Kopi Sessions: The Foreign Worker Levy — Who Really Pays?

Before Singapore’s Budget 2026 was announced, the HOME published a wishlist outlining what we hoped to see for migrant workers. Unfortunately, none of these proposals were taken up.

Instead, one of the key announcements was an increase in foreign worker levies for “basic-skilled” Work Permit holders, set to take effect from 2028. In the marine sector, levies will rise from $500 to $600 per worker. In the process sector, they will increase to $650 or $800 per worker, depending on nationality.

At first glance, these may seem like technical adjustments. But they raise deeper questions about how Singapore’s labour system is structured — and who ultimately bears its costs.

What is the foreign worker levy?

The foreign worker levy is, in essence, a monthly tax paid by employers to hire migrant workers.

In 2024 alone, the Singapore government collected more than S$6 billion from foreign worker levies. By 2026, this is projected to reach S$7 billion — or approximately $19 million every day, and $13,000 every minute.

The levy was first introduced in 1982 as a policy tool to:

• Encourage productivity

• Regulate the number of foreign workers

• Protect jobs for Singaporeans

According to the Ministry of Manpower, it functions as a pricing mechanism to manage reliance on foreign labour.

Has the levy achieved its purpose?

More than four decades on, it is worth revisiting whether the levy has achieved its original goals.

When the policy was introduced, Singapore’s founding Prime Minister, Lee Kuan Yew, envisioned that the country would eliminate its reliance on migrant labour within a decade. Yet today, Singapore is more dependent on migrant workers than ever.

There are now over 1.1 million Work Permit holders in Singapore — the highest number in history.

At the same time, the nature of work has remained largely unchanged. Many of the jobs filled by migrant workers — in construction, shipyards, and process industries — are physically demanding, high-risk, and unattractive to most local workers.

This raises an important question:
If these are jobs Singaporeans are not taking up, are levies truly protecting local employment? Or are they simply increasing the cost of maintaining a workforce that Singapore continues to depend on?

When costs rise, who pays?

While levies are paid by employers, their impact does not stop there. When labour costs increase, businesses adjust. And too often, these adjustments are felt by migrant workers themselves.

Wage stagnation is one example. In the 1990s, a newly arrived Bangladeshi construction worker earned about $18 a day. Three decades later, many newly arrived workers are still earning around similar amounts. But the impact goes beyond wages.

Cost pressures can also affect:

• Workplace safety standards

• Living conditions in housing

• Transport arrangements, including continued reliance on lorry transport

• Access to timely and adequate medical care

In some cases, employers may attempt to recover costs through illegal practices such as kickbacks.

In other words, while employers formally pay the levy, migrant workers often bear part of its consequences.

A system that generates billions — but for whom?

Despite generating billions in revenue, foreign worker levies are not earmarked for migrant worker welfare.

The government has stated that tax revenue — including levy collections — is not ring-fenced for specific spending. This means that none of the billions collected annually is specifically set aside to directly support migrant workers.

At the same time, when NGOs and civil society groups advocate for improvements — such as safer transport, better healthcare access, or stronger protections — these are often framed as costly measures. This creates a troubling contradiction.

On one hand, Singapore collects significant revenue from a system built on migrant labour. On the other, investments into improving migrant workers’ wellbeing are frequently constrained by concerns over cost.

What does HOME want to see?

At HOME, we believe that there is a need for  immediate improvements and longer-term policy reflection.

1. Reinvest levy revenue into migrant worker wellbeing

If levies continue to be collected, a portion should be directed towards improving the lives of migrant workers. This includes:

• Restoring subsidised healthcare
  Public healthcare subsidies for migrant workers were removed in 2007. Today, low-wage migrant workers pay the same rates as other foreigners at public hospitals, creating significant barriers to care.

• Supporting safer transport options
  Levy revenue could be used to help SMEs transition away from transporting workers on the back of lorries, towards safer and more dignified alternatives.

2. Recognise structural dependence

Singapore is structurally dependent on migrant labour. Policy tools should reflect this reality, rather than assume that reliance can simply be reduced through pricing mechanisms alone.

3. Rethink the levy system in the long term

The foreign worker levy has been in place for over forty years. As Singapore’s economy and labour needs evolve, it is time to reassess whether it remains the most effective and equitable tool.

Towards a more inclusive system

Migrant workers continue to face significant challenges, including wage theft, recruitment debt, unsafe transport, and poor working conditions.

If billions of dollars are collected each year from a system built on migrant labour, it is only fair that some of that revenue is reinvested into improving their wellbeing. This is not just a matter of fairness. It is also about the kind of society Singapore wants to be.

We hope the government will engage NGOs, employers, and migrant communities in a meaningful conversation about how foreign worker levy policies — and the revenues they generate — can be better aligned with the realities on the ground. A more equitable system for them ultimately strengthens social wellbeing and cohesion for everyone.