The Answer in 60 Seconds

The Singapore foreign-worker cost stack is reshaping through 2025-2026 with concurrent changes to levy rates, quota frameworks, and insurance requirements. S Pass Tier 1 levy raised to S$650 per month from 1 September 2025 (Tier 2 remains S$650). Local Qualifying Salary (LQS) rises from S$1,600 to S$1,800 per month from 1 July 2026 - local employees must earn at least the LQS to count fully towards the foreign-worker quota denominator. Basic Skilled levy increases announced at Committee of Supply 2026 take effect from 2028: marine shipyard +S$100, process sector +S$150. The Workplace Fairness Act 2025 (Act 8 of 2025) and the Workplace Fairness (Dispute Resolution) Act 2025 (Act 22 of 2025) passed Parliament on 8 January 2025 and 4 November 2025; commencement expected end-2027. From 1 November 2025, WICA compensation limits uplifted (death S$269,000 maximum, permanent incapacity S$346,000 maximum, medical S$53,000) - see how the uplift reaches WICI policies. Foreign Worker Medical Insurance (FWMI) is mandatory under the Employment of Foreign Manpower Act 1990 for Work Permit and S Pass holders; the employer is statutorily liable for medical expenses even where they exceed the WICA cap of S$53,000, with some market insurers offering extended medical cover to S$300,000 to address this gap. Migrant domestic worker (MDW) employers must buy separate medical and personal accident insurance. Employment Pass holders are not subject to FWMI. The Workplace Fairness Act will commence with a 25-employee threshold (below which TGFEP continues to apply) and, under the Dispute Resolution Act, the Employment Claims Tribunal will hear workplace discrimination claims up to and including S$250,000.

The Sourced Detail

The foreign-worker cost stack for Singapore SME employers is shaped by concurrent regulatory streams: the Employment of Foreign Manpower Act 1990 (EFMA) and its subsidiary Employment of Foreign Manpower (Work Passes) Regulations 2012 administer pass conditions, levies, and insurance requirements; the Work Injury Compensation Act 2019 administers statutory work injury compensation (see what WICA requires of employers); and the upcoming Workplace Fairness Act framework will administer fair employment practices from expected end-2027.

The reform velocity in 2024-2026 reflects the Singapore government's strategy of progressive upskilling, productivity uplift, and tighter foreign-worker dependence ratios. SMEs in construction, manufacturing, marine shipyard, process, and services sectors face the largest aggregate cost-stack changes.

Headline 2024-2026 levy and pass evolution

1 September 2025: S Pass Tier 1 levy raised to S$650 per month. Tier 1 (the tier for S Pass holders up to 10% of a firm's total workforce) levy was previously S$550 per month; Tier 2 remains S$650 per month, with the two tiers now equalised. SMEs should verify the current S Pass levy table at the MOM Foreign Worker Levy page at the time of payment.

1 July 2026: Local Qualifying Salary (LQS) raised to S$1,800 per month. The LQS is the minimum monthly salary at which a local Singaporean or PR employee counts fully towards the local headcount denominator for foreign-worker quota calculation. A local employee paid at least half the LQS but less than the LQS counts as 0.5, and one paid less than half the LQS does not count. Firms that hire foreign workers must also pay every local employee not covered by a Progressive Wage Model at least the LQS (S$10.50 an hour for part-timers), or they cannot apply for or renew work passes. So from 1 July 2026, such firms must pay full-time local employees at least S$1,800 a month.

Basic Skilled levy increases announced at Committee of Supply 2026, from 2028. The marine shipyard Basic Skilled (R2) levy will rise by S$100 a month (S$500 to S$600) and the process sector R2 levy by S$150 a month (S$450 to S$600, or S$650 to S$800 for Non-Traditional Sources workers); Higher Skilled (R1) rates do not change. SMEs in these sectors should verify the rates at MOM before 2028.

Sector levy rate ranges (approximate):

Construction: from S$250 per month (off-site construction, Higher-skilled) to S$900 per month (Non-Traditional Sources, Basic-skilled); Malaysia, North Asian Sources and PRC workers are S$300 (Higher-skilled) or S$700 (Basic-skilled).

