Complying with Singapore's Fair Consideration Framework: What multinational corporations should know when expanding into Singapore

Sunday, November 6, 2016 - 23:31
When Singapore introduced its Fair Consideration Framework (FCF), the objective was to create a forum for employers to fairly consider Singaporeans before hiring foreigners. However, it has evolved into a far more comprehensive obligation to develop a strong Singaporean core rather than relying heavily on foreign talent.
 
Over the past year, the IT industry has come under particular scrutiny, as it often deploys large numbers of foreign workers to undertake work on client projects in Singapore. This model is regarded especially unfavorably by Singaporean authorities, since long-term jobs and skills are not developed locally. As a result, a number of IT consultancy companies have been placed on a watch list, and they will likely have to adjust their model to develop a strong Singaporean population going forward.
It is important for multinational corporations to be aware of the FCF’s strict requirement that employers intending to hire foreigners first advertise the position on a dedicated government job bank for at least 14 days. If the employer does not find a suitable Singaporean for the position, it may then hire a foreign national. The employment pass (EP) application has to be consistent with the job advertisement and list the advertisement ID.
 
The Ministry of Manpower (MOM) prefers all new positions to be advertised via its job bank. However, there are some exemptions from the advertising requirements:
• Firms with 25 or fewer employees
• Employees earning a fixed monthly salary of SGD 12,000 or more
• S Pass (skilled workers) and Work Permit (unskilled workers) applications
• Short assignments of up to one month only (EP is not renewable, and the holder may not apply for a new EP for a period of three months after the expiry of the previous pass)
• Jobs to be filled by intracompany transferees (ICTs)
Unfortunately, the ICT route is not a reliable option because the MOM’s preference is for companies to advertise all positions and consider Singaporeans first. In practice, the MOM requires a high standard of proof that the candidate’s experience and job position are within the exemption’s required definition of “manager,” “executive” or “specialist.” In many cases, the MOM rejects seemingly strong cases on this basis, and it is then necessary to advertise on the job bank and reapply for the EP, which results in significant delays.
 
The MOM has its own criteria for assessing whether or not a company has an acceptable proportion of Singaporeans compared to the industry average. However, the MOM has not issued any specific guidelines on their ratio expectations. More recently they have mentioned that it is undesirable for foreign professionals to outnumber Singaporeans, so companies with more than half of their population on EP are likely to be looked at closely. 
 
This year the MOM is actively scrutinizing companies with a large foreign population and a Singaporean core that is weaker than the industry norm (especially if it is less than the foreign population). Such companies are now also being assessed on their commitment to hiring and developing Singaporeans and their importance to Singapore’s economy and society. Those companies not doing well under these criteria are likely to be referred to the Tripartite Alliance for Fair and Progressive Employment Practices for assessment. Around 250 companies have already been placed on a watch list, which means they have six months to improve their HR policies and strengthen their Singaporean core. If no progress is made during that period, work pass privileges may be suspended.
 
Once a company has been placed on the watch list, the EP process takes much longer than usual as the MOM scrutinizes the applications to see if Singaporeans have been fairly considered for the job. As part of this process, the MOM will ask for additional information regarding any Singaporeans who have applied for the job, whether or not they have been interviewed, and why they have not been interviewed or chosen. The MOM will also ask for wider information regarding Singaporeans who have left the company in the past six months and the level of training and support provided to Singaporean employees. Therefore, it is essential to keep comprehensive HR records in respect to recruitment, training and promotion.
 
While multinational corporations usually need foreign talent for key roles and regional coverage, it is essential to hire and promote Singaporeans as far as possible. This may be difficult to achieve if there are few Singaporeans with the right skills and experience applying for the jobs. However, it is important for international companies to not merely rely on internal transfers to Singapore but also to formulate concrete plans for the successful hiring and training of Singaporeans in order to ensure a good ratio and avoid being placed on the watch list.

Mark Buchanan is a partner at Fragomen, Del Rey, Bernsen & Loewy, LLP, resident in its Singapore office. Amy Cococcia is a partner at Fragomen, Del Rey, Bernsen & Loewy, LLP, resident in its New York office. 

You can reach the authors at mbuchanan@fragomen.com or acococcia@fragomen.com.