Business Law Articles
Written By: Patrick Gervais, B.C.L./LL.B
HJM Asia Law & Co
The city state of 5.4 million boasts one of the highest GDP per capita in the world and has been attracting large numbers of foreigners looking for opportunity in Asia in an efficient locale. After being ranked by HSBC as the top expat destination in 2011 and 2012, Singapore fell to third place in 2013. Higher cost of living and tighter immigration policy were blamed for the fall.
Over the past year, the government has implemented a series of new requirements regarding foreign labour. These changes raise the barrier for foreigners who want to immigrate to Singapore, whether they are fresh grads or seasoned entrepreneurs. Changes in both the entrepreneur visa scheme (the “EntrePass”) and the employment pass scheme (the “EP”) are affecting business operations in Singapore. This article summarizes what you need to know if you want to start a business in Singapore under the EntrePass or if you are planning on hiring foreign labour with an EP.
1. Changes to EntrePass criteria
a. EntrePass criteria
Singapore implemented the EntrePass program in 2003 to position the city state as a destination for entrepreneurs. Under the scheme, entrepreneurs are allowed to come into Singapore usually for a one year period to start an innovative business. Innovative businesses exclude basic services businesses such as bars, massage parlours, simple restaurants and recruitment agencies.
Under the EntrePass program, the start-up must be a private limited company not more than six months old on the date of the EntrePass application. The EntrePass applicant must submit a business plan for the new start-up that includes a business idea, products or services offered, a market analysis, a market plan, an operation plan, financial projects, the management team and any supporting documentation (licenses, certificates, etc.).
The start-up must have at least SGD $50,000 in paid-up-capital (aprox. USD $40,000) supported by a local bank statement. The business must not be illegal and the EntrePass applicant must hold at least 30% of the shares in the start-up.
b. Changes to EntrePass criteria
Since its implementation in 2003, there have been many changes to the program to raise the EntrePass requirements. New requirements that came into force on September 1st, 2013 raise the barrier again for entrepreneurs wishing to set-up in Singapore. The rationale for these changes is for the country to focus on only attracting value-added businesses that differentiate themselves from local start-ups.
Entry stage companies must now qualify as “innovative” by meeting one of the following criteria:
1. Receive funding from a third party of at least SGD $100,000 (aprox. USD $80,000) (this includes venture capital or capital from an angel investor recognized by the Singapore government);
2. Holds intellectual property registered in a national institution;
3. Conducts ongoing research with a local higher education institution; or
4. Is a Singapore government-supported incubator.
Renewal criteria have also become stricter. The start-up must now employ at least two local employees per year of operation and reach minimum business spending between SGD $100,000 (aprox. USD $80,000) for the first year to SGD $400,000 (aprox. USD $320,000) for the fifth year. EntrePass holders must meet the new renewal criteria no later than the renewal date or the visa renewal will be denied.
2. Changes to the EP
a. New salary criteria
Under the new EP scheme, the qualifying monthly salary for new EP applications was raised in late 2013 from SGD $3,000 (aprox. USD $2,400) to SGD $3,300 (aprox. USD $2,640). This mainly affects multinational corporations (“MNCs”) who would rely on fresh grads from overseas institutions for graduate programs or traineeships. More experienced employees must meet higher salary thresholds commensurate with experience.
b. Fair Consideration Framework
Under the new EP scheme and starting August 1st, 2014, employers will have to post any new position on a new centralized job bank administered by the Singapore Workforce Development Agency for at least 14 days before being able to apply for an EP for a foreign employee for that specific position. Proof of the job posting will be required when submitting the EP application.
c. Exemptions to the Fair Consideration Framework
Employers with less than 25 employees and employment opportunities with monthly salaries exceeding SGD $12,000 (aprox. USD $9,600) will be exempt from the Fair Consideration Framework. In Practice, this means that start-ups and smaller regional offices as well as higher level employees will be exempt from the new requirements. Large MNCs on the other hand should review their recruitment processes and strategically position employees in different offices if they fail or are unable to meet the new criteria. The Singapore government will monitor companies receiving complaints relating to the lack of local employees in their workforce.
All told, the new EntrePass requirements and the revised EP framework illustrate Singapore’s success in recent years attracting foreign skilled labour. The higher thresholds for foreign labour illustrate the appeal of the island state to foreigners and the rising competition for those who want to move to the island state.
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