Singapore’s EOR Crackdown: Employer Guide

Companies expanding into Singapore must establish a local entity or explore alternative employment solutions.

For many years, using an EOR was a standard solution for overseas companies looking to employ foreign workers in Singapore. It offered flexibility and cost savings by allowing businesses to test the market without incorporating a local entity. However, under the latest guidelines, only Singapore-based companies can apply for work passes, closing a regulatory loophole.

Why have EOR regulations been tightened in Singapore?

For a long time, the Ministry of Manpower (MOM) has maintained that a foreign worker should only work for the organization that sponsors their work permit—that is, the EOR—and not the foreign business.

The most recent clarification confirms that work passes can only be granted to those directly employed by a Singapore-registered company, even though this restriction was not strictly implemented in the past.

This modification guards against employee misclassification and guarantees employment agreements comply with Singapore’s labour laws.

Businesses that don’t follow the rules face harsh legal and financial consequences.

What are the alternatives to Employer of Record (EOR) in Singapore?

With the EOR route no longer an option, overseas businesses must consider alternative methods to employ foreign workers in Singapore legally.

Here are some of the available options:

Establishing a Representative Office

• Although it has severe restrictions, a representative office enables businesses to investigate business prospects in Singapore. However, it cannot execute contracts, do business, or make money. This solution is perfect for conducting market research or communicating with regional partners.

Including a local Singaporean business

• In the long run, foreign workers can be hired by registering a business with the Accounting and Corporate Regulatory Authority (ACRA). Companies can lawfully operate and hire employees directly despite the administrative work involved. GERAI LTD has streamlined the incorporation process for many years and offered professional advice on payroll, tax, and corporate compliance to companies from the UK, Europe, and the Americas looking to set up local corporations in Singapore.

Support from a local organization

• Your foreign employee may be eligible for a work pass sponsored by a Singaporean business partner or client; however, this arrangement must adhere to MOM requirements, and the local corporation must assume all employer duties.

The Overseas Networks & Expertise Pass (ONE Pass) application

• The ONE Pass, which is intended for top talent, enables highly qualified people to work in Singapore without being restricted to a particular employer. This option is appropriate for senior executives and leaders in the business because applicants must achieve a high salary and experience limits.

Making a Permanent Residency Application

• Workers who intend to remain in Singapore for an extended period of time can consider applying for permanent residency, which offers more job freedom. However, some international experts may not be able to meet the strict eligibility requirements.

Non-compliance risks

Businesses and workers who try to circumvent these new rules risk serious legal repercussions. If an EOR sponsors a foreign worker’s work permit in an inappropriate manner, both the company and the employee may be breaking the law. Penalties could include fines, jail time, job disqualification, liability to an overseas organization, and harm to one’s image.

What are the impacted companies supposed to do now?

Foreign businesses that previously depended on an EOR ought to immediately reorganize their employment contracts in Singapore.

This comprises:

• When evaluating alternative employment models, decide which strategy—company incorporation, work pass applications, or other visa schemes—is best for your company’s needs.
• Reviewing present agreements: Review current employment and service contracts to comprehend potential responsibilities and liabilities resulting from these legislative changes.
• Creating a communication plan: Companies should manage changes to job terms or contract terminations carefully to preserve employee compliance and morale.
• Consult a professional: Navigating Singapore’s corporate and employment rules can be challenging without the right assistance from local professionals. Consulting with business, legal, and human resources professionals reduces risks and guarantees compliance.

In conclusion

For multinational companies employing foreign talent in Singapore, the ban on EOR-sponsored work passes represents a significant change.

Although this reform eliminates a flexible recruiting process, businesses dedicated to creating a legal presence still have other options.

Businesses can continue to draw in and keep talented employees while adhering to Singapore’s

Changing labour laws by being aware of these new rules and investigating compliant employment practices.

Investing in the appropriate employment structure will be essential for businesses looking to establish a long-term presence in Singapore’s vibrant economy and achieve success and sustainable growth.

For more information, please get in touch with us.