The A-Z of securing an employment agency licence in Singapore

Apr 29

The A-Z of securing an employment agency licence in Singapore

The article was originally published in RI Asia Magazine, April 2015 issue.

It is no wonder that being ranked as the best place in the world to do business by the World Bank for nine years in a row, Singapore has a huge number of established companies and newly setup businesses. However, it is also known that the Singapore resident population is rather small, which means a smaller talent pool available to these businesses. With a population of only 3.84 million Singapore residents, finding the right employee for a company can thus be a rather daunting task.

The Singapore government therefore highly encourages more Employment Agencies (EA) to come to Singapore to support the local economy and infrastructure by introducing the best candidates to meet employers’ needs. To protect employing companies and ensure fair practice, regulations have been set in place by the Ministry of Manpower (MOM).

Employment Agency Licences and Regulations

Licensing and regulation are a normal way of life in Singapore; it is a free market but there are rules to abide by. In Singapore, starting a recruitment firm is covered by an employment agency (EA) licence, which comes in two forms. Both forms are issued only to registered local entities and are valid for three years.

  Comprehensive Licence (CL): An EA holding a CL may place any type of worker. The security deposit that a CL EA needs to furnish will vary according to the number of work permit holders and S pass holders placed and its cumulated demerit points over the preceding 12 months. New CL EAs will have to furnish a S$60,000 security deposit.

  Select Licence (SL): An SL is for EAs that only place workers earning a monthly salary of more than S$7,000 per month. SL EAs are required to furnish a security deposit of $20,000, and there is no limit on the number place.

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Comprehensive Licence (CL) Select Licence (SL)
Type of workers EA is allowed to place Any type of worker Locals and/or Employment Pass holders, earning a monthly salary of more than S$7,000
Licence validity 3 years 3 years
Registration of EA personnel EA personnel (key appointment holders and other EA personnel) performing EA work are required to be registered EA personnel (key appointment holders and other EA personnel) performing EA work are required to be registered
Certification of EA personnel Key appointment holders are required to attain certification, regardless of whether they perform EA work or not
Other EA personnel performing EA work are required to be registered
EA personnel are not required to attain certification
Security deposit S$60,000* S$20,000


 

* New CL-EAs will have to furnish a $60,000 security deposit. // Table source: MOM web-site

Securing an EA licence is not as easy as most think when setting up their agencies. Fulfilling the licensee requirement from the Ministry of Manpower (MOM) is only half of what an EA needs to be prepared for. The second half of the application process involves completing financial details. It is, therefore, very important that agencies ensure they have done their homework before applying for an EA licence.

Security deposit for an EA licence

Most people get a shock when they discover that MOM requires furnishing of a S$60,000 security deposit. The security deposit is compulsory, as it will be used to discharge an EA’s liabilities to their clients in unforeseen circumstances. However, in most cases, agencies are not able to cough up the lump sum cash in short notice after applying for the licence. And even if the money is available, it does not really make business sense to park it aside. A good way of getting around this is to purchase a Security Bond or Surety Bond (SB) from a general insurance company.

The fee for the insurance company to issue an SB is known as the premium. The one time premium for the SB usually costs about S$3,500 – S$5,900. The insurer will assess the risk and the current claims experience of the company to determine the premium.

The request for the quotation itself will take three to five working days. Before requesting for a quotation, the EA needs to submit the following documents to the insurer:

  In-principle Approval Letter from MOM,

  Latest income tax returns from the Inland Revenue Authority of Singapore (IRAS), and

  Business Profile of the company from the Accounting and Corporate Regulatory Authority (ACRA).

After MOM issues the In-principle Approval Letter, companies usually have a limited one month window period to submit the SB. Before you even apply for the EA licence, it is very important to make preparations to pay this premium to the insurer. It will be a desperate race against time if you wait until you receive the In-principle Approval Letter before trying to raise the money for the premium payment.

Guarantors for an EA licence

Another important piece of homework to be done before applying for the EA licence is getting two guarantors with a minimum taxable annual income of S$50,000 each. They must be Singapore citizens or Singapore permanent residents.

This is required by the insurer before they can issue an SB. Usually only one guarantor is needed, but the insurer has the right to ask for an additional guarantor. For most, this is the trickiest part before applying for an EA licence.

The issuance of an SB usually takes five working days. The agency should inform their insurer what is the preferred date of issue. In most cases, companies collect the SB from their insurer and submit it to MOM on the same day. You should already have this date in mind when you receive your In-principle Approval Letter for the EA Licence.

If you have done all the preparatory homework above, the application for an EA licence should go smoothly.


This article is written with inputs from Kheng Seng Chua, a financial service professional.



The A-Z of securing an employment agency licence in Singapore

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