Understand How Foreign Worker Quota Works in Singapore (SME Guide)

Did you know that more than 40% of SMEs in Singapore rely on foreign workers to keep their businesses running smoothly? Yet, many first-time employers face confusion over the rules, fear of Ministry of Manpower (MOM) rejections, and shock when levy bills arrive.

This guide explains how the foreign worker quota Singapore system works, step by step. By the end, you will know how to calculate your company’s quota, avoid common mistakes, and plan your workforce confidently.

TL;DR: Foreign Worker Quota Singapore Explained

• The foreign worker quota Singapore is called the Dependency Ratio Ceiling (DRC) – it limits how many foreigners SMEs can hire compared to locals.
• In the services sector, the cap is 35% foreign staff.
• MOM counts locals only if they earn at least S$1,600 (1 full worker) or S$800–S$1,600 (0.5 worker).
• Always budget for the monthly levy (hiring tax), which increases if you max out your quota.
• Common mistakes: miscounting CPF headcount, ignoring levy costs, no buffer, and wrong industry classification.
• Use the MOM quota calculator to check your allowance before hiring.

👉 SMEs should leave a quota buffer, plan their workforce mix, and track levy costs weekly. For smoother compliance, you can get help with Grof’s payroll services.

What the Foreign Worker Quota Means

The foreign worker quota in Singapore is also called the Dependency Ratio Ceiling (DRC).

• It sets the maximum proportion of foreign workers your SME can employ compared to locals.
• For most SMEs in the services sector (such as F&B, retail, cleaning, and logistics), the cap is 35%.
• This means if you have 10 eligible local staff, you can hire up to 5 foreign employees.

Understanding the quota is crucial. If you miscalculate, MOM will reject your application, or worse, revoke existing work passes.

How MOM Calculates Your Quota (Step-by-Step)

MOM uses a structured formula to decide how many foreigners you can employ. Here’s the breakdown:

Step 1: Count Your Local Employees

MOM counts only those locals who meet the Local Qualifying Salary (LQS) and contribute CPF:

• S$1,600 or more → counts as 1 local worker.
• S$800 to <S$1,600 → counts as 0.5 local worker.

For example:

• 3 staff earning S$1,600 each = 3 locals.
• 2 part-timers earning S$1,000 each = 1 local.
• Total = 4 locals.

Employees earning less than S$800 do not count towards your quota. This is why you must accurately track your payroll.

Step 2: Apply Your Industry Cap

Next, you apply the industry-specific cap to your total workforce. For most SMEs, you fall under the services sector. This means your MOM quota for SME is capped at 35%. In other words, foreign employees can make up a maximum of 35% of your total workforce.

• Services sector (SMEs): 35% cap.
• So, with 4 locals → you can hire 2 foreign workers.

Step 3: Use MOM’s Quota Calculator

Instead of doing manual math every time, check your quota eligibility with MOM’s official calculator.

This tool reflects your CPF contributions in real time and gives you the exact work permit quota or S Pass quota available. To understand the differences between Employment Pass and S Pass, check out our full guide on Singapore Employment Pass (EP) vs S Pass.

The Levy: A Cost SMEs Must Budget For

Hiring foreigners isn’t just about quota. You must also pay a monthly foreign worker levy, essentially a hiring tax.

Levy rates vary depending on:

• Pass type: Work Permit vs S Pass.
• Quota usage: If you max out your quota, you fall into a higher levy tier.

👉 For example, hiring a worker in Tier 1 may cost S$300 per month, while Tier 2 can cost over S$600.

Many SMEs forget to budget for the levy, only to struggle with cash flow later. Always include levy costs in your manpower planning.

Common Mistakes First-Time Employers Make

Many SMEs stumble during their first round of hiring foreigners in Singapore. Here are the top mistakes to avoid:

• Not checking CPF headcount: Assuming all local hires count, when only those above Local Qualifying Salary (LQS) qualify.
• Forgetting levy costs: Adding up only salaries but ignoring the levy can double employment costs.
• No quota buffer: If a local resigns, your quota shrinks immediately, putting foreign passes at risk.
• Wrong SSIC classification: If your company is misclassified under the wrong industry code, MOM applies the wrong quota rules.

Tips to Stay Compliant and Flexible

Here’s how SMEs can stay on top of quota rules without losing sleep:

1. Keep a quota buffer: Always leave some margin instead of hiring to the maximum limit.
2. Balance workforce mix: Strategically plan the ratio of locals and foreigners.
3. Track weekly: Use MOM’s WP Online to monitor quota balance and levy charges. Make it a habit to check it weekly to avoid surprises.
4. Get professional help: If you feel unsure, consult HR or compliance experts to avoid costly errors. They can provide expert advice and ensure you remain compliant with all regulations.

👉 A practical step for SMEs: engage an accounting and payroll services expert. It simplifies payroll, levy tracking, and compliance management.

Final Thoughts

For SMEs, understanding the foreign worker quota Singapore system is key to sustainable growth. Once you know how to calculate your quota, budget for levy costs, and avoid common mistakes, hiring foreigners becomes much less stressful.

With proper planning, you can maintain compliance, stay flexible, and build a workforce that supports your business goals.

If you are ready to streamline your SME’s manpower and compliance, contact us today.

FAQs on Foreign Worker Quota Singapore

1. Is Singapore removing work permit time limits for foreign workers starting July 2025?

Yes. From July 2025, Singapore will remove the two-year limit for certain work permit holders. This gives SMEs the chance to retain experienced foreign staff longer.

2. What are the new rules for foreign workers in Singapore?

From 2025, MOM will adjust salary thresholds, levy rates, and criteria depending on worker skill level and country of origin. SMEs should monitor MOM updates and industry news.

3. What happens if I exceed my foreign worker quota?

If you exceed your quota, MOM will not approve new passes. In some cases, MOM may cancel existing passes until you return within limits. Always check your quota balance before hiring.