EOR Alternatives for Companies in Singapore That Hire Foreigners

With a labor force participation rate of 68.6%, Singapore offers great opportunities for international expansion. However, the process can be challenging for companies in Singapore that hire foreigners. This is particularly true for first-time employers or companies lacking the resources to set up a local entity, among other complexities of global expansion.

For many businesses, partnering with an employer of record (EOR) in Singapore has been one of the safest and most efficient solutions for international recruitment. These EORs tackle hiring and management problems, including sponsoring work passes for foreign talent. However, the Singapore EOR ban has changed the employment landscape for overseas companies.

Due to this regulation by Singapore’s Ministry of Manpower (MoM), EORs can no longer apply for work passes for foreign employees to work for non-Singapore-based companies. Below, we explore how this regulatory change affects companies in Singapore that hire foreigners and suggest alternatives for successful global hiring.

What is the EoR ban in Singapore?

In July 2024, MoM banned non-Singaporean companies from using an EOR to sponsor work permits for foreign employees working with overseas companies. Per the new rule, EORs can only apply for work passes for Singapore nationals, permanent residents, or individuals employed directly by a Singapore-based company.

Before this new development, an EOR could sponsor foreign workers for work permits, S Pass, and Employment Pass, alongside other legal requirements. This outsourcing streamlined day-to-day employee management for companies in Singapore that hire foreigners as they retained total control over their staff.

Many non-Singaporean entities used an EOR without having to establish a local presence. However, with the MoM implementing this policy, the EOR can only hire and process work permits for local employees. Non-Singaporeans looking to work in Singapore must be directly employed with a locally registered business that adheres to the country’s labor regulations.

According to the MoM, violating this law can lead to fines, imprisonment, debarment from hiring, and reputational damage. 

Read next: Global Hiring Guide: Singapore

What does this mean for companies in Singapore that hire foreigners?

For companies in Singapore that hire foreigners, this policy requires a shift in your recruitment strategy and introduces new administrative and compliance responsibilities for your business. 

To continue hiring foreign workers without an EOR, you must establish a legal entity in Singapore and sponsor work passes independently as their legal employer or simply hire locals. 

However, while EORs are now prohibited from applying for work permits, they can still offer other administrative services, such as payroll processing, compliance maintenance, and HR management for local employees.

EOR Alternatives for Companies in Singapore that Hire Foreigners

As EOR solutions are no longer a viable option for companies in Singapore that hire foreigners, it becomes crucial to seek cost-efficient hiring solutions while maintaining quality and compliance. 

Below, we explore the alternatives non-Singapore-based companies can use to sponsor work passes for foreign workers:

Option 1: Incorporating a Company with ACRA

A private company limited by shares, also known as a private limited company (Pte Ltd), is the preferred structure for companies in Singapore that hire foreigners. 

It is an independent and flexible option for small and medium-sized (SME) foreign companies setting up a local business presence in Singapore. Private limited companies benefit from tax incentives available to local businesses. They can sign employment contracts, generate revenue, and fully participate in Singapore’s labor market. 

Incorporating a company with ACRA offers access to the wider Asian market and ASEAN free trade zones. Companies also stand to gain from trade-free agreements like the ASEAN-Hong Kong FTA, ASEAN-India FTA, and the Regional Comprehensive Economic Partnership (RCEP). This is particularly valuable for businesses planning larger manufacturing operations in other ASEAN countries.

To set up a private limited company, businesses must incorporate with the Accounting and Corporate Regulatory Authority (ACRA), meeting these requirements:

Essential requirements

Company name: The first step in incorporating companies in Singapore that hire foreigners is to choose a business name and apply for it via ACRA’s online business registration and filing portal, BizFile+. The name application costs S$15 (US$11.1) and will be reserved for 120 days upon approval.

‍Company type: When submitting your company name, specify the type, as seven business types can be incorporated in Singapore. 

They include: 

• exempt private companies
• private companies limited by shares
• public companies limited by shares
• public companies limited by guarantee
• unlimited private companies
• unlimited exempt private companies
• unlimited public companies

Registered address: All companies in Singapore that hire foreigners must ensure their registered office is physically located in Singapore and stays open to the public for at least three hours every business day. This access is necessary for easy contact or delivery of legal documents. Companies that fail to comply with this requirement may be fined up to S$5,000.

Directors: Companies in Singapore that hire foreigners must appoint at least one director who is either a permanent resident, Singaporean citizen, or EntrePass/Employment Pass holder. The director must also be at least 18 and without a work history of misconduct or bankruptcy.

Company secretary: The company secretary ensures all directors and shareholders stay informed of their statutory obligations, including filing annual returns. They should be appointed within six months of incorporation; otherwise, the directors may face a penalty of up to $1,000.

Shareholders: The minimum shares issued and paid-up capital for shareholders is S$1 (US$0.74).

Additional considerations

Business activities: When registering companies in Singapore that hire foreigners, specify your business's primary and secondary activities. Choose the most relevant Singapore Standard Industrial Classification (SSIC) code that best matches your intended business operations. 

Licenses and permits: Some companies in Singapore that hire foreigners may require licenses and permits for operations. The specific licenses vary depending on the industry, such as construction businesses, retail, spas, hotels, trading companies, and employment agencies. Ensure you obtain the necessary license for your business before starting operations.

