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Should You Hire a Local Resident or Send an Employee to Singapore?

If you are just entering the Singapore market or expanding your existing business, you will need to decide how to staff your operations.  You have two options: hire a local resident with the right skill set, or send an employee from home on assignment.  While assigning an expat may seem like the top choice, the risks and costs reduce the appeal of sending employees abroad, and many companies are beginning to favor hiring talented locals.

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Advantages of Hiring in Singapore

There are some real perks when you set up an entity and hire any type of employee in Singapore:

  • An English speaking country with ease of access to all Asian markets
  • The business climate is favorable for multinationals
  • An existing highly educated workforce with a wide range of talent
  • Government supports private enterprise and entrepreneurship
  • Developed infrastructure, transport, public safety and government regulations
  • Relatively low corporate tax rate of 17% to incentivize businesses
  • Double Taxation Agreements with many countries to offset any double tax effects

Hiring Local vs Sending an Employee to Singapore

Considering these positive elements of doing business in Singapore it is no wonder that multinationals have an interest in opening a subsidiary or branch.  The process of staffing operations will lead to the choice of either hiring locals or sending employees on assignment.

There are pros and cons to each, and here is a quick overview of the key points to keep in mind:

Hiring Locals in Singapore

At first, hiring a local may seem more difficult given the need to recruit, hire and onboard from your home office.  But, if you take a closer look at the realities, it is not an insurmountable challenge and in many ways preferable to sending an employee on assignment.

Pros

  • Fair Consideration Framework (FCF)

The FCF was recently expanded in scope in Singapore to favor hiring of locals over foreign nationals.  This is an express government policy now, and hiring a local will be easier from a regulatory standpoint.

When sending staff from home, employers will need to show that the position was advertised in Singapore for consideration of locals first, and that any foreign employees are being paid a certain level of salary.

  • Lower Cost/No Relocation Expenses/Logistics

Hiring a local means a lower cost, even with an equivalent salary level.  There is no need for the time and expense of relocation, and the local hire can be onboarded almost immediately.

  • No Immigration Issues

Obviously, locals will not need any type of work permit to begin employment.

  • Local Knowledge

Hiring a resident employee also brings their personal and professional network inside of Singapore, as well as their knowledge of the country.

  • Offers Diversity

Even if you send employees on assignment, also hiring locals will bring diversity to your team and organization.

  • No Language/Cultural Barriers

Although English is the business language in Singapore, the local’s knowledge of other Asian dialects, culture and business customs will help bridge any gaps for your company.

Cons

  • New to the Organization

Like any new hire, a local will not be as familiar with your company or the position, compared to your existing employees.

  • Remote Work Challenges

Sometimes companies will hire locals as remote workers, or ask them to interface with a team from your home office, which means they need to overcome communication challenges and time zone differences.

  • Need for Training and Support

Naturally, the local hire will need either in person or remote training and support in their new role, whereas an expat will already be proficient and experienced.

  • Limited Talent Pool

Although Singapore has many adept professional and technical workers, it is still a relatively small country with some limits, and competition for available local talent.

Sending an Employee on Assignment to Singapore

Companies traditionally have sent willing management or technical employees on assignment from home, but this is no longer the default method of staffing in countries like Singapore.

Employment Pass in Singapore

The first issue that comes up is that all expats on assignment of more than 60 days will need a work permit.  The Employment Pass is the primary permit for professional workers and does come with a few requirements.

  • The Employment Pass is given to individuals that earn minimum SG$3600 monthly. For expats that want to bring their dependents that amount has increased to SG$6,000 as of Jan 1, 2018.
  • The EP application can only be done manually by an employer or employment agent.
  • In November 2017, changes were made to the EP application making it more in-depth and detailed, asking about company’s hiring practices, and reasons to not hire a local applicant instead.

You can read more about the EP rules in this article here, but its clear that the EP is by no means an automatic work permission for expats.

Pros

Despite the immigration hurdles, there are a few real advantages to sending an employee on assignment:

  • They Know Your Company

They are already well-versed in your company and its products or services, and can bring that expertise directly to Singapore.  There is no need for training, except to get accustomed to the local business environment.

  • You Know Them

Expats will have existing internal relationships, and were likely selected for the assignment due to their competence and experience.  You don’t have to wonder if they will be qualified or fit in over the long term.

Cons

In addition to the cost and time involved to get a work permit, there are some downsides to sending an employee to Singapore, that may outweigh the advantages.

  • FCF Rules

The new FCF requirements will mean that assigned employees will need to have a higher level of qualification and compensation to avoid compliance problems.

  • Higher Cost

When contrasted to hiring a local, there are numerous additional costs involved for an expat, including relocation, allowances, language training, maintaining home country benefits and family expenses such as education.

  • Risk of Assignment Failure

This is the one variable that is hard to control, and even if the assigned employee is a perfect fit for the role, there are a number of reasons that the assignment could fail.  Sometimes the transition will not be smooth or there are family issues that interfere with the assignment.  In other cases, the employee simply cannot perform as well in a foreign country, and the assignment fails for business reasons.

Risks of Non-compliance and Other Factors in Singapore

Because of immigration compliance risks and the cost of relocating an expat employee, hiring a local resident in Singapore emerges as the better choice.  This will depend on your ability to recruit the right local for the position, but for technical or specialized roles there is a good talent pool available, as well for administrative or support staff.  On top of this, your company will be employing in accord with a stated government policy of hiring local employees, which can only result in goodwill.

Shield GEO Solution

If you are planning to hire employees of any type in Singapore, you will need to have a legal entity in the country to run payroll and meet all employment laws.  Some companies choose to set up their own subsidiary, but this step can be costly and cause delays in starting your business activity.

Our solution saves you the time and trouble of incorporating, as our local employer of record in Singapore can easily hire, onboard and payroll all of your employees, whether residents or expats.

Shield GEO also takes care of any work permit applications, withholds taxes and makes all statutory contributions, virtually eliminating the risk of compliance through our in-country experts.  We make international employment simple in Singapore and all major global markets.

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