During the 2021 National Day Rally, then-Prime Minister Lee Hsien Loong introduced a relatively obscure term: the Local Qualifying Salary (LQS). Many lauded this change as a quasi-minimum wage for Singapore workers.
Thrust into mainstream attention, the government has subsequently continued to use the LQS, revising it upwards – ensuring lower-wage workers are not left behind as the nation progresses.
What Is The Local Qualifying Salary (LQS)?
The Local Qualifying Salary (LQS) is not a new wage number but has been in place for years, even before 2021. It is a wage threshold set by MOM to determine whether a local employee can be counted towards the company’s foreign worker quota entitlement.
This was previously known as the Full-Time Equivalent (FTE) salary. The salary threshold for classifying workers as FTE was raised from $1,000 to $1,100 in 2017 and from $1,100 to $1,200 in 2018. In 2019, the LQS was raised from $1,200 to $1,300 as part of the 2019 Committee of Supply (COS) announcements. Thereafter, the LQS was adjusted again in June 2020 as part of COS 2020.
In Budget 2024, the LQS was again revised from $1,400 to $1,600 effective 1 July 2024.
As announced in the Singapore Budget 2026, the LQS will be raised from from $1,600 to $1,800 for full-time employed local workers with effect from 1 July 2026. Part-time local workers must be paid at least $10.50 per hour
Local Qualifying Salary Is Used To Determine A Company’s Foreign Worker Quota
By setting an LQS, the intention is that companies will hire local workers meaningfully rather than just hiring locals at token salaries to gain access to more foreign workers. After all, a LQS of $1,600 per month ($1,800 from 1 July 2026), or $10.50 per hour (since 1 July 2024), is not insignificant, so companies should take it seriously.
A Singapore Citizen or Permanent Resident (PR) employee employed under a contract of service, including the company’s director, is counted as:
- 1 local employee if they earn the LQS of at least $1,600 per month ($1,800 from 1 July 2026).
- 0.5 local employee if they earn half the LQS of at least $800 to below $1,600 per month.
- Business owners of sole proprietorships or partnerships and employees who receive CPF contributions from three or more employers are not counted as local employees when calculating the quota
Since 1 July 2024, all companies that hire foreign workers have been required to pay their local employees at least the local qualifying salary (LQS, currently set at $1,600). This means that paying the LQS for foreign worker quotas is not sufficient; companies must pay the LQS to all local employees to be eligible to hire foreign workers in the first place.
Read Also: Foreign Worker Quota In Singapore: What Is It And How To Calculate It For Your Business
Local Qualifying Salary Also Relevant To Companies That Hire Only Employment Pass Holders
The LQS initially applied only to foreign workers hired under the foreign worker quota, namely Work Permit (WP) and S Pass holders. Since there was no quota on Employment Pass (EP) holders, a company could hire as many foreign nationals under the EP as it wanted, subject to candidates meeting the points-based COMPASS requirements and the EP qualifying salary.
This changed after the introduction of the LQS in September 2022. Since then, companies hiring foreign employees, such as Work Permit holders, S Pass and EP holders, are required to pay at least the LQS to all their local employees.
Companies that hire only local workers are not subject to the foreign worker quota, since they don’t hire foreign workers. These companies are not covered by this framework and may hire and pay workers below the LQS. However, market forces typically require them to pay a fair wage to retain their low-wage local employees. An estimated 6% of lower-wage workers fall into this category, with most of them employed in minimart and heartland shops.
Read Also: Understanding TAFEP’s Guidelines On Fair Employment Practices & Fair Consideration Framework (FCF)
Local Qualifying Salary Is Not Pegged To A Wage Benchmark
When MOM set the LQS to $1,000 in 2017, it was not tied to a specific wage benchmark. In fact, then-Minister of State for Manpower, Mr Sam Tan, said that the 10th percentile income was already $1,200 in 2013 and $1,300 in 2015. This meant the LQS was lower than the earnings of the lowest 10% of workers in Singapore at the time.
According to the latest Manpower Statistics for 2024, the 20th-percentile income was $3,026. The 10th-percentile income data was not published, but the current LQS of $1,600 ($1,800 from 1 July 2026) is likely still below the 10th-percentile income.
For reference on who is considered a lower-wage worker, we can look at other government schemes. The current household income cut-off for ComCare Long Term Assistance is $2,230 (for a 4-person household), while the qualifying gross monthly income cap for the Workfare Income Supplement Scheme is $3,000 in 2025.
Read Also: Guide To Workfare Income Supplement Scheme And How Much Those Who Are Eligible Will Receive
Local Qualifying Salary May Not Achieve Its Intended Effect In Certain Scenarios
Not only is the LQS not determined by a meaningful wage benchmark, but it also affects only companies that hire a mix of local and foreign workers. The new changes may affect whether the company wants to maximise its current foreign worker quota or reduce the number of local workers.
Instead of increasing local wages to the LQS, it may reduce local employment in some instances.
For example, an eatery has 7 local employees paid above the LQS of $1,600 (since 1 July 2024) and 2 local employees paid below the LQS. This means that they have a quota of 3 foreign workers (based on the current services sector’s quota of 35%), but cannot hire new foreign employees or renew their existing foreign workers’ passes once they expire. Currently, they only hire 1 WP holder as a dishwasher and general cleaner.
Under the new requirement, if they want to hire a new foreign worker (i.e. their existing foreign worker leaves or his work permit expires), they would have to increase the pay of the 2 local workers to at least the LQS of $1,600, in order to hire their WP holder or they can restructure their work to do without the 2 local workers who earn less than LQS.
It is also possible that companies that are not maximising their foreign worker quota may choose to do so in the future instead of filling the job with local workers who are willing to accept less than LQS. Admittedly, these scenarios may be few and far between.
Part of the accepted Tripartite recommendations is to allow for the conversion of the LQS to fair hourly rates for those working part-time or overtime. In the above fictional eatery scenario, the company may also choose to convert their 2 local workers earning less than LQS to a part-time arrangement that pays an LQS-equivalent wage of $10.50 an hour.
Local Qualifying Salary Is Not A Minimum Wage But Is A Step Towards Improved Wages
While the LQS can have a direct effect on wages, it does not actually raise the wages across all sectors and industries as a whole as a minimum wage would.
According to the Tripartite Workgroup on Lower Wage Workers’ report, raising the LQS is expected to affect 35% of lower wage workers. 47% of lower wage workers are expected to benefit from the existing and expanded Progressive Wage Model (PWM). Together, this two-pronged approach is expected to benefit about 80% of lower wage workers. The remaining almost 20% is expected to benefit from the introduction of the Progressive Wage Mark accreditation as well as surrounding market forces as most of the market moves towards improved wages.
Instead, we can see LQS as a step towards better wages. In a way, it makes explicit what has been an implicit wage threshold hidden under the guise of Singapore’s foreign manpower policies.
