THE government is aware of concerns that the increase in foreign worker levies could have an impact on domestic inflation, said Acting Manpower Minister Tan Chuan-Jin yesterday.

However, it was also important to send a "clear signal" to employers who choose not to restructure and continue to rely heavily on foreign workers for their business operations.

Mr Tan made these points in a written parliamentary response to Nominated Member of Parliament Tan Su Shan.

Ms Tan had asked if the Manpower Ministry would consider adjusting the foreign worker levy rates according to the sector's "strategic importance" to the local economy and the sector's dependence on foreign workers, taking into account the impact that this would have on local inflation rates.

In his reply, Mr Tan explained that the foreign worker levy - one of several levers used to manage the number of foreign workers in Singapore - operated as a pricing mechanism.

The government had previously announced a tiered increase for foreign worker levies. Effective Jan 1 this year, employers have to pay $20 to $70 more a month for each worker. A second round on top of that, effective from July 1, ranges from $20 to $60 per worker.

Mr Tan explained that raising the cost of foreign labour would encourage bosses to consider investing in technology or equipment, which they would be more hesitant to do if the cost of getting more workers was cheaper than the capital cost.

"Singapore has reached a stage where we need to move away from a labour-intensive mode of growth which is not sustainable," said Mr Tan, outlining several factors that are considered when adjusting foreign worker levy rates.

These include whether productivity had improved, the rate of foreign worker growth, and local wages.

Sectors that continue to rely heavily on foreign workers have stagnating wages for locals or, with the greatest scope of productivity improvements, have been subjected to higher foreign worker levy increases, he added.

In a separate written response on issues related to the Personalised Employment Pass (PEP), Mr Tan said that there were 12,000 PEP holders in Singapore as at June last year.

Based on their declared occupations, about 120 of them were performing support staff functions. Around 3,000 PEPs were issued annually from 2010 to 2012 on average, he said in his reply to Lee Bee Wah (Nee Soon group representation constituency).

The PEP is a premium work pass for top-level foreign talent. Last November, the government raised the minimum annual salary requirement of a PEP holder to $144,000, up from $34,000 previously.