1. The company did not need to pay for the CPF contribution for foreign staff
2. Their salary expectations were also lower
3. Their skill sets and experiences were about the same as local Singaporeans
The total cost differential between local and foreign staff was PME 20% to 40%
For an Asian foreign worker with University degree and has work experiences, he would clearly have a goal to make SGD 200k or more and with these earnings, he can easily afford a 2-3 bedroom apartment in the city or suburban area of his own country. He would also want to own a family sedan car (VW) that may cost around SGD22K. In Singapore, SGD200K would only allow a Singaporean with the same qualifications to buy a 2-bedroom HDB apartment at the outer-most corner of Singapore like Woodland or West Jurong. A family sedan car would set a Singaporean back by SGD120K. The normal medical operation cost for a foreign worker in his home country would probably be around SGD 3k compared to Singapore medical costs of around SGD 15k.
Back in their own country, the foreigners' cost of living is so much lower. Hence, he is definitely happy to work for SGD3K to 5K a month which means that within 10 years, he would be able to buy his dream home, car, and accumulate enough money to pay for all his necessary living expenditures and lifestyle. As for a Singaporean graduate earning SGD4K a month, his family would hardly survive as he would be trying to keep up with the ever inflating house, food, transport, education, medical and miscellaneous costs.
As a Singapore PME with university education, it doesn't make sense that while our fellow foreign PME colleagues have bright future ahead by working in Singapore, Singapore PMEs get cornered into 2-bedrooms HDB flats and struggling to keep up with the living expenses. There are exceptions whereby local Singapore PME get into strong sectors like banking, oil, medical or other "super normal profit" industries and due to the attractive packages offered in these industries, the relative costs become insignificant. As for the rest of the locals, life is a struggle.
When it comes to employing maids, a levy is imposed, but when it comes to foreign PME, there is no such 'tax' so as to balance off the differential in the cost-of-living with the foreign countries. No wonder foreign PME staff are replacing local PME at an increasing rate over the last few years until only last year where tighter restrictions are imposed. At the moment, the local PME retrenchment rate is still at high level as employers simply employ foreigners to substitute for locals due to much lower costs.
The replacement trend of locals by foreign PMEs will not affect the IRAS income tax collection in the short term, but over medium to long term, it will weaken Singapore's economy as local PMEs being not employed for too long will become the structurally unemployed as they will loss their skills and employ-ability.
The Government has argued that if Singapore impose restrictions to employ foreign PMEs, the Singapore economy will suffer as companies will move to other countries that has lower PME labor costs.
On the contrary, companies that are established in Singapore will not move out of Singapore just over one cost factor, a foreign PMEs levy. Singapore offers many benefits to companies as compared to them operating elsewhere:
1. Low corporate tax rate; Singapore is amongst the world's lowest corporate tax country
2. Efficient infrastructure; air and sea-ports, robust utilities' services and infrastructures.
3. Clear and effective business laws and regulations
4. Safe business environment; no burning of factories, labor strikes, riots, political risks, ...etc
Imposing a foreign PME levy is to level the playing field and rebalance living standard between the local and foreign PMEs . Afterall, Singaporeans have made the above attractive listed factors for companies possible through:
1. their 2-years NS service to ensure safe business environment
2. contributed to taxes which is reinvested by the Singapore government in infrastructure
3. and paid good salaries to civil servants and government officials to ensure efficiency in business laws and regulations and keeping corporate tax low.
Should companies move away just because of foreign PME levy, then it is not worthwhile to hold them back in Singapore, as they are already free-riding on Singapore for all the other attractive factors listed above.
If replacement of local with foreign PMEs continue, not only will local PMEs end up structurally unemployed, the foreign PMEs will also bring back their enhanced skillsets and experiencs back home, which will further strengthen their home countries' competitive edge over Singapore.
