Is Singapore’s tech sector being held back by tight immigration laws?

The nation-state is letting fewer, not more foreign experts in these days.

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Is Singapore’s tech sector being held back by tight immigration laws?

Talent shortage is a common problem everywhere as the global workforce has to keep up with rapid technological change.
Especially small countries with small populations but fast-growing economies have it tough, and they have to construct immigration laws that bring in the right number and type of workers.

Israel is in that position, and it has tried to make adjustments to its work visa process to make it easier for companies in the nation’s flourishing tech industry to hire from abroad.

Singapore’s case is similar, but the city-state is adopting an increasingly stricter approach in the hiring of foreign professionals. For some startups, finding the right talent is a major obstacle.

In Singapore, an Employment Pass (EP) is given out to foreign professionals in managerial, executive, or specialised position. There are three categories that these foreign experts can apply for, namely P1, P2, and Q1.

The Singaporean government has been raising the threshold for entry-level salaries in a bid to curb the influx of foreigners.
Q1 EP is the “lowest” level intended for foreign fresh graduates, whereas the P1 and P2 EPs are the most common employment passes for skilled foreign professionals looking to work in Singapore.

P1 and P2 EPs require a minimum salary of SGD 4,500, which is beyond what most local startups can afford. But even the Q1 passes ask for a minimum monthly salary of SGD 3,600, an increase from the SGD 3,300 minimum salary in 2014. Q1 applicants are also subject to stricter scrutiny, with applicants from certain countries being more welcome than the others.

In 2016, the criteria for approving an employment pass were further tightened to factor in the proportion of foreigners in a company; whether the company tried to recruit Singaporeans for the job; and the extent of the company’s contribution to the economy and society.

In 2017, the number of employment passes granted in Singapore saw its biggest drop in 15 years.

In the lead-up to the announcement of Singapore Budget 2019, KMPG published a proposal, titled “Becoming Smarter: Making our Smart Nation vision real”. In the proposal, KPMG advocated for more open immigration policies for skilled workers in key areas of data science and emerging technologies.

However, against the wishes of many, the Singapore Budget 2019 did not touch upon hiring of foreign tech talents on EP.

It’s smaller tech startups that feel the crunch

One problem this has resulted in is that smaller tech startups are finding it especially hard to hire. It’s not the immigration rules alone. The growing influence of the biggest and most-funded tech companies means both local and foreign talent gravitate towards those roles first.

“There’s definitely a much healthier pool of tech talent available currently, compared to 5 years ago,” Shaun Heng, the founder of Singaporean food delivery and payment startup Eatsy told KrASIA.

“However, the reality is that we are also going head-on with the tech giants like Google, Facebook, Grab, etc, for the same pool of talents. These companies can usually pay better than what an SME can afford.”

This sentiment is shared by homegrown prop tech startup, Ohmyhome. Startups can never compete with these “big boys” in terms of the salary package, working environment, prestige, and funding, said Race Wong, COO and co-founder of Ohmyhome.

Without these perks, it makes little sense for a tech expert looking to relocate to Singapore to join a startup, especially considering the fact that Singapore is one of the most expensive places to live in in the world.

For some startups, this means they cannot expand as quickly as they would like to.

“Instead of building two features at a time, a small team simply means building one feature at a time which definitely results in slower growth and productivity for the company,” said Race.

S Pass: an alternative to Employment Pass

With even the entry-level Q1 Employment Passes increasingly out of reach for startups, some seem to have found an alternative way to hire foreign tech talents — the so-called S Pass that’s originally intended for jobs in the service sector, which require less specialized skills.

Heng told KrASIA that his company recently hired a Vietnamese senior product designer on an S Pass.

When it comes to hiring, what really matters is skill set, passion and team fit, Heng said. This is what drove Eatsy to bring onboard a foreigner despite knowing that a foreigner tends to lack the deep understanding of the local ecosystem and user behaviour that a local tech talent would have.

The minimum qualifying salary for an S Pass is SGD 2,300 as compared to the SGD 3,600 for an entry-level EP

.The application for an S Pass is also efficient and quick, which is a huge contrast from the tedious application for an Employment Pass. The application for an Employment Pass can take anywhere between a couple days to a few months to be processed and approved, often depending on the salary bracket.

The S Pass can alleviate the problem for SMEs like Eatsy that are unable to afford the minimum salary for an EP.
is not exactly a convenient replacement for Employment Pass per se since it targets mid-level skilled individuals. But it’s also only a short term solution and S Passes also come with limitations.

Currently, the S Pass Dependency Ratio Ceiling (DRC), which sets the maximum permitted ratio of foreign workers to the total workforce at a company, stands at 20% in most sectors.

The Singapore government has already started cracking down on S Pass DRC for the service sector, which means that it could tighten the S Pass quota for other sectors, including tech sector.

The crux of the issue is a dearth of talent for high-tech jobs. And this problem can only be solved either by quickly increasing the supply of local tech talents or by loosening immigration laws.

Editor: Nadine Freischlad