International businesses in Singapore are facing increasing barriers to hiring expatriates as the government seeks to assuage domestic political concerns over soaring unemployment in the Asian financial centre.

Despite increasing interest among global companies in using Singapore as an alternative regional base to Hong Kong, authorities in Singapore last week tightened criteria for hiring foreign professionals.

The government raised the cost of hiring expatriates by increasing the minimum salary needed to qualify for an Employment Pass, or work permit for foreign professionals, by 15 per cent to S$4,500 (US$3,300) a month. The government for the first time also introduced a sector-specific higher qualifying salary of at least S$5,000 a month for those working in finance and double that for candidates aged in their forties.

The new rules, the second time requirements have been updated this year, would affect businesses trying to hire new foreign employees as well as renewing existing visas, said Ravi Chandran, assistant dean of undergraduate studies at the National University of Singapore Business School. Even for those who meet the criteria, there is often “no guarantee” of obtaining a work pass, he added.

The new regulations come as some fund managers and traders are looking for a new base for their headquarters in Asia after Beijing introduced national security legislation for Hong Kong that critics argue threatens to undermine the rule of law in the city.

Singapore, long a choice destination for foreigners in Asia because of its low taxes and high living standards, has been restricting the rules for employment passes in recent years to encourage businesses to consider locals first. Singapore also has quotas to ensure businesses strike a balance between the local and foreign employees.

That drive has been exacerbated this year with the unemployment rate among local Singaporeans and permanent residents increasing from 3.3 per cent to nearly 4 per cent in the second quarter, its highest in more than a decade.

Singapore fell into recession for the first time since the global financial crisis in the second quarter after the city-state imposed a lockdown to battle coronavirus. The economy shrank by 12.6 per cent year on year, the largest drop since independence in 1965. 

The government said the changes to employment pass rules would help companies “ensure a strong Singaporean core” while the city remained an open hub for international business.

The changes were “obviously good” for comparable local talent, said Damien Joseph, an associate professor at Nanyang Technological University’s Nanyang Business School. There was increasing discontent on social media platforms among Singaporeans “unhappy with hiring policies” in recent months, he said.

Earlier this month, nearly 50 employers, mostly in the financial and professional services sectors, were added to a government watchlist of companies with suspected discriminatory hiring practices.

Protecting Singapore workers’ interests was a theme of the national election held in July. The manifesto of the opposition Workers’ party, which won a record number of seats, included proposals to curb the number of employment passes granted. 

One partner at a top international law firm with a large number of expat employees in the city said the changes were not expected to have much impact on the top level in areas such as banking and law. 

“This is about perception, giving the perception that Singapore is doing more to help locals’ employment prospects,” the partner said. “The flip side to that is it will probably damage international perception of Singapore even if it doesn’t have a big impact.”

TY Shao, a Singapore-based manager at technology and financial services recruitment firm Hudson, said he had already seen an increase in local hiring in response to the pressure. 

“A lot of organisations are trying to avoid having to apply for an EP because there is a real risk it will not be approved,” he said. 

But a large percentage of affected workers would also be foreigners from Malaysia and China working in sectors such as retail or marketing who were paid less, he added.