment. All local workers should be employed as REGULAR EMPLOYEES - and maybe short-term contract employees should be limited to 10%, and their work should not be work in core business]


If there is a high demand, and the number of workers are limited > this would have resulted in employers willing to pay higher wages for workers. It would also mean that employers will also invest in training workers, including skills training, so that they would be able to satisfy their labour demands. End of the day, we will be having local workers with greater skill and higher wages. Such a situation would also mean better employment security - and employers will hire with the hope of keeping their workers - they will be regular employers until retirement after their probation period. Now, that there are so many workers out there, employers choose short-term contract employment and other precarious employment practices. This will all stop - and employers will be more responsible and caring to workers - because they will want workers to be with them for the full duration.

But when Malaysian local workers were in demand, with a certain chance of being able to demand for better pay and working condition, this struggle can be said was 'crushed' by the introduction of migrant workers in large numbers ...Hence, wages stayed the same - low?? Worse, it was the Malaysian government that allowed this...and, as such, blame must lay on this Barisan Nasional Malaysian government

Even now, more and more migrant workers are allowed into Malaysia - and thus the ability of workers to demand higher wages and better working conditions is hindered. What with all the unemployment, retrenchment, factory closures, when Malaysian workers are in dire need, Malaysia goes ahead with a MOU with Bangladesh to supply 1.5 million migrant workers in Malaysia? Is there a need for so many? Remember, most migrant workers come to work in Malaysia for 3-5 years at the very least > How many will be going back to their country of origin because their 5-year contract is over? If their contract is over, many of this already trained migrant workers may be willing to renew their contracts for a few more years, would they not. So, where is the justification that Malaysia will need a further 1.5 million over the next 3 years - remembering also that the number of documented migrant workers now is only about 2.1 million.???

Unjustly low Minimum Wages? Has 'Real Wage' in Malaysia increased or decreased?

To make matters worse, Malaysia's minimum wage of RM900 is pathetic - and, interestingly employers started paying workers just minimum wage... [Malaysian government recognizes that individuals in Malaysia earning RM2,000 or less, and families earning less than RM4,000 deserve financial assistance from the government to survive - the BR1M. As such, it makes no sense why the Minimum Wage in Malaysia is still so low??]. Is the Malaysian government doing this to maintain 'low wages' to woe in the foreign investor? Sad...

Keep Wages Low - Workers Forced to Work Overtime to Survive?

Malaysia's policy seems to be to KEEP WAGES OF WORKERS LOW - and for survival, get workers to work overtime and maybe even work a 2nd Job? What about respecting the right to '8 hours work, 8 hours rest and 8 hours leisure/social life'? 

To facilitate the ability to work more - the government set the monthly overtime limit to 104 hours a month, that means workers in Malaysia will end up working for 12 hours every working day...

Some stuff from Singapore Ministry of Manpower website

What is the foreign worker levy

If you employ Work Permit holders you may be limited by a quota for your industry. You will also have to pay a monthly levy for each worker.
The foreign worker levy, commonly known as 'levy', is a pricing mechanism to regulate the number of foreign workers in Singapore.
The levy liability will start from the day the Temporary Work Permit or Work Permit is issued, whichever is earlier. It ends when the permit is cancelled or expires.
As an employer, you don't have to pay Central Provident Fund (CPF) contributions for foreign workers. However, you must a pay monthly levy for Work Permit holders.

Levy rate and quota

The levy you pay depends on two factors:
  1. The worker’s qualifications (skilled or unskilled).
  2. Dependency ceiling or quota (for manufacturing and services sectors).
Find out the levy requirements by sector: - Singapore Government Ministry of Manpower website

Quota and levy

The number of Work Permit holders that you can hire is limited by quota (or dependency ratio ceiling) and subject to a levy. The levy rates are tiered so that those who hire close to the maximum quota will pay a higher levy.
The quota and levy rate for the manufacturing sector are as follows:
Quota Unskilled - monthly Unskilled - daily Skilled - monthly Skilled - daily
Basic Tier / Tier 1:
Up to 25% of the total workforce
$370 $12.17 $250 $8.22
Tier 2:
Above 25% to 50% of the total workforce
$470 $15.46 $350 $11.51
Tier 3:
Above 50% to 60% of the total workforce
$650 $21.37 $550 $18.09
Calculate your quota or refer to the Guidelines on the Calculation of Quota and Levy Bill.
Note: The daily levy rate only applies to Work Permit holders who did not work for a full calendar month. The daily levy rate is calculated as follows: (Monthly levy rate x 12) / 365 = rounding up to the nearest cent.

Qualifying for skilled worker levy

You pay less levy for skilled foreign workers. You can apply for the skilled-worker levy rate for workers with the following certificates:
Type of qualification Certificates needed
Academic qualifications Malaysia - Sijil Pelajaran Malaysia (SPM). If you wish to use a diploma or higher qualification, you need to produce a copy of the transcript or a letter from the institution stating the course duration.
North Asian sources (NAS) - High school certificates
People's Republic of China (PRC) - Diploma
Skills Evaluation Test (SET) conducted by ITE SET Level 1 or National ITE Certificate (Nitec)
Workforce Skills Qualification (WSQ) Composite Assessment for Generic Manufacturing (CGM)

Required safety courses

Foreign workers in the metalworking industry must take the Metalworking Safety Orientation Course (MSOC) before their Work Permits can be issued.
As soon as you get in-principle approval, register the workers for the course. They should take the course within 2 weeks of arriving in Singapore. The Work Permit cannot be issued until they take the course.
As an employer, you are responsible for your workers passing the test. If they fail the course, they should retake it as soon as possible. They need to pass the course within 3 months of arrival or their Work Permit could be revoked.

Course requirements during employment

Workers in the metalworking industry need to retake and pass the MSOC regularly. How often they need to take the test depends on their years worked in the sector.
If they've worked They should take the MSOC
6 years or less Once every 2 years
More than 6 years Once every 4 years
When renewing a Work Permit, the worker's MSOC certificate must be valid for more than 1 month on the day of renewal. Otherwise the Work Permit will not be renewed.

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