"Phantom Workers – A Phantom Menace"

The Ministry of Manpower of Singapore ("MOM") has been consistently implementing a multi-pronged strategy to tighten the work pass regime for foreigners, with the primary goals of fostering a strong local workforce, ensuring foreign workers complement local talent, and maintaining fair hiring practices.

However, there are companies which seek to profit by circumventing the work pass framework, by hiring "phantom workers", to artificially inflate the number of qualifying local employees in their employ, allowing them to hire additional foreign workers under S Passes or Work Permits who they would otherwise not be able to hire.

This disrupts the local employment ecosystem, with local workers losing out on employment opportunities. This article examines what constitutes a phantom employee, the key legal touchpoints and sentencing considerations, tax risks, sectoral patterns and enforcement trends, individual liability, and how these issues compare with practices seen in other jurisdictions.

1. What are "phantom workers" and how are they distinct from genuine employees?
"Phantom workers" refers to people recorded on a company's payroll and declared to authorities as employees when they do not, in fact, perform genuine work for the employer.

Under Singapore laws, companies are limited to employing a certain number of foreign workers (under S Passes or Work Permits) in proportion to the total workforce – as such, by employing phantom workers to increase the number of total workforce, this artificially inflates the number of foreign workers that a company can legally employ under such work passes. The number of local employees hired by the company is computed by the authorities based on the company's Central Provident Fund ("CPF") account.

There is no statutory threshold for how much work an individual must perform to be considered a genuine employee. The authorities will determine whether a worker is a genuine worker or phantom worker based on the facts of each case. Factors that may be taken into account are the employment agreement and the performance records of the employee.

2. What consequences may be faced by a company hiring phantom workers to inflate its foreign-worker quota?
Where a company hires phantom workers to artificially inflate its foreign-worker quota, it may potentially breach the following laws:

(a) Employment of Foreign Manpower Act 1990 of Singapore ("EFMA"): Hiring local phantom workers in order to fraudulently hire more foreign workers violates the EFMA, which requires all employers and work pass applicants to make accurate and truthful declarations to the Controller of Work Passes. Employers found guilty of this may have their work pass privileges suspended, and the work pass applicant may be barred from working in Singapore in the future. Any employee who colludes with an employer by providing their personal details in exchange for fraudulent CPF contributions to meet the requirements of Work Permit applications may also be prosecuted. Individuals convicted of making false declarations in work pass applications are liable to a fine not exceeding S$20,000, or imprisonment for a term not exceeding two (2) years, or to both.

(b) Income Tax Act 1947 of Singapore ("ITA"): If CPF contributions are made to phantom workers, these contributions can be used by the employer to file claims for expenses in their tax declarations. This allows employers to falsely declare a lower yearly taxable income.

(c) Central Provident Fund Act 1953 of Singapore ("CPF Act"): As to knowingly making any false statement, or producing or furnishing or causing or knowingly allowing to be produced or furnished any document which the person knows to be false in a material particular, or failing to comply with the regulations or rules under the Act.

(d) Penal Code 1871 of Singapore ("PC"): Employers who hire phantom workers can also benefit from government schemes that offer tax benefits or payouts to incentivise training and hiring of local workers. This may be considered an abuse of government funds, as these employers did not actually meet the qualifying criteria but are falsely inflating their employee count to appear otherwise.

3. What are the recent sentencing trends and factors typically taken into consideration by the Singapore Courts?
The Singapore courts have handled multiple cases involving employers sanctioned for hiring phantom workers in 2024 and 2025. Recent cases involving syndicates and shell company arrangements have attracted substantial custodial sentences, significant fines, and confiscation of illicit proceeds, alongside administrative bars on work pass privileges as imposed by the MOM (i.e. the company would not be able to apply for new work passes or renew existing work passes for foreign workers). Factors taken into account include: (i) the scale of the fraudulent scheme and (ii) the amount of profit reaped by employers from the fraud perpetuated. For matters which are prosecuted in court, such matters typically involve a large-scale scheme involving multiple employees with fabricated records, and the typical sentencing outcome is a proportionate imprisonment sentence, a fine, and/or disgorgement of illicit proceeds.

4. If a company pays CPF contributions for phantom workers or claims such expenses as deductions to reduce corporate taxes, which sections of the ITA may this violate?
This may constitute a breach of Sections 14, 95, 96, 96A and 97 of the ITA.

