Singapore plugs tax and benefit loopholes with tighter foreign hiring rules

The cost of setting up shop would be lower than getting caught for operating illegally.

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A law that bars local job agencies from hiring non-Singaporeans for companies without an office in the city-state is expected to plug a loophole that allowed foreign employers to avoid retirement contributions and other taxes, recruitment experts said.

The law, which took effect in September last year, would also ensure job protection for all Singapore-based talent regardless of their origin under the Ministry of Manpower's (MoM) comprehensive labour laws.

The government banned the so-called employer of record sponsorship for outsiders for the right reasons, Andrew McNeilis, managing director at global recruiter Phaidon International, told Singapore Business Review.

"Those reasons likely include the fact that enough people were taking advantage of the employer of record model in ways that were unfair to the local workforce—perhaps avoiding Central Provident Fund contributions, shifting tax offshore, and ultimately keeping money and commerce from being part of Singapore's ecosystem," he said.