Tech firms ponder impact of tighter work pass rules

Aug 30, 2021

SINGAPORE'S toughened criteria towards foreign work pass holders could put the city-state's tech talent pool under further strain and temporarily dampen expansion plans for some in the industry, but observers reckon this is the right step in easing concerns among Singaporeans.

On Sunday, Prime Minister Lee Hsien Loong said Singapore will tighten its criteria for those entering the city-state on Employment Passes (EPs) and S Passes, amid growing resentment towards foreign work pass holders.

This will be done "gradually and progressively" so as to not introduce sudden shocks that might hurt businesses, he said in his televised National Day Rally speech. Work pass holders will therefore be able to join Singapore's workforce when and where they are most needed, but the labour market will not be flooded with more workers than it can absorb.

Singapore has raised salary cut-offs for EPs and S Passes in line with rising wages. In 2020, it raised the cut-offs twice and instituted a higher qualifying salary for the financial sector.

Although these policies might bring additional stress on employers during the hiring process, it will also cause businesses to properly weigh the benefits and costs of hiring a foreign work pass holder versus a Singaporean, said Christopher Quek, managing partner of early-stage venture capital firm Trive. "It will ease concerns among Singaporeans that a fair hiring process is given."

Observers noted that in line with the tighter restrictions from last year, companies in the tech sector have started prioritising hiring Singaporeans. Rather than viewing it as a protectionist policy, they reckon it can instead be seen as a fair play policy - since employers will be more likely to turn to Singaporeans to fill their roles, giving citizens a better chance at employment.

"Singaporeans applying for roles in startups should feel even more confident that if they have the right mindset, mastery and motivation for startups, they would be prioritised over foreigners," said Elena Chow, founder of talent consulting firm ConnectOne.

Although industry watchers are still optimistic that tech companies have the bandwidth to adapt and pivot accordingly, they raised concerns that this might dent expansion plans for some businesses here, especially when considering the existing talent crunch in the tech industry.

Alvin Ea, chief executive and co-founder of logistics startup Haulio, noted that the increasing costs of hiring foreigners will impact some of its plans. But in the longer term, it could be a good thing as it might help spur the industry to innovate and reshape job scopes.

Mr Ea explained that in his industry, foreigners are typically hired for certain roles such as drivers and more laborious work as there is a shortage of Singaporeans willing to take up these jobs.

He said increasing the costs to hire foreign labour might "force companies who are less productive to step up and onboard digital transformation; pivoting from pure physical transportation to increasing value-added work such as analytics and automation".

But having the capital for innovation is another issue. Observers raised concerns about the possible disparity that this policy might cause between startups - where well-funded ones might be impacted less in the hiring of foreign talent.

"Startups that have less than 10 staff and received less than S$5 million in funding will be heavily impacted in trying to hire both foreign talent and local talent. They will be outshone by the larger companies which can afford to pay higher salaries," said Mr Quek.

He added that these smaller startups might shift operations to neighbouring low-cost countries to compete. "It remains to be seen how this will develop in the long term. I would encourage the government to review special exemptions on hiring passes for smaller startups."

The labour market is not homogenous, and a one-size-fits-all approach will not help our country, said Ng Choon Peng, chief executive of biotech startup Immunoscape.

He said: "Increasing minimum qualifying salary tightens the valve for incoming foreign workers and is a policy that is easy to understand. However, if we do not combine it with other considerations, we can do harm to the economy and the overall well-being of Singapore as a place to do business."