A foreign worker levy is a government-mandated fee employers must pay when they hire a foreign employee in certain markets.
Several markets charge local employers a levy for hiring foreign nationals, including Hong Kong, Singapore, Malaysia, and Saudi Arabia. By charging a foreign worker levy, these markets aim to incentivize employers to hire local talent over foreign talent.
Types of foreign worker levies
There are several types of foreign worker levies tied to global immigration policies around the world, including the following:
- Work permit levy. Employers pay a work permit levy for each foreign employee on their payroll. This levy covers the cost of processing a work permit.
- Quota levy. Employers pay a quota levy fine if they have hired more foreign employees than the quota set by the government.
- Skills development levy. Employers pay a skills development levy to promote local skills and education programs because they have hired foreign talent living in the country rather than hiring local talent.
- Sector-specific levy. Employers pay a sector-specific levy if they are in industries more prone to rely on foreign labor, such as construction and hospitality.
- Time-based levy. Employers pay a time-based levy calculated based on the foreign employee’s length of employment.
Why do employers pay a foreign worker levy?
Governments impose foreign worker levies to regulate the number of foreign residents working in the country. The goal is to encourage employers to hire and advance local talent rather than hiring expatriate talent in the country.
For example, Saudi Arabia issues a monthly expat levy, or Maktab Amal fee, to employers seeking an Iqama residence visa and work permit to relocate foreign talent to the country. The monthly fee is SAR 800, or roughly US$213, and the employer is responsible for paying the fee.
Additionally, employers interested in hiring foreign talent in Singapore are limited by a quota and must pay a monthly foreign worker levy for each Singapore work visa holder they hire. The fee depends on the sector the company operates in, the type of work visa their employees hold, and their employees' qualifications and skills.
How do employers pay a foreign worker levy?
Paying a foreign worker levy depends on the country issuing the fee. For example, in Singapore, employers pay foreign worker levies in monthly installments to the Ministry of Manpower. Employers make payments using the General Interbank Recurring Order (GIRO).
The foreign worker levy amount depends on various factors detailed by the country, including employment duration, local regulations, industry, exchange rates, nationality, quotas, and limitations.
Penalties for failing to pay a foreign worker levy
Companies interested in hiring foreign talent or transferring employees abroad must understand and comply with the immigration and employment regulations of the country of interest.
If employers fail to pay the foreign worker levy, they may face penalties for late payment, cancellation of existing work permits, denial of new work permits, and possible legal action.
To avoid penalties and other repercussions, employers often choose to work with a global immigration services expert to handle every step of the immigration or relocation process and ensure compliance on their behalf.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. You should contact your attorney or tax advisor to obtain legal and/or tax advice with respect to your particular situation. Only your individual attorney or tax advisor can provide assurances that this information—and your interpretation of it—is applicable or appropriate to your specific situation. All liability with respect to actions taken or not taken based on this information is hereby expressly disclaimed. All content is provided "as is," and Pebl makes no representations or warranties concerning this information.