Potential offences under the Income Tax Act include: (i) making an incorrect return without reasonable excuse; (ii) wilful tax evasion or fraud (e.g. knowingly making false statements or entries, using false invoices/payroll, or omitting income); and (iii) assisting or abetting another person or the company to evade tax.

In 2009, a local construction company was charged under Section 95(2)(a) of the ITA, for making incorrect returns by under-reporting income of S$3,378,129, and consequently tax undercharged of S$644,945.92, for the Years of Assessment 2001 to 2006. The company had claimed fictitious expenses relating to "phantom workers".

5. Which industries tend to engage in such unscrupulous practices?
From 2021 to 30 June 2023, the top three (3) reported sectors for phantom worker activities are as follows: food and beverage (F&B), personal services (such as beauty salons and spas) and manufacturing. This is consistent with recent news publications and MOM enforcement actions in 2024 and 2025 in relation to phantom worker schemes.

6. What are the risks for persons named as phantom employees? Would they face restrictions on working in Singapore, and does this depend on their nationality?
Phantom employees may be liable for abetting any offence committed by the company, where the relevant person has colluded with the company by providing their personal details in exchange for fraudulent CPF contributions, or even if such person has provided his/her CPF or Singpass details without knowing how this information would be used.

A person convicted of breaching Singapore laws may be subject to restrictions which would impact working in Singapore, depending on the offence committed, regardless of their nationality. For example, they may be disqualified as acting as a director of a Singapore company for offenses involving fraud or dishonesty. For Singapore permanent resident phantom employees, their permanent residency status may be revoked as a result of offences committed.

7. How can an individual who claims his/her name was used protect themselves?
If the phantom employee claims they were unaware that their name was used, it will assist their case to demonstrate that:

(a) They did not accept CPF contributions from unknown or illegitimate sources. As employees are able to track their CPF contributions through their CPF account, if the employee spots a CPF contribution from an unknown source, the employee should investigate it immediately.

(b) They sought clarification with the employer directly, and if the employer was unresponsive or could not be contacted, the employee had reported the same to the MOM.

Even if the employee has provided their CPF or Singpass details without knowing how this information would be used, they may still be investigated for aiding others in making false declarations of employment, and may be prosecuted.

For example, under the EFMA:
(a) Section 21(1) read with Sections 22(1)(a) and (d): Any police officer or employment inspector may arrest without warrant any person whom he or she reasonably suspects has abetted the commission of an employer making a work pass application or renewal application which is false in any material particular, or is misleading by reason of the omission of any material particular, or from contravening any condition of the work pass.

(b) Section 23(1): Any person who abets the commission of an offence under this Act shall be guilty of the offence and shall be liable on conviction to be punished with the punishment provided for that offence.

(c) Section 25F(1): Where any person abets a prescribed infringement, the Controller may impose on the person a financial penalty of an amount, not exceeding the maximum financial penalty prescribed for the prescribed infringement, as the Controller may determine.

Where the phantom worker's details were obtained without his/her knowledge, or such details were somehow made publicly available, in the absence of any collusion, such person may be required to assist with investigations, such as providing statements to the relevant authorities or appearing as witness at a trial.

8. Is the phantom menace of "phantom workers" unique to Singapore?
The issue of phantom / ghost workers appears in other jurisdictions. However, the driving force behind these arrangements may differ from the Singapore context (i.e. in Singapore, employing phantom workers is commonly used by business who are attempting to artificially inflate the number of foreign workers that the company can hire). For instance, such arrangements in other jurisdictions may involve:

(a) fraudulently diverting (fictitious) employee wages and benefits;
(b) public sector / civil service roles as political favours or for the purposes of corruption for persons who do not carry out such functions;
(c) abuse of government subsidies / reliefs / tax credits / training grants for the hiring of new workers or upskilling / training programmes;
(d) inflating of wage bills for tax purposes;
(e) inflating the workforce headcount to meet stipulated requirements for government or private sector contracts; or
(f) money-laundering.

Conclusion
Phantom employee arrangements are not simply administrative shortcuts; they are legally and financially hazardous. Artificially inflating headcount to secure foreign worker capacity, lower tax liabilities or access public schemes is an offence and attracts increasingly robust criminal and administrative outcomes in Singapore. Companies should expect close scrutiny of payroll records, CPF filings and work pass declarations, particularly where patterns suggest non genuine employment. Directors and officers ought to ensure that headcount figures are supported by verifiable contracts, timesheets and performance records, and that any anomalies, such as unexplained CPF postings, are promptly investigated. Where issues are suspected, early remediation and legal advice can materially reduce exposure for both entities and individuals.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.