What Is A Foreign Worker Bond? All You Need To Know As An Employer

A Foreign Worker Bond is a type of security bond required by MOM when hiring Work Permit employees. The bond will cover you if you or your employee defaults on the Work Permit conditions set forth by MOM. Bonds are required to ensure that both companies and foreign employees abide by the labour regulations that MOM has placed.

What is the Bond amount I need? You must purchase a $5,000 Foreign Worker Bond for each foreigner you hire. This is the amount that is stipulated by MOM. You are also not allowed to ask your worker to pay for the bond.

Which foreigners do I need to purchase Foreign Worker Bonds for? You must purchase a Foreign Worker Bond for each non-Malaysian foreign worker you hire who are Work Permit (WP) holders. There is no need to purchase a bond for S-Pass or Employment Pass (EP) holders.

Work Permit holders generally perform unskilled and semi-skilled roles, like construction workers, cleaners, F&B staff, manual technicians, and more.

When should I purchase the Foreign Worker Bond? You must buy it before your hired worker arrives in Singapore. Before making any arrangements to fly your worker in to Singapore, you should log in to MOM’s online Work Permit system to check whether your bond has been successfully registered with MOM.

If your bond has not been successfully registered, your worker will not be allowed into Singapore. You will then have to bear the cost of repatriating your foreign worker, and then arranging for them to travel back to Singapore again on another date. A quick check on MOM’s system first will save you lots of money and time!

What can cause a Foreign Worker Bond to be forfeited? It’s important that you comply with MOM’s regulations on maintaining your Work Permit. Otherwise, MOM may forfeit your bond. There may also be other penalties involved for employers who breach their Work Permit terms.

Your bond may be forfeited if:

• You violate any conditions of the Work Permit

• You violate any conditions of the Bond

• You pay your workers’ salaries late, or withhold their salaries

• You don’t repatriate your foreign workers to their home country when their Work Permit has expired

• Your foreign worker goes MIA. If you file a police report and can show you invested a reasonable amount of effort into locating your worker, only 50% (i.e. $2,500) of your bond will be forfeited, for every missing worker

• Your foreign worker engages in restricted activities, such as working in another occupation for another employer, starting their own business in Singapore, living somewhere other than the address set by you (if they wish to move, they must inform you of the change), failing to carry their original Work Permit on their person and not producing it to a public officer when requested, marrying a Singapore citizen/PR without MOM's official approval (even after their Work Permit has expired), and becoming pregnant or giving birth in Singapore while living here on their Work Permit (unless they are already married to a Singapore citizen/PR, and even after their permit has expired)

In order to avoid the $5,000 bond being forfeited, employers should carefully brief their foreign employees on observing the above conditions.

Employers won’t be held liable for their workers’ violations (e.g. workers getting pregnant while in Singapore) if you can prove the following:

• You have informed your foreign workers of their Work Permit conditions, and their responsibility to abide by these terms

• You report a Work Permit violation to the relevant authorities once you become aware of it

How does a claim on a Foreign Worker Bond work? Foreign Worker Bonds carry a clause called “Counter Indemnity”. This clause means that you must reimburse the insurance company if your bond is forfeited. This prevents businesses from acting irresponsibly.

If the employer or foreign worker violates their Work Permit conditions, MOM may forfeit your Foreign Worker Bond. When the Bond is forfeited, the insurance company will first bear the cost of the bond payment ($5,000) to MOM. After the insurance company meets the bond call by MOM, the insurer will then proceed to recover this sum from you, under the Counter Indemnity clause.

When does a Foreign Worker Bond end? Your liability will only end when:

• You cancel your employee’s Work Permit, and

• Your foreign employee has returned home, and

• You did not breach any of the bond conditions

You must fulfill all 3 of the above criteria before MOM will discharge your bond. Usually, bonds are discharged one week after the worker has left Singapore.

If you posted a cash collateral for the bond with your bank or insurance company, you will receive your collateral back at this juncture.

So do I need to post a cash collateral when purchasing the bond? It depends on a few key factors:

1. Age of company

2. Nationality make-up of company directors

Typically, companies with at least 1 Singaporean director, and a couple years of operating history, don’t need to post any cash collateral. Having to post cash collaterals are a real drain on a company’s resources.

What other insurance do I need when hiring foreign workers? You must purchase Foreign Worker Medical Insurance for all Work Permit holders. This insurance must have a minimum cover amount of $15,000.

What documents do I need to provide to purchase the bond? In most cases, only a copy of your IPA (In-Principle Approval) letter from MOM is needed. For very newly registered businesses (e.g. less than 3 months old), the insurers may also require your ACRA profile.

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