Singapore Tightens Employer of Record (EOR) Regulations: What Overseas Employers Need to Know

Why has Singapore tightened EOR regulations?

The Ministry of Manpower (MOM) has long held that a foreign employee should only provide services to the entity that sponsors their work pass, meaning the EOR, rather than the overseas company.

Although this rule was not rigorously enforced in the past, the latest clarification reinforces that work passes can only be issued to individuals directly employed by a Singapore-registered company.

This change ensures that employment arrangements align with Singapore’s labour laws and prevents potential misclassification of employees.

Companies that fail to comply risk severe legal and financial penalties.

What are the alternatives to Employer of Record (EOR) in Singapore?

With the EOR route no longer an option, overseas businesses must consider alternative methods to legally employ foreign workers in Singapore.

Here are some of the available options:

1. Setting up a Representative Office
   A representative office allows companies to explore business opportunities in Singapore, but it has strict limitations. It can’t engage in commercial activities, sign contracts or generate revenue. This option is ideal for market research or liaising with local partners.

• Incorporating a local Singapore company
  Registering a company with the Accounting and Corporate Regulatory Authority (ACRA) provides a long term solution for hiring foreign employees. Although this requires administrative effort, it allows businesses to operate legally and employ staff directly. ZEDRA has been helping businesses from the UK, Europe and the Americas to establish local entities in Singapore for many years, streamlining the incorporation process and providing expert guidance on payroll, tax, and corporate compliance.

1. Sponsorship by a local entity
   A Singapore-based business partner or customer may be able to sponsor a work pass for your overseas employee; however this arrangement must comply with MOM regulations, and the local entity must take on full employer’ responsibilities.

• Applying for the Overseas Networks & Expertise Pass (ONE Pass)
  Designed for top-tier talent, the ONE Pass allows highly skilled professionals to work in Singapore without being tied to a single employer. Applicants must meet high salary and experience thresholds, making this option suitable for senior executives and industry leaders.

1. Applying for Permanent Residency
   Employees looking to stay in Singapore long term may consider applying for permanent residency, which provides greater employment flexibility. Eligibility criteria can be stringent and may not suit all foreign professionals.

Risks of non-compliance

Companies and employees who attempt to bypass these new regulations face significant legal consequences. If an EOR improperly sponsors a foreign employee’s work pass, both the employer and employee may be committing an offence. Potential penalties include fines, imprisonment, debarment from employment, overseas entity liabilities and reputational damage.

What should affected companies do now?

Overseas companies that previously relied on an EOR should take immediate steps to restructure their employment arrangements in Singapore.

This includes:

• Assessing alternative employment models: Determine the most suitable approach based on business needs, whether through company incorporation, work pass applications, or alternative visa schemes.

1. Reviewing existing agreements: Examine current employment and service contracts to understand potential liabilities and obligations arising from these regulatory changes.

• Developing a communication plan: If employment terms need to be adjusted or contracts terminated, businesses should handle transitions carefully to maintain employee morale and compliance.

1. Seek professional advice: Navigating Singapore’s corporate and employment laws can be complex without appropriate support from local experts. Consulting legal, corporate, and HR professional ensures compliance and mitigates risks.

Conclusion

The prohibition of EOR-sponsored work passes marks a significant shift for overseas businesses hiring foreign talent in Singapore.

While this change removes a flexible hiring route, alternative solutions remain available for companies committed to establishing a legal presence.

By understanding these new regulations and exploring compliant employment strategies, businesses can continue to attract and retain skilled talent while maintaining compliance with Singapore’s evolving labour laws.

For companies seeking a long term foothold in Singapore’s dynamic economy, investing in the right employment structure will be key to sustainable growth and success.

How ZEDRA can help

ZEDRA’s Corporate & Global Expansion experts in Singapore, together with our extensive network of local and international accountants and lawyers, can assist with every aspect of company formation, compliance, and entity management.

We provide practical guidance tailored to your business needs, ensuring a seamless transition into the Singapore market.

Contact Lisa Tan to explore your options for company formation, payroll, and compliance in Singapore.