Phantom employment is more than an irregularity in a company’s CPF records. Where CPF contributions are made for individuals who do not genuinely work for the company, the arrangement may be used to inflate the company’s local workforce and, in turn, its foreign worker quota.
For employers, the consequences can extend well beyond the CPF contributions themselves. Depending on how the arrangement was used, the company and those responsible may face financial penalties, debarment from hiring foreign workers, criminal prosecution, tax exposure and personal liability.
Financial Penalties and Loss of Foreign Worker Quota
The Ministry of Manpower (“MOM”) has stated that employers who make work pass applications using CPF contributions made to existing phantom workers may face a financial penalty of up to S$20,000 for each work pass application made using the inflated quota. The employer may also be debarred from hiring foreign workers.
This means the criminal and/or financial exposure can increase with the number of work pass applications affected. An employer that has relied on an inflated local workforce over a period of time may therefore face severe financial consequences in respect of multiple applications, rather than a single penalty for the underlying arrangement.
Criminal Liability for False Work Pass Applications
Where the false employment records are used to support a work pass application, there are criminal procedures involved too.
Under section 22(1)(d) of the Employment of Foreign Manpower Act 1990 (“EFMA“), a person who makes a statement or furnishes information in connection with a work pass application which he or she knows, or ought reasonably to know, is false in a material particular, or misleading by reason of the omission of a material particular, commits an offence. The offence carries a maximum punishment of a fine of S$20,000, imprisonment for up to two years, or both.
The courts have emphasised the severity of such offences. In Chiew Kok Chai v Public Prosecutor [2019] SGHC 169 at [62], the High Court of Singapore held that imprisonment should generally be the norm for offences under section 22(1)(d), reflecting the need for deterrence where false declarations are deliberately made to obtain foreign workers. The Court subsequently reaffirmed this approach in Ferrer Luwi Inez Ramos v Public Prosecutor [2024] SGHC 245 at [84], while recognising that the appropriate sentence depends on the circumstances of each case. In determining the appropriate sentence, the court may consider factors including the materiality and sophistication of the false declaration, the offender’s role, the number of persons or applications involved, any financial gain and the offender’s motive, together with relevant mitigating circumstances.
Debarment and Business Disruption
For businesses that depend on foreign manpower, debarment may have consequences that extend beyond the financial penalty.
Where phantom employment has been used to inflate a company’s foreign worker quota, MOM may debar the employer from hiring foreign workers. Restrictions affecting work pass applications can also affect the company’s ability to maintain its existing workforce and disrupt current operations.
The practical impact can therefore be significant, particularly for labour-intensive businesses that rely on foreign workers to meet operational, contractual or project requirements. Employers should not treat debarment as a secondary consequence of a CPF irregularity: it may directly affect business continuity.
Tax and Government Scheme Exposure
Phantom employment may also create exposure outside the foreign manpower framework.
Where fictitious salary expenses or CPF contributions have been recorded for individuals who did not genuinely work for the company, the arrangement may also have income tax consequences. CPF Board has identified tax evasion as one reason phantom workers may be used, including arrangements involving fictitious salary expenses to reduce taxable income.
Similarly, false employment records may become relevant where the company has applied for government grants, payouts or other schemes based on its local workforce or employment figures. Depending on the circumstances, benefits obtained on the basis of false information may be recovered and further liability may arise.
The same records can therefore be examined by different authorities for different purposes. Resolving the CPF issue does not necessarily resolve the company’s wider exposure.
Personal Liability for Directors and Officers
One cannot hide behind the shield of the company. Under section 20 of the EFMA, where an offence by a company is committed with the consent or connivance of, or is attributable to the neglect of, a director, manager, secretary or other officer, that individual may also be made liable.
A director or officer therefore cannot necessarily avoid responsibility by pointing to a payroll employee or external service provider and disclaim liability. An investigation may examine who approved the arrangement, who knew how the local workforce figures were being used, and who authorised or signed the relevant work pass applications.
What Should Employers Do?
Employers who discover discrepancies between their CPF records, declared local workforce, and actual employment arrangements should address them promptly. This is particularly important where individuals may have been recorded as employees despite performing no work, previous work pass applications may have relied on those records, or tax filings and government scheme applications may have used the same information.
In situations where MOM or CPF Board is investigating the matter, employers should seek legal advice and cooperate with the authorities. A proper internal assessment should also be done as soon as possible, which would include the chronology of events, the relevant CPF and employment records, affected work pass applications, and any tax or government scheme claims that may have relied on the same information.
Whether you are an employer concerned about a possible phantom employment arrangement, a director or officer facing questions about the company’s workforce records, or a company responding to an MOM investigation, understanding the potential exposure early is relevant before determining the appropriate next steps. If your company is facing a suspected phantom employment issue, regulatory enquiry or 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. Specific legal advice should be sought where necessary.
Sources
- MOM — Written Answer to PQ on Detecting and Enforcing Against Phantom Worker Offences (27 February 2026)
- CPF Board — Phantom workers and the risk of unknown CPF contributions
- Employment of Foreign Manpower Act 1990 s.20, s.22(1)(d)
- Chiew Kok Chai v Public Prosecutor [2019] SGHC 169
- Ferrer Luwi Inez Ramos v Public Prosecutor [2024] SGHC 245
- MOM — What happens if an employer is debarred from hiring migrant workers?