Singapore Budget 2026: What Every Employer Must KnowAbout The New Work Pass and Levy Change

The Singapore Government has announced significant changes to its foreign worker framework, raising qualifying salaries for Employment Pass and S Pass holders, adjusting levy rates, and strengthening local wage floors. Here's a clear breakdown of what changes, when, and who it affects.

Source: Singapore Budget 2026, Annex D-1 & D-2·Ministry of Finance

Singapore's Ministry of Finance has released two key annexes as part of the FY2026 Budget that directly impact employers who hire foreign workers. The measures span a wide spectrum from raising the minimum salary for skilled work pass holders to simplifying levy structures for lower-wage work permit categories. Together, they signal a continued push toward a higher-quality, more productive, and better-paid workforce.

If you employ foreign nationals in Singapore, whether through Employment Passes, S Passes, or Work Permits, here is everything you need to know.

"These changes reflect a long-standing Government approach: foreign talent must demonstrably complement, not substitute, local workers, while local wages are progressively uplifted."

Employment Pass: Higher Bar for Skilled Professionals

What's Changing

The Employment Pass (EP) minimum qualifying salary will be raised across the board. For most sectors, the floor moves from $5,600 to $6,000 per month. The Financial Services (FS) sector, which operates under a higher threshold, will see its minimum rise from $6,200 to $6,600. Both increases are calibrated against the top one-third of local PMET (Professionals, Managers, Executives and Technicians) wages.

Importantly, salaries are not flat , they scale progressively with age. Older candidates are expected to command significantly higher salaries to qualify for the EP.

Table 1 — EP Minimum Qualifying Salaries
Sector	Current Minimum	New Minimum	Age 45+ (New)
All sectors except Financial Services	$5,600	$6,000	$11,500
Financial Services	$6,200	$6,600	$12,700

Key Dates — Employment Pass

New EP applications: effective 1 January 2027Renewal applications: effective 1 January 2028

Employers sponsoring EP holders, or planning to, should review current employee salaries well ahead of 2027. Candidates who are currently marginally above the qualifying threshold may fall below it under the new framework, particularly in older age brackets.

S Pass: Mid-Tier Foreign Workers Face Higher Salary Floor

What's Changing

The S Pass minimum qualifying salary will also be raised. For general sectors, the floor climbs from $3,300 to $3,600. For Financial Services, it moves from $3,800 to $4,000. As with the EP, age-based salary progression applies.

Table 2 — S Pass Minimum Qualifying Salaries
Sector	Current Minimum	New Minimum	Age 45+ (New)
All sectors except Financial Services	$3,300	$3,600	$5,100
Financial Services	$3,800	$4,000	$5,650 (unchanged)

Key Dates — S Pass

New S Pass applications: effective 1 January 2027Renewal applications: effective 1 January 2028

Note that a previous S Pass salary increase (to $3,300 for general sectors and $3,800 for FS) had already taken effect for new applications from 1 September 2025. The 2026 Budget announcement layers a further increase on top of this recent baseline. Employers should track both the current and upcoming thresholds carefully, especially for renewals.

Work Permit: Levy Restructuring Across Sectors

The Government is also reshaping Foreign Worker Levy (FWL) rates for Work Permit holders (WPHs). Changes differ by sector and skill level.

Marine Shipyard & Process Sectors

For the Marine Shipyard sector, monthly levy for Basic-Skilled (R2) WPHs increases by $100, from $500 to $600. Higher-Skilled (R1) rates remain unchanged.

For the Process sector, R2 workers from Malaysia, North Asian Sources, and PRC will see levies rise $150 (from $450 to $600). R2 workers from Non-Traditional Sources face the same $150 hike, moving from $650 to $800. R1 rates in both cases are unaffected.

Table 3 — Marine Shipyard & Process Sector Levy Rates
Sector	Nationality Group	Current R2	New R2
Marine Shipyard	All	$500	$600
Process	Malaysia, North Asian Sources, PRC	$450	$600
Process	Non-Traditional Sources*	$650	$800

* Non-Traditional Sources include Bangladesh, Cambodia, India, Myanmar, the Philippines, Thailand, and others.

Services & Manufacturing Sectors: Simplified Levy Tiers

Currently, the Services and Manufacturing sectors operate on a three-tier levy system based on how heavily firms draw on their WPH quota. The Government is streamlining this by merging Tier 1 and Tier 2 into a single rate, effectively raising the cost for firms that rely on lower levels of quota utilisation.

