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An employee at my company has changed from an EP to a PEP. Should I cancel their existing EP?

Yes, you should cancel their Employment Pass (EP) after the Personalised Employment Pass (PEP) application is approved. They will need a cancellation letter from your company when they pick up the PEP.

You can continue employing them as you would a Singapore citizen or PR, as long as you notify MOM that you're employing a PEP holder.