The $1,800 Local Qualifying Salary: A Survival Guide for Low-Margin Businesses

The $1,800 Local Qualifying Salary: A Survival Guide for Low-Margin Businesses starts with a simple fact. Since 1 July 2026, the Local Qualifying Salary (LQS) for full-time local employees has been $1,800 a month, up from $1,600. For a restaurant, cleaning contractor, retailer or small workshop running on thin margins, that change touches two things at once: the wage bill for local staff and the number of foreign workers the business is allowed to hire.

Who this applies to

The LQS is not a national minimum wage. It is a condition attached to hiring foreign manpower. It applies to any company in Singapore that employs, or wants to employ, Work Permit, S Pass or Employment Pass holders. If your business hires only Singaporeans and Permanent Residents and has no work pass holders, the LQS does not directly bind you, although the Progressive Wage Model (PWM) may still apply in sectors such as cleaning, security and landscape.

It matters most to:

• F&B outlets, retailers and services businesses that rely on Work Permit and S Pass quotas
• Small firms with part-time local staff whose hours fluctuate
• Businesses where a director or family member is on the payroll at a modest salary

Key rules and requirements in Singapore

The two conditions for hiring foreign workers

According to MOM, a firm that hires foreign workers must meet both of these conditions:

• Pay PWM wages to local employees covered by a sectoral or occupational Progressive Wage Model
• Pay at least the LQS to all other local employees

Firms that do not comply will not be able to apply for new work passes or renew existing ones. For a business that depends on foreign staff, a missed renewal can leave a shift short-handed within weeks.

How local employees count towards quota

Your Work Permit and S Pass quota is calculated from your local workforce, and the LQS decides how each local is counted:

• A local earning at least $1,800 a month counts as one local employee
• A local earning at least $900 but below $1,800 a month counts as half a local employee
• A local earning below $900 a month is not counted

Full-time means 35 to 44 hours a week. Locals working fewer than 35 hours a week are assessed on a gross hourly rate set by MOM, and for monthly-rated part-timers the hourly rate is total monthly gross wages divided by total hours worked in the month. Where an employee works more than 44 hours a week, the LQS increases for each overtime hour under MOM’s LQS wage schedule.

Who does not count

Only Singapore Citizens and PRs employed under a contract of service count. Owners of sole proprietorships and partnerships, and platform workers, do not count. A company director on the payroll does count, provided the salary and CPF contributions are genuine. A local can count towards the quota of up to two companies, and MOM has warned employers against declaring salary and CPF contributions across multiple accounts to inflate quota.

Step-by-step process

A practical review for a low-margin business might look like this:

• List every local employee. Record each person’s gross monthly wages, normal weekly hours and employment type.
• Classify them. Mark who counts as one, who counts as half, and who does not count at all under the $1,800 threshold.
• Recalculate your quota. Compare the result with the Work Permit and S Pass holders you currently employ and those due for renewal in the next six to twelve months.
• Price the gap. For each local below $1,800, work out the monthly cost of bringing them to the threshold, including employer CPF contributions under the CPF Act.
• Check PWM coverage. Confirm whether any role falls under a sectoral or occupational PWM, where the PWM wage, not the LQS, is the relevant floor.
• Update payroll and contracts. Adjust salary in the employment contract and the itemised payslip so the records match what is paid and what is reported to CPF Board.
• Allow time for the quota to update. For new hires, MOM reflects the quota adjustment only after the first full month’s salary and CPF contribution have been paid. Plan work pass applications around that lag.

Common mistakes to avoid

• Splitting a full-time role into “allowances”. The LQS is assessed on gross wages. Restructuring pay so that the basic salary looks lower or higher than reality creates inconsistencies with CPF records and invites scrutiny.
• Forgetting part-timers. Part-time staff on low hourly rates may not count towards quota at all. Many small businesses overestimate their headcount for this reason.
• Paying a director a nominal salary. A director drawing a token $500 a month will not count. If you rely on that person for quota, the salary must genuinely meet the threshold.
• Inflating local headcount. Phantom locals, or salaries declared without real work, are offences under the Employment of Foreign Manpower Act.
• Ignoring the timing lag. Hiring a local in the same month you need to renew a Work Permit will not help, because the quota updates only after salary and CPF have been paid.

Practical examples

Example 1: The café with part-time crew

A café has three full-time locals earning $1,900, $1,700 and $1,650, plus four part-timers on low hourly rates. Under the $1,800 LQS, it counts one full local and two halves, a total of two. The part-timers do not add to the count. By lifting the two $1,600-plus earners to $1,800, the café raises its count to three for an extra $250 a month in wages plus employer CPF, which may preserve a Work Permit slot that would otherwise be lost at renewal.

Example 2: The family-run workshop

A metal workshop pays the owner’s spouse, who is a director, $1,000 a month to keep costs down. That salary counts only as half a local. Raising it to $1,800 costs more in salary and CPF, but if it secures an S Pass the business cannot otherwise replace, it may be the cheaper option.

Example 3: The cleaning contractor

A cleaning company’s local cleaners are covered by the Cleaning PWM, so their floor is the PWM wage for their grade, not the LQS. Its local office administrator, however, is covered by the LQS. The company needs to check both, because a shortfall in either can block work pass renewals.

Support that can soften the cost

MOM has announced that the Progressive Wage Credit Scheme (PWCS) will be extended to 2028 with co-funding raised to 30%, and the qualifying wage increase for PWCS rises from $100 to $200 from 2027. Eligibility depends on the employee’s wage band and the size of the increase, so check the current IRAS and MOM guidance before relying on it in a budget.

How Singapore Employment Agency can help

Low-margin businesses rarely have a full-time HR team, and LQS problems tend to surface at renewal. Singapore Employment Agency helps employers review their local headcount against the LQS and PWM rules, recalculate quota, plan Work Permit and S Pass renewals, and prepare appeals where a work pass application has been refused. We also support HR compliance work such as employment contracts, payslips and Employment Act obligations, so that your records hold up if MOM asks.

Frequently Asked Questions

Is the $1,800 Local Qualifying Salary a minimum wage?

No. Singapore does not have a general minimum wage. The LQS is the salary a local employee must earn to count fully towards your foreign worker quota, and companies hiring work pass holders must pay it to locals not covered by a PWM.

Does overtime pay count towards the LQS?

The LQS is assessed on gross monthly wages for normal hours of 35 to 44 a week. If an employee works more than 44 hours a week, the LQS requirement itself goes up for each overtime hour, so overtime does not simply top up a low basic salary.

Can a company director count as a local employee?

Yes, if the director is a Singapore Citizen or PR employed under a contract of service, is paid a genuine salary and has CPF contributions made. Sole proprietors and partners do not count.

What happens if one of my locals earns $1,500?

They count as half a local employee for quota purposes.

Key takeaways

• The LQS for full-time locals rose from $1,600 to $1,800 on 1 July 2026.
• Locals earning $1,800 or more count as one; those earning $900 to below $1,800 count as half; those below $900 do not count.
• Firms hiring foreign workers must pay PWM wages where applicable and the LQS to all other locals, or risk being unable to apply for or renew work passes.
• Quota updates only after the first full month of salary and CPF, so plan hires ahead of renewals.

Requirements may change, so always check the latest guidance from MOM, IRAS or ACRA, or consult a professional adviser.

If you would like to find out more about how Singapore Employment Agency can assist with your work pass and employment compliance requirements, please get in touch with the team at [email protected].

Yours sincerely,
The editorial team at Singapore Employment Agency

Disclaimer: This does not constitute legal advice. If you require legal advice, please contact a lawyer.