Table 4 — Services & Manufacturing: Simplified Levy Rates
Sector	Tier (New)	New R1 Rate	New R2 Rate
Services	Merged Tier 1+2 (up to 25% of workforce)	$400	$600
Services	Tier 3 (above 25% to 35%)	$600 (unchanged)	$800 (unchanged)
Manufacturing	Merged Tier 1+2 (up to 50% of workforce)	$300	$470
Manufacturing	Tier 3 (above 50% to 60%)	$550 (unchanged)	$650 (unchanged)

Key Dates — Work Permit Levy Changes

All Work Permit levy changes take effect from 2028. MOM will release specific implementation timelines in due course.

Local Qualifying Salary: Raising the Floor for Local Workers

Any firm hiring foreign workers must also comply with the Local Qualifying Salary (LQS), the minimum monthly wage that local employees must be paid for them to count toward the firm's foreign worker quota entitlement.

The LQS will be raised from $1,600 to $1,800 per month for full-time local workers. Part-time local workers must be paid at least $10.50 per hour. These changes take effect from 1 July 2026, the earliest deadline across all the measures announced.

The counting rules for quota entitlement are adjusted accordingly:

·       Full Count (1.0)

Local workers paid at least $1,800/month

·       Partial Count (0.5)

Local workers paid at least $900 but less than $1,800/month

·       No Count (0)

Part-time locals earning below $900/month gross wages

This means companies that currently have local employees earning between $1,600 and $1,799 may find their quota entitlement reduced if those salaries are not increased. For businesses that are dependent on significant numbers of foreign workers, this is worth reviewing urgently.

Progressive Wage Credit Scheme: Extended Support Through 2028

To help employers manage the cost of raising local wages, the Government is extending and enhancing the Progressive Wage Credit Scheme (PWCS). The PWCS co-funds a portion of qualifying wage increases given to lower-wage workers.

The scheme now covers wage increases in qualifying years 2026, 2027, and 2028. Co-funding rates are as follows:

Table 5 — PWCS Co-Funding Rates (Revised)
Qualifying Year	Payout Period	Co-Funding Rate
2026	Q1 2027	30% Increased from 20%
2027	Q1 2028	30% New
2028	Q1 2029	20% New (final year)

From 2027, the minimum qualifying wage increase will be raised to $200 per year (up from $100). Businesses that made incremental raises below this threshold in 2026 may still qualify for 2027 co-funding if those increases are sustained — but any new increases from 2027 onward must meet the $200 bar.

"The PWCS is a transitional support mechanism, not a permanent subsidy. Firms are expected to use this window to uplift workers, invest in skills, and improve productivity."

Key Takeaways for Employers

The 2026 Budget workforce measures are layered but clear in intent: make Singapore's workforce leaner, better-paid, and more productive while ensuring foreign talent genuinely adds value at every tier. Here's what employers should prioritise:

Review EP and S Pass salaries now. While the new minimums apply from January 2027 for new applications, planning ahead avoids last-minute compliance risks, especially for older pass holders where age-banded thresholds can be significantly higher.

Audit your LQS compliance by June 2026. The LQS increase to $1,800 kicks in on 1 July 2026, the earliest change in this entire package. Any local employee currently earning between $1,600 and $1,799 needs attention now.

Plan around Work Permit levy changes for 2028. While these changes are further out, the Services and Manufacturing sector simplification effectively raises costs for firms in lower utilisation tiers. Use the lead time to optimise headcount mix or explore productivity investments.

Maximise PWCS entitlements. If you are raising wages for lower-wage workers earning under $3,000 gross monthly, ensure wage increases meet the qualifying criteria and are documented for co-funding claims.

Work With Us

Navigating Singapore's work pass framework with its overlapping timelines, age-banded salary thresholds, sector-specific rules, and levy structures can be a significant hassle for any HR or operations team. K.Merleone is a registered agency with deep expertise in Singapore's foreign manpower landscape. Whether you need to assess how the 2027 salary changes affect your current EP and S Pass holders, restructure your workforce ahead of the 2026 LQS deadline, or simply register a new work pass from scratch, our team is here to guide you through every step accurately, efficiently, and in full compliance with MOM requirements.

From initial eligibility checks and documentation to submission, follow-ups, and renewals, K.Merleone provides end-to-end work pass management so you can focus on running your business. Get in touch today and let's make sure you're ready for what's ahead.

Contact us here.