Non-Singaporean companies need to consider alternatives to using an Employer of Record for employing a foreign national in Singapore

At a glance

• The Ministry of Manpower has clarified that non-Singaporean companies can no longer use an Employer of Record (EOR) to sponsor work passes for non-Singaporean employees.
• Work passes can only be issued to individuals employed by a Singapore-based company, making clear that the previous practice of foreign companies using EORs to sponsor work passes is not lawful.
• Foreign companies must consider alternatives such as, setting up a representative office or incorporating a local Singapore company with the Accounting and Corporate Regulatory Authority.

The Ministry of Manpower has clarified that non-Singaporean companies who want to employ an individual in Singapore who is not a Singapore national or permanent resident, can no longer use an EOR to sponsor the individual for a work pass.

Previously, it has been a common practice in Singapore to use an EOR in this scenario. However, there has always been some risk with this arrangement because, strictly speaking, a foreign employee should only be providing services to the entity which sponsors their work pass ie the EOR and not the end user client. This clarification is intended to shut down a loophole which has not been actively policed before now. Going forwards, the position is clear that a work pass can only be issued to individuals who are employed by a Singapore based company.

Therefore, a foreign company who intends to employ a non-Singaporean in Singapore will need to consider alternatives. These may include:

• setting up a representative office;
• incorporating a local Singapore company with the Accounting and Corporate Regulatory Authority;
• arranging for a local Singapore entity who is not the employer to sponsor a work pass application (eg a customer / client / business partner);
• the employee applying for the Overseas Networks & Expertise Pass (ONE Pass), a relatively new type of work pass designed for high-earning employees which is not tied to the employer but to the employee themself; or
• the employee applying for permanent residency status.

Each of the above options has its respective advantages and disadvantages, and may or may not be suitable depending on the circumstances.

EORs who continue to apply work passes for non-Singaporeans working for a foreign company, as well as the foreign employees themselves, would be committing an offence. The penalties for such offences are severe and can include monetary fines, imprisonment (generally for up to two years), debarment from working in Singapore and other reputational consequences (eg being publicly named by the Ministry of Manpower). It is also possible that the foreign company may be liable for abetment, and liable to the same punishment for the relevant offences.

Foreign companies who are currently using EORs to hire foreign employees in Singapore should review their current practices and consider implementing alternative arrangements on an urgent basis.