EoR Services Banned in Singapore: Key Alternatives for Hiring Overseas Talent

Employer of Record services allow businesses to hire foreign talent without setting up a legal entity in the target country. Through an EoR, a third-party provider handles employment, payroll, and compliance, while the company manages day-to-day employee activities. This flexible solution, which reduces upfront costs, was particularly beneficial for companies expanding into markets like Singapore.

Until recently, many foreign businesses relied on EoR services to hire talent in Singapore without the need for a local entity. However, the latest regulations from MOM have changed this, requiring businesses to find alternative solutions.

For a more in-depth look at EoR services, explore our guides on the meaning of EoR or how to choose the best EoR services for your business.

In September 2024, the Singapore MOM announced that it would no longer issue Employment Passes (EP) for foreign workers via EoR services. Under this new policy, foreign employees must be directly employed by a Singapore-based entity, and all work passes—including the EP, S Pass, and Work Permit—must be tied to a local business. This marks a major shift for companies that previously relied on EoR services to manage foreign employees without having to set up a legal presence in Singapore.

While EoRs offered a flexible way for businesses to hire without local incorporation, MOM now requires that foreign workers be employed by the entity sponsoring their work pass, not by the client company. This change closes a loophole and enforces stricter compliance with local employment laws.

The MOM has made it clear: only locally registered businesses can sponsor foreign workers. Non-compliance with the new regulations can lead to fines, imprisonment, and debarment from future hiring.

This EoR ban presents challenges for businesses that previously relied on EoR solutions to hire foreign talent. Companies must now either employ foreign workers through a local entity or explore other workforce solutions to stay compliant with Singapore’s labour regulations. This change disrupts previous hiring strategies, forcing businesses to explore alternative workforce solutions to remain compliant with Singapore’s labour regulations.

The most immediate concern is the disruption to ongoing and future employment plans. Businesses must quickly transition to alternative arrangements, such as setting up a Private Limited Company (Pte Ltd) or considering other visa options. This could delay expansion plans or affect operational continuity if the workforce is left in legal limbo.

Failure to Adapt Could Lead to Serious Legal Consequences:

• Fines: Non-compliant companies could face significant financial penalties for hiring foreign workers without proper local sponsorship.


• Imprisonment: Violating MOM’s strict employment regulations can also lead to imprisonment for directors or responsible officers of the company, especially in cases of prolonged non-compliance.


• Debarment from Hiring: Companies that fail to meet compliance standards may be banned from applying for future work passes, severely limiting their ability to hire foreign talent in Singapore.


• Reputational Damage: Beyond legal penalties, non-compliance with MOM’s regulations could lead to public naming by the Ministry, damaging your company’s reputation and trustworthiness in the market.

Following the EoR ban, affected businesses can explore three main alternatives: setting up a Representative Office (RO) for non-commercial activities, incorporating a Private Limited Company (Pte Ltd) for broader operations, or applying for the Overseas Networks & Expertise Pass (ONE Pass) to hire high-earning professionals.

1. Setting Up a Private Limited Company (Pte Ltd)

Key Benefits:

• Tax Incentives: Singapore offers competitive tax rates, with partial exemptions on the first S$200,000 of chargeable income. Startups may also receive additional exemptions in their first three years.


• Broader Scope: Unlike ROs, a Pte Ltd can sign contracts, generate revenue, and fully engage in the market.

Requirements:

• ACRA Registration: Must register with Singapore’s Accounting and Corporate Regulatory Authority (ACRA).


• Minimum Paid-Up Capital: S$1, though more substantial capital (12 months’ worth) is recommended.


• Local Director: A Singapore citizen, permanent resident, or Employment Pass holder must be appointed.


• Registered Address: A local office address is required.


• Employment Pass Requirements: To qualify for an EP under a Pte Ltd, employees must hold a degree and earn a minimum salary of S$10,000 per month.

2. Opening a Representative Office (RO)

Limitations:

• No Profit-Generating Activities: ROs cannot engage in revenue-generating activities.


• Temporary Status: ROs can operate for up to three years, after which the company must incorporate as a Pte Ltd or leave the market.

3. Applying for the Overseas Networks & Expertise Pass (ONE Pass)

Key Benefits:

• Flexible Employment: Holders can work for multiple employers, start businesses, or take on advisory roles.


• Spousal Employment: The spouse can also work in Singapore with a Letter of Consent.

Eligibility:

• Applicants must earn at least S$30,000 per month or demonstrate outstanding achievements in fields like research, technology, or sports.


• For those not recently employed in Singapore, proof of employment with a company valued at US$500 million or generating US$200 million annually is required.

As Singapore enforces new regulations regarding Employer of Record (EoR) services, businesses must look toward alternative solutions like setting up a local entity. At the ConnectaVerse, we offer expert guidance and comprehensive services to help your company establish a strong presence in Singapore, ensuring compliance with all local laws and a smooth transition into the market.

Whether you need to establish a Private Limited Company (Pte Ltd) or explore other entity options, the ConnectaVerse is here to simplify the process. Our tailored solutions ensure that your business can operate effectively while navigating the complexities of setting up in Singapore.

Our Services Include:

• Entity Formation: From registering with Singapore’s Accounting and Corporate Regulatory Authority (ACRA) to setting up your corporate structure, we handle the full process of establishing a legal entity in Singapore.


• Compliance and Legal Expertise: Our team ensures that your business adheres to Singapore’s employment and regulatory standards, helping you avoid fines or legal complications.


• Local Representation: We provide essential services like appointing local directors and setting up a registered office, meeting all legal requirements.

Why Choose the ConnectaVerse?