Marine Shipyard: S$350 per month Higher Skilled and S$500 per month Basic Skilled, with Basic Skilled rising to S$600 from 2028.

Process: S$200 to S$650 per month today (Malaysia, North Asian Sources and PRC: S$200 Higher Skilled, S$450 Basic Skilled; Non-Traditional Sources: S$300 and S$650), with Basic Skilled rates rising by S$150 from 2028.

Manufacturing: approximately S$370 per month (Tier 1) up to approximately S$650 per month (Tier 3 Basic Skilled).

Services: approximately S$450 per month (Tier 1) up to approximately S$800 per month (Tier 3 Basic Skilled); Dependency Ratio Ceiling (DRC) capped at 35%.

S Pass (all sectors): Tier 1 S$650 per month from 1 September 2025; Tier 2 S$650 per month.

The R1-R2 skill classification

Within the Work Permit framework:

R1 (Higher Skilled) workers are typically tertiary-qualified or with documented Singapore-relevant skill certification. R1 attracts a lower levy.

R2 (Basic Skilled) workers attract a higher levy; the gap to R1 ranges from S$100 to S$400 per month depending on the sector and tier (S$400 in construction, except off-site construction).

The R1-R2 differential creates an incentive for SMEs to upskill foreign workers and obtain R1 classification. The savings on levy can be material across a sizeable foreign-worker complement.

Dependency Ratio Ceilings and S Pass sub-DRC

The DRC framework caps the proportion of foreign workers in an SME's workforce:

Services sector DRC: 35% (of total workforce can be foreign workers).

Manufacturing: 60%.

Construction: up to 83.3% (5:1 foreign-to-local ratio, reduced from the former 87.5% / 7:1 ceiling in January 2024).

Marine Shipyard and Process: comparable to construction.

S Pass sub-DRC: 10% of total workforce in Services; 15% in Construction, Manufacturing, Marine Shipyard, Process.

The DRC denominator counts each local employee paid at least the LQS as one, and each paid at least half the LQS but less than the LQS as 0.5. From 1 July 2026, firms hiring foreign workers must pay full-time local employees at least S$1,800 a month, or they cannot apply for or renew work passes.

Workplace Fairness Act 2025 framework

The Workplace Fairness Act 2025 (Act 8 of 2025) was passed on 8 January 2025 with expected commencement end-2027. The Workplace Fairness (Dispute Resolution) Act 2025 (Act 22 of 2025) was passed on 4 November 2025.

Substantive features of the WFA framework:

Protected characteristics: age, nationality, sex / marital status / pregnancy / caregiving responsibilities, race, religion, language, disability, mental health condition.

Employment decision definition: hiring or deciding not to hire; appraisal; promotion or a decision not to promote; reducing an employee's rank or status; providing or not providing training; and dismissal, retrenchment or termination (WFA sections 5 to 7).

Threshold for application: clause 4 of the Bill (as enacted) sets a 25-employee threshold below which the TAFEP-administered Tripartite Guidelines on Fair Employment Practices (TGFEP) continue to apply. The exact statutory threshold and any phased implementation should be confirmed at SSO.

Grievance-handling procedures: WFA-covered employers must maintain documented internal procedures for handling discrimination complaints.

Statutory tort of discrimination: the WFA creates a statutory cause of action for employees suffering discrimination on protected grounds. Adverse employment decisions (e.g., dismissal, demotion, non-promotion) on a discriminatory basis become directly actionable.

Employment Claims Tribunal (ECT) to hear workplace discrimination claims up to and including S$250,000 under the Workplace Fairness (Dispute Resolution) Act 2025, once it takes effect; claims above that go to the High Court.

The implication for SME Employment Practices Liability Insurance (EPLI) procurement is significant: from expected end-2027, an SME with 25 or more employees faces statutory discrimination exposure with claims potentially reaching the ECT jurisdictional limit. EPLI may become a material SME line in this period.

