Changes for EOR in Singapore? Let Us Explain

Singapore has long been a key hub for global businesses, attracting top talent from around the world. To streamline hiring processes, many companies use Employer of Record (EOR) services to manage HR functions. This often includes handling work passes for foreign talent. However, a recent ruling by Singapore’s Ministry of Manpower (MOM) has significantly altered this landscape.

This landmark regulatory shift raises important questions for companies that depend on foreign talent. In this blog post, we explore the key aspects of this new ruling and discuss its implications for businesses by answering common questions.

What is the new ruling by Singapore’s MOM regarding EOR?

The MOM in Singapore has introduced a regulation that prevents EOR companies from applying for work passes on behalf of their clients. This means businesses can no longer delegate the work pass application process to third-party EOR services. Instead, companies must now apply directly to MOM as the legal employer for their foreign workers.

Why did MOM implement this change?

MOM implemented this rule to prioritize greater accountability and transparency. By requiring companies to apply directly for work permits, MOM aims to curb potential misuse of the work pass system. The result is that employers will take responsibility for their foreign employees.

This regulatory measure aligns with the government’s broader goals of promoting a fair and responsible labor market in Singapore.

How does this impact businesses currently using EOR services in Singapore to hire non-locals?

Companies that have relied on EOR providers to hire non-local employees will now need to shift their approach.

Moving forward, businesses can no longer apply for new work passes through EORs. If they wish to continue employing foreign workers, they must now apply for work passes directly as the legal employer.

This change introduces new administrative and compliance responsibilities for these businesses. They must now handle work pass applications and related processes independently.

Can companies still work with EORs for other services?

Yes. While EORs are no longer allowed to apply for work passes, they can continue to offer other valuable services, such as payroll processing, HR management and compliance assistance for local employees.

These services remain beneficial for companies without a legal entity in Singapore. However, as per the new regulations, businesses must now directly handle the employment process for foreign workers.

What alternative solutions are available for companies affected by this ruling?

Several alternatives are available for businesses affected by this ruling:

  • Direct Employment: Companies can set up a legal entity in Singapore, allowing them to directly hire non-locals and manage the work pass application process themselves. MOM offers guidance on various types of work passes, including eligibility criteria and application steps.
  • Leverage Government Programs: The Singapore Economic Development Board (EDB) offers programs to help companies establish a local presence. For example, the Tech@SG Programme and Tech.Pass provide avenues for high-growth tech firms and professionals to hire foreign talent. These programs can serve as an alternative solution for companies needing to relocate talent to Singapore.

How difficult is it to set up a legal entity in Singapore for direct hiring?

Although setting up a legal entity is straightforward in Singapore, companies should be aware of specific compliance requirements. These include corporate tax registration, annual filing obligations and statutory employee benefits.

It is a viable solution for companies with long-term plans to expand in Singapore. The government also offers various incentives to some industries to establish regional headquarters in Singapore. To navigate complexities and maintain compliance, it’s advisable to consult with legal and HR experts familiar with Singapore’s regulatory framework.

What happens to the existing work permits obtained via an EOR?

MOM has not announced any plans to revoke existing work permits obtained through EORs. However, businesses should prepare for a transition in the way they apply for work passes moving forward. It is essential to assess current employment arrangements and plan how to manage future work pass applications going forward.

What steps should companies take to avoid disruptions to their workforce in Singapore?

To avoid disruptions, companies should consider the following four steps in light of the new ruling:

  • Review current employment arrangements: Identify roles that may be impacted by the new ruling and assess the feasibility of transitioning to direct employment.
  • Explore alternative employment structures: Consider setting up a local entity or subsidiary for direct hiring. If needed, explore options to relocate employees to other jurisdictions where applicable.
  • Communicate with affected employees: Keep employees informed about the company’s plans. Transparent communication can minimize uncertainty and disruption.
  • Seek legal and HR guidance: Consult with experts to ensure full compliance with MOM regulations and facilitate a smooth transition to direct employment or alternative solutions.

Contact us to talk with an international expansion expert about how our cross-border solutions can support your business goals.

The content provided in this publication is for general information purposes only and should not be considered legal advice. Due to potential changes in regulations, the information may become outdated. GoGlobal and its affiliates disclaim any responsibility for actions taken or not taken based on the information contained in this publication.