At first glance, there appears to be little commercial reason for a business to make CPF contributions for a person who performs no work for it. Yet this is precisely what may occur in a phantom employment arrangement.
The explanation lies not in the worker’s labour, but in what that worker may represent for regulatory purposes. In Singapore, the number of qualifying local employees a company has can affect the number of foreign workers it is permitted to employ. For an errant employer seeking to increase its foreign manpower capacity, an additional local employee recorded on paper may therefore carry a commercial benefit even where no genuine employment exists.
What is a phantom worker?
A phantom worker is a person who is declared as an employee of a company and receives CPF contributions even though he or she does not actually perform work for that employer. CPF Board describes phantom workers as persons who are declared as employees on paper and receive CPF contributions despite performing no work for the company.
This is different from a genuine employment relationship. Ordinarily, an employee performs work for a business, receives salary in return and, where required, has CPF contributions made by the employer. In a phantom employment arrangement, the records may still show CPF contributions or other signs of employment, but the underlying labour relationship is absent.
The existence of CPF contributions therefore does not, by itself, establish that genuine employment exists.
Mechanism of a phantom worker arrangement
The arrangement may begin when an employer or intermediary obtains the personal particulars of a Singapore citizen or permanent resident. The company then represents that person as an employee and makes CPF contributions in his or her name despite no genuine work being performed.
This matters because the Ministry of Manpower (“MOM”) uses information from employers’ CPF accounts when determining the number of local employees for foreign worker quota purposes. The Local Qualifying Salary, or LQS, is also relevant in determining how local employees count towards a company’s Work Permit and S Pass quota entitlement.
As at August 2026, a Singapore citizen or permanent resident employed under a contract of service and earning at least S$1,800 per month may count as one local employee for quota purposes. A person earning at least S$900 but less than S$1,800 may count as half a local employee, subject to the applicable requirements.
An errant employer may therefore seek to create the appearance that it employs more qualifying locals than it actually does. The inflated local headcount can then be used to support the hiring of additional foreign workers.
MOM does not simply accept every CPF record as proof of genuine employment. It has stated that it uses data analytics, inspections and investigations to detect companies that inflate their foreign worker quotas through phantom workers. Nevertheless, phantom employment seeks to take advantage of the fact that CPF and employment records are an important part of the system used to administer foreign manpower quotas.
Rationale behind usage of phantom workers
The principal commercial incentive is access to foreign manpower.
Businesses cannot hire an unlimited number of foreign workers. The number they may employ depends on the quota applicable to their sector and the size of their qualifying local workforce. Once an employer reaches its quota, increasing its foreign manpower capacity will generally require it to employ more qualifying local workers.
Genuine local employment involves more than CPF contributions alone. It involves salaries, recruitment, training, supervision and the provision of actual work. A phantom arrangement attempts to obtain the regulatory benefit associated with an additional local employee without creating a genuine local job.
For an errant employer, the CPF contribution made for a phantom worker may therefore be treated as a cost of obtaining additional quota capacity rather than as payment for labour.
Foreign worker quota inflation is not the only possible motive. CPF Board has also warned that false employment records may be used to support fictitious business expenses or to obtain benefits under government schemes intended for businesses that genuinely employ or train local workers.
Relationship between local and foreign manpower
Singapore’s foreign manpower framework seeks to balance employers’ manpower needs with the need to maintain a strong local workforce.
The Dependency Ratio Ceiling, or DRC, limits the proportion of foreign workers that businesses in different sectors may employ. Current limits include 83.3% in construction and process, 75% in the marine shipyard sector, 60% in manufacturing and 35% in services.
The Local Qualifying Salary supports the same objective. It helps ensure that a local employee does not count fully towards foreign worker quota merely because his or her name appears on the payroll for a nominal amount. MOM has explained that the LQS is intended to ensure that local workers are employed and paid meaningfully while maintaining effective foreign workforce controls.
Phantom employment undermines this framework because it creates the appearance of local employment without the genuine job that the system is intended to recognise.
Significance of phantom work arrangements
The consequences extend beyond an incorrect CPF contribution or an improperly obtained work pass.
If an employer artificially increases its local headcount, it may obtain foreign worker quota that it would not otherwise be entitled to. This weakens Singapore’s manpower controls and undermines the policy objective of maintaining a meaningful local workforce.
There is also a fairness issue between businesses. A compliant employer that genuinely hires local workers bears the full costs of salaries, CPF contributions, recruitment, training and supervision. A business using phantom workers attempts to obtain the same regulatory recognition without bearing those genuine employment costs, potentially placing compliant employers at a competitive disadvantage.
The issue remains current. In March 2026, MOM stated that enforcement action had been taken against around 100 employers in 2024 and 2025 for inflating foreign worker quotas through fraudulent CPF contributions. In July 2026, MOM also announced an investigation involving suspected fraudulent CPF contributions made to 139 locals who were not employed by the companies concerned.
Legal consequences for employers
MOM has stated that employers which inflate their foreign worker quotas may face a financial penalty of up to S$20,000 for every work pass application made using the inflated quota. They may also be debarred from hiring foreign workers.
False declarations made in connection with work pass applications may also amount to offences under the Employment of Foreign Manpower Act 1990. Depending on the conduct involved, this may lead to criminal prosecution.
The issue is therefore more than inaccurate paperwork. An investigation may consider why the false employment record was created, who authorised the CPF contributions, whether inaccurate information was used in work pass applications and which individuals were involved in the arrangement.
Employer Obligations and Best Practices
Employers should ensure that every person counted as part of the company’s local workforce corresponds to a genuine employment relationship. CPF contributions, salary records, employment contracts and work pass applications should accurately reflect the actual working arrangement.
Where discrepancies are identified, they should be reviewed promptly. The employer should consider how the discrepancy arose, whether any incorrect declarations have been made and whether corrective action is required.
Directors and managers should also be aware that responsibility may not end with the company itself. Under the EFMA, company officers may in certain circumstances be liable where an offence by the company was committed with their consent or connivance, or was attributable to neglect on their part.
Liability of Individuals in Phantom Employment Schemes
The fact that a person’s name appears in a phantom employment arrangement does not necessarily mean that he or she knowingly participated in it. The circumstances may differ depending on how the person’s particulars were obtained, what the person understood about the arrangement and whether there was any deliberate involvement.
We consider the position of individuals, as well as the potential responsibility of employers, company officers and intermediaries, in our next article, “A Job You Never Had: Who Is Responsible in a Phantom Employment Scheme?”
For employers, phantom employment is ultimately a foreign manpower and compliance issue, not merely an irregularity in CPF records. Businesses should ensure that their declared local workforce reflects genuine employment and address any discrepancies promptly.
If you require advice concerning suspected phantom employment, foreign worker quota issues, CPF records or a possible MOM investigation, please feel free to reach out to our firm for assistance.
The information provided in this article is for general informational purposes only and does not constitute legal advice. It should not be relied upon as a substitute for legal advice in relation to any particular circumstances. You should seek specific legal advice where necessary.
Sources
- CPF Board, Phantom workers and the risk of unknown CPF contributions
- MOM, Foreign worker quota and levy requirements
- MOM, Local Qualifying Salary
- MOM, Construction sector: Work Permit requirements
- MOM Parliamentary Answer, 27 Feb 2026
- MOM Parliamentary Answer, 3 Mar 2026
- Employment of Foreign Manpower Act 1990, s 22(1)(d) and s 20