The insurance interaction

The foreign-worker cost stack interacts with insurance through several channels:

Work Injury Compensation Insurance (WICI 2019) is mandatory for manual employees and non-manual employees whose salary, not counting overtime, bonuses, the annual wage supplement, incentive payments and allowances, is S$2,600 per month or less, unless they fall in a class the WIC (Insurance) Regulations exclude, such as the staff of retailers and hotel-keepers, or staff employed in operating a coffee shop. From 1 November 2025, the WICA compensation limits uplifted (death S$269,000 maximum, permanent incapacity S$346,000 maximum, medical S$53,000). The compulsory policy terms let an insurer charge reasonable additional premium, or cancel the policy, when the legislation changes.

Foreign Worker Medical Insurance (FWMI) is mandatory under EFMA for Work Permit and S Pass holders. The minimum annual coverage amount is set by MOM and has stepped up in prior cycles. The current FWMI minimum should be verified at MOM at the time of placement. FWMI covers inpatient medical expenses for the foreign worker.

Critical structural gap: the employer's statutory liability under EFMA for foreign-worker medical expenses can exceed the WICA medical cap of S$53,000. Some market insurers offer extended medical cover to S$300,000 to address this gap; SMEs should specifically test the gap at procurement and consider the extended limit where the realistic medical exposure exceeds S$53,000.

Migrant domestic worker (MDW) insurance is a work permit requirement under EFMA: the employer must buy medical insurance with an annual claim limit of at least S$60,000 and personal accident insurance with a sum assured of at least S$60,000 a year, and must buy a security bond for a non-Malaysian helper. Current minimums and designated FDW insurers should be verified at MOM.

Employment Pass holders are not subject to FWMI under EFMA. Medical cover (Group Hospitalisation and Surgical, Group Term Life) is commercially common for EP holders but not statutorily mandated.

Employment Practices Liability Insurance (EPLI) is the line that will become materially more relevant from expected end-2027 WFA commencement. Once the Act takes effect, the ECT will hear workplace discrimination claims of up to S$250,000 each, with larger claims going to the High Court.

Verbatim regulatory text - primary-source routing

The primary-source URLs for the regulatory framework:

EFMA 1990 consolidated text on SSO.

Employment of Foreign Manpower (Work Passes) Regulations 2012 on SSO.

MOM Foreign Worker Levy page.

MOM Quota and DRC page.

MOM foreign employee quota calculator.

Workplace Fairness Act 2025 (Act 8 of 2025).

Workplace Fairness (Dispute Resolution) Act 2025 (Act 22 of 2025).

MOM WFA press release.

Claim-time worked example

SME C (services sector, 60 employees, 8 S Pass holders, current renewal cycle).

Cost stack impact:

  • S Pass Tier 1 levy uplift from 1 September 2025: S$100 per month × 8 = S$800 per month additional levy from September 2025 onwards (annualised approximately S$9,600).
  • LQS uplift from 1 July 2026: full-time local employees earning S$1,700 per month must be raised to at least S$1,800 per month; a firm hiring foreign workers that pays less cannot apply for or renew work passes.
  • WICI premium: the compulsory policy terms let an insurer charge reasonable additional premium when the WICA limits change.
  • FWMI premium uplift: incremental, depending on the carrier's response to the EFMA medical liability framework.
  • WFA preparation for expected end-2027 commencement: grievance-handling procedure development, training, documentation.

Insurance procurement workflow:

  • Review FWMI cover at renewal: confirm minimum annual coverage at the current MOM threshold. For work-injury medical costs above the WICA S$53,000 cap, some insurers offer a higher medical limit on the work injury policy, up to S$300,000.
  • Review WICI cover for 1 November 2025 alignment: WICI policies issued on or after the effective date automatically incorporate the new compensation limits.
  • Consider EPLI procurement: as a standalone or as a module within a Management Liability programme. Wording should respond to statutory tort of discrimination claims under WFA (when commenced) and to existing employment-claim exposure under the Employment Act 1968 and TGFEP.

Common Mistakes / What Goes Wrong

  1. Procuring FWMI only at the bare MOM minimum. The employer's medical liability under the EFMA work pass conditions can exceed the WICA cap of S$53,000. Some insurers offer a higher medical limit, up to S$300,000, on the work injury policy. The MOM minimum is the floor.