Corporate bank account: Open a corporate bank account in Singapore to handle monetary transactions, such as payroll, and track your business income and expenses, especially when filing income tax returns. Most banks request account signatories and majority directors to be in Singapore for signing when opening a corporate account. Before making your choice, research different banks and compare their requirements, fees, and services for companies in Singapore that hire foreigners.

Tax implications: Local and overseas companies in Singapore that hire foreigners are taxed at a flat rate of 17% of their chargeable income. If your annual revenue exceeds SGD 1 million, register for Goods and Services Tax (GST) with the Inland Revenue Authority of Singapore (IRAS) and charge it on your sales. However, Singapore resident companies may be exempted from tax on some foreign-sourced income received in Singapore, including dividends, branch profits, and service income. Such companies are also not taxed on foreign-sourced income not received in Singapore.

Corporate governance: Adhere to corporate governance requirements, including appointing directors, secretaries, and auditors, when incorporating your company to avoid penalties that can disrupt operations.

Steps to Setting Up Your Entity in Singapore

1. Company name reservation: Check if your company name is similar to other business names and if it’s available as a domain name or a username on social media. You may submit an appeal if ACRA rejects your proposed business name or if you have valid reasons for using an identical or prohibited name. For a successful company name reservation, follow the ACRA business name guidelines.
2. Prepare incorporation documents: Once your company name is approved, prepare these vital documents for incorporation: your company’s constitution, consent to act forms, identification details for shareholders, and corporate shareholder documents.
3. Appoint directors and a company secretary: As the law stipulates, appoint a company director and secretary. All proposed company directors and secretaries must endorse their appointments online through BizFile+. However, if you use a registered filing agent (RFA) to apply, this endorsement isn’t necessary, as the RFA will handle the required declarations for you.
4. Submit the application to ACRA: Log in to Bizfile+ and submit your application. You can either apply for a company name and incorporate your company in a single application or do both at different times. If you choose the latter, you must provide the transaction number from your approved company name application to proceed with the incorporation process.
5. Pay required fees: Besides the S$15 name application fee, registering a company costs S$300. You can pay using a credit/debit card (Visa, MasterCard, or American Express), PayPal, Apple Pay, or Google Pay. 

Option 2: Setting Up a Representative Office Singapore

A representative office (RO) is a temporary solution with limited functions for companies in Singapore that hire foreigners. As a short-term alternative, an RO can’t engage in profitable business activities. It can only participate in activities such as information gathering, market research, trade shows, and developing trade contacts.

A representative office Singapore is suitable for foreign businesses testing the Singaporean markets or researching their investment options before beginning permanent operations. It is established for a maximum of three years and can have up to five staff members. Afterward, Enterprise Singapore, the government agency under the Ministry of Trade and Industry, will evaluate the RO status before it can be renewed annually. 

Key requirements for setting up a representative office Singapore

 Overseas companies looking to establish an RO in Singapore must meet these requirements:

• The parent company has been operating for more than three years.
• The parent company has an annual sales turnover of at least US$250,000.
• The foreign chief representative is either a Singaporean citizen or from the company’s headquarters.
• The RO does not employ more than five local employees as support staff.

Option 3: Apply for Short-Term Visit Pass (STVP)

Companies in Singapore that hire foreigners can apply for an STVP for temporary business needs, such as attending company meetings, conferences, or corporate retreats. An STVP allows expatriates to stay in Singapore for up to 90 days but doesn’t permit long-term employment.

Option 4: Support relocations and visas to alternative countries

Another alternative for companies in Singapore that hire foreign workers is to encourage employees to relocate to countries with beneficial work visa processes that align with workers’ skills and business needs. 

Work with immigration specialists or law firms to handle complex visa and compliance requirements. Provide employees with relevant sponsorship documents, including job offer letters and proof of employment, to assist them throughout the process.

Option 5: Support foreign talent in becoming permanent residents or citizens of Singapore.

Encourage foreign employees to become permanent residents or Singapore citizens by applying for the Overseas Networks & Expertise (ONE) Pass. This employment permit allows high earners and global talent to live in Singapore without first getting a job. Additionally, ONE pass holders can work for multiple employers, start businesses, or take on advisory roles. Their spouses can also work through a letter of consent with the Ministry of Manpower.

To qualify for the Overseas Networks & Expertise Pass, applicants must earn at least S$30,000 monthly or demonstrate exceptional achievements in fields such as research, technology, sports, arts, or culture. Applicants without a recent work history in Singapore must provide proof of employment with a company valued at at least US$500 million or an annual revenue of at least US$200 million.

Future-Proof Your Business with Omni

For companies in Singapore that hire foreigners, navigating through the EOR ban and the complexities of hiring doesn’t have to be complicated. By following best practices and staying updated with legal requirements, HR professionals can ensure a smooth and compliant hiring process.

Omni helps you streamline and automate your process of Singapore-based companies hiring foreign talent, enabling you to attract, screen, and hire the best talent. Our platform allows you to sync all candidate applications in one place and easily collaborate with hiring managers to schedule interviews, send impactful communications, and analyze interview feedback.

With Omni’s recruitment workflows, you can send offers or rejections with just a few clicks, coordinate candidate interviews, share candidate feedback among management, and swiftly transition successful candidates into the onboarding process to ensure top performance and engagement.

Omni manages and automates time-consuming manual tasks to allow you and your recruitment team to focus on what’s really important: crafting impactful interview questions, establishing parameters to interpret responses, and ultimately hiring award-winning candidates.

‍Book your product tour with our team today to learn more about how Omni can simplify your Singapore hiring process.