COMPASS salary rules rise as firms rethink foreign hiring

Better planning tools are needed as work pass decisions move closer to HR finance and operations.

Singapore’s tighter COMPASS salary thresholds are raising labour costs and limiting hiring flexibility, forcing companies to reassess workforce strategies and reliance on foreign talent.

According to Lily Cheang, Partner for People Advisory Services Tax at Ernst & Young Solutions, the revised rules, tied to the top one-third of local PMET wages, will take effect for new work pass applications from 1 January 2027 and for renewals from 1 January 2028. Cheang said the policy ensures “it is not cheaper for employers to hire foreigners,” reinforcing a shift towards higher-skilled, higher-paid roles.

The impact is most immediate for firms dependent on junior foreign hires, which now face higher salary requirements and stricter alignment between role value and pay. “We are going after quality, and the COMPASS framework is designed to encourage quality over quantity,” Cheang said, noting that salary is increasingly treated as “an indicator of quality.”

Companies are being pushed to match higher wages with higher-value output. Roles based in Singapore are expected to deliver more strategic work, whilst lower-value functions such as administrative support or routine processing are likely to be offshored or replaced by automation.

The changes also alter how companies approach hiring. Immigration requirements can no longer be treated as “an administrative process,” Cheang said, but must be embedded into business planning. This requires closer coordination across HR, finance, and operations to ensure compliance and cost alignment.

Firms have been given lead time to adjust, but the changes are already prompting reviews of salary structures, budgets, and hiring pipelines. Cheang said companies should “plan, adjust workforce strategy, review salary structures, and assess downstream impact on budgeting and talent pipelines.”

Attention is also turning to existing work pass holders. Companies are advised to conduct a “health check” to identify roles at risk during renewals and take early action to avoid disruption.

Technology is becoming critical in managing the transition. Firms need to “use better technology and data to support work pass planning,” as hiring decisions become more complex and continuous.

As wage thresholds rise, the trade-off between cost, talent quality, and compliance is tightening. Companies that redesign roles, invest in local talent, and align pay with value are better placed to compete, whilst those reliant on lower-cost foreign labour risk higher expenses, reduced hiring options, and weaker workforce resilience.