  2. Not aligning WICI cover with the 1 November 2025 compensation limit uplift. The compulsory policy terms indemnify the employer for all sums payable under the Act as amended, so a policy in force on that date covers the new limits; the insurer may charge reasonable additional premium, or cancel, when the legislation changes.

  3. Failing to plan for the 1 July 2026 LQS uplift. Full-time local employees earning between S$1,600 and S$1,800 per month must be raised to the new LQS: firms hiring foreign workers must pay it, or they cannot apply for or renew work passes.

  4. Treating R1 and R2 classifications as interchangeable. The levy differential between R1 and R2 ranges from S$100 to S$400 per month depending on the sector and tier. Upskilling efforts that move workers from R2 to R1 deliver direct levy savings.

  5. Not testing the WFA implementation timeline. Expected commencement is end-2027 with a 25-employee threshold. SMEs at or above the threshold should begin grievance-handling procedure development well before commencement.

  6. Ignoring the S$250,000 ECT limit for discrimination claims. Once the Workplace Fairness Act takes effect, the ECT will hear workplace discrimination claims up to and including S$250,000.

  7. Buying Employment Practices Liability cover without verifying WFA response. From expected end-2027 commencement, the policy should specifically respond to statutory tort of discrimination claims. Older EPLI wordings may pre-date the WFA framework.

  8. Misclassifying employees for WICI purposes. "Manual employee" and "non-manual employee whose salary, not counting overtime, bonuses, the annual wage supplement, incentive payments and allowances, is S$2,600 per month or less" are the WICA 2019 categories, subject to the excluded classes. Misclassification can lead to inadequate WICI cover and statutory penalties for failure to insure.

  9. Not coordinating cyber, EPL, and D&O cover. Employment-related claims can intersect with cyber (employee data privacy), EPL (discrimination), and D&O (board-level decisions on dismissal). The three policies should be coordinated to avoid gaps.

  10. Letting EFMA medical cover lapse mid-employment. EFMA cover must be continuous for the foreign worker's pass duration. Lapse exposes the employer to direct statutory medical liability.

What This Means for Your Business

For a Singapore SME employer of foreign workers, the structural priority for 2025-2026 is: confirm work injury compensation insurance from an MOM designated insurer for the employees the duty covers; confirm medical insurance for Work Permit and S Pass holders at or above the MOM minimum, and consider a higher medical limit on the work injury policy where work-injury medical costs may exceed the WICA cap; confirm medical and personal accident insurance for any migrant domestic worker; plan for 1 July 2026 LQS uplift and the DRC denominator impact; review R1-R2 classifications for levy efficiency; begin WFA grievance-handling procedure development for expected end-2027 commencement.

For SMEs at or near the 25-employee WFA threshold, EPLI procurement should be on the renewal-cycle agenda. The policy should respond to statutory discrimination claims; the limit can take account of discrimination claims of up to S$250,000 being heard at the ECT once the Act takes effect.

For SMEs in marine shipyard or process sectors affected by the Basic Skilled levy increases announced at Committee of Supply 2026, which take effect from 2028, the annual cost-stack impact should be modelled and reflected in pricing decisions for downstream customers.

Questions to Ask Your Adviser

  1. Has our insurer charged additional premium, or changed our work injury compensation policy, for the compensation limits in force from 1 November 2025 (death S$269,000, permanent incapacity S$346,000, medical S$53,000)?
  2. For our foreign workers' medical insurance, are we at the current MOM minimum, and would a higher medical limit on our work injury policy (some insurers offer up to S$300,000) cover work-injury costs above the WICA S$53,000 cap?
  3. For our local employees, will the 1 July 2026 LQS uplift to S$1,800 require wage adjustment, and how does this affect our DRC denominator?
  4. For our R2 (Basic Skilled) workers, is there an upskilling pathway to R1 that delivers levy savings?
  5. Are we at or above 25 employees, and have we begun WFA grievance-handling procedure development for expected end-2027 commencement?
  6. For EPLI cover, does the wording respond to statutory tort of discrimination claims under the WFA framework?
  7. At renewal, are we aligning WICI, FWMI and MDW insurance cover with current MOM requirements and Designated Insurer lists?

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