Longer stay for work permit holders does not mean more foreign workers, say analysts

SINGAPORE: Lifting work permit duration limits and raising the age ceiling will not lead to an increase in foreign worker numbers as Singapore's work permits remain capped by quotas, economists said.

But the country needs to rethink its social compact with its transient migrant workforce, particularly older workers who have lived here longer and have more healthcare needs as well as social connections, some analysts said.

Starting in July, work permit holders will no longer have a maximum employment duration, which currently ranges from 14 to 26 years depending on skill level, sector and where they are from. Workers from Malaysia, Hong Kong, Macau, South Korea and Taiwan already have no such restrictions.

All work permit holders are still limited by a maximum age, which will be raised to 63, aligning with the local retirement age.

Sector-specific foreign worker quotas – often referred to as dependency ratio ceilings – also remain unchanged, and these range from 35 per cent in the services sector to 83.3 per cent in the construction and process sectors. The number of work permit and S Pass holders in a company cannot exceed its sector’s quota.

As of June 2024, Singapore had about 843,400 work permit holders, excluding domestic workers.

Labour economist Walter Theseira, an associate professor at the Singapore University of Social Sciences (SUSS), said the policy is not about increasing numbers but optimising the composition of the workforce.

“The actual number will still be capped by the quota policy, so unless the quota is relaxed or firms are able to hire more local manpower, there will not be growth in work permit holders,” he said.

Associate Professor (Practice) Terence Ho, also from SUSS, added that the change is meant to retain experienced workers and improve workforce quality.

NEED FOR CHANGE

Singapore Business Federation vice-chair Mark Lee said labour-intensive businesses need a stable and experienced workforce to maintain their productivity.

The work permit changes will reduce turnover, which lowers recruitment and training costs and minimises operational disruptions, said Mr Lee, who is also CEO of Sing Lun Holdings and a nominated Member of Parliament.

He cited an example from the process sector, where one of his businesses had to let go of highly experienced technicians due to existing regulations.

“With these changes, we can retain them longer, allowing them to mentor and train younger employees effectively. This continuity directly enhances operational safety, reduces downtime and significantly boosts productivity,” said Mr Lee.

Singapore faces strong competition for skilled workers from economies like South Korea and the Middle East. The revised policies could make Singapore a more attractive destination by offering greater job security and career stability, he said.

Another change from June will add Bhutan, Cambodia and Laos to the list of non-traditional sources of migrant labour. Starting in September, workers on this list can also work in more jobs in the manufacturing and services sectors.

Assoc Prof Theseira said the work permit adjustments address two key structural issues: the productivity of firms and the cost and availability of migrant labour.

Limiting employment duration has hindered productivity by forcing out skilled and experienced workers. At the same time, attracting foreign workers has become more challenging as both traditional and non-traditional sources experience stronger economic growth, he said.

SOCIAL IMPACT

Allowing work permit holders to stay longer would also help manage their impact on Singapore’s social fabric, according to the analysts.

This is a better, more sensible way to address the integration of foreign workers into society, said Dr Leong Chan-Hoong, head of the social cohesion research programme at the S Rajaratnam School of International Studies (RSIS).

Recruiting new hires from abroad means restarting a process of cultural learning that is disruptive to both the receiving society and the worker, he said. 

“This group of non-residents would have lived in Singapore for a long time and they would be most familiar with the local norms, and therefore require less handholding to adjust to life here, and presumably understand how to get along with Singaporeans,” he said.

Dr Leong said the discussion is not just about numbers but about defining the social compact between foreign workers and Singaporeans.

Regardless of their work pass type, foreign workers should appreciate that their presence is a “politically sensitive matter” here and “respect Singaporean norms”, he said.

Assoc Prof Ho agreed that foreign workers who have been here longer would be more familiar with Singapore and likely better integrated into the society.

“Over time, this could change the perception of work permit holders from a transient, low-skilled source of labour, to a more skilled and experienced pool that can augment the local workforce in critical industries and occupations,” he said.

HEALTHCARE, RESIDENCY CONSIDERATIONS

With work permit holders able to stay longer – potentially until age 63 – healthcare needs will become a more pressing issue.

Assoc Prof Theseira noted that under the current system, many foreign workers leave Singapore before reaching the age when chronic conditions become prevalent.

Work permit holders are also typically sent home for more serious medical treatment as their insurance is not sufficient to cover those conditions.

“With older work permit holders, there is a need to at least provide treatment for everyday chronic conditions, and also perhaps a need to think about the off-boarding process more, since returning home at retirement age after spending their entire career here may be quite different from returning earlier,” he said.

“The right balance between treating workers (medically) here versus at home may also have to be considered.”SBF's Mr Lee said that for employers, the benefits of retaining experienced workers outweigh potentially higher healthcare costs.

He also pointed out that the Manpower Ministry has enhanced medical insurance requirements. This includes age-differentiated premiums for workers above and below 50 years old, as well as higher claim limits and clearer co-payment structures.

Another question is whether work permit holders who have spent decades in Singapore should be eligible for permanent residency.

Assoc Prof Theseira noted that in many countries, long-term legal residency is enough to qualify foreign workers for permanent residency. But in Singapore, work permit holders are not eligible.

“What I expect over time is there will be more debate on this matter, because when someone has been in Singapore for decades and has contributed to the economy and society, there will be questions raised on why they won’t qualify for residency,” said Assoc Prof Theseira.

Additionally, work permit holders need government approval to marry locals, raising further discussions about social integration.

These are matters Singapore will have to discuss as a society, he said.