Malaysia: New Requirements Relating to the Employment of Foreign Nationals

In brief

The Labour Department of Malaysia has recently released guidance on the approval and notification requirements relating to employment of non-citizens and non-permanent residents of Malaysia ("Foreign Employees").

Briefly, the recent amendments to the Malaysian Employment Act ("Amended EA"), which came into force on 1 January 2023, introduced a new requirement for employers to seek prior approval of the Malaysian Director General of Labour ("DGL") before employing Foreign Employees.

The Amended EA also expanded the scope of employees who fall under the purview of the Malaysian Employment Act ("EA"), which effectively extended the existing reporting requirements relating to foreign workers to all Foreign Employees.  

Prior Approval Requirement

There is now a statutory requirement for employers to obtain prior approval of the DGL to employ Foreign Employees ("Prior Approval Requirement"). The guidance has clarified that this Prior Approval Requirement applies to all non-Malaysian and non-permanent residents who require immigration passes to work in Malaysia, for example:

  • expatriates who work under an Employment Pass;
  • professionals who visit on a Professional Visit Pass;,
  • foreign workers who work under a Visitor's Pass (Temporary Employment);
  • resident pass-holders, individuals enrolled under the Malaysia My Second Home (MM2H) programme, etc.

The application for such approval is to be done by way of submission of the relevant form(s) to the Labour Department, which are available on their website. The DGL's approval is subject to the conditions set out in the Amended EA, i.e. the DGL must be satisfied that the employer has no outstanding matters or breaches under the EA and the laws relating to social security, housing and accommodation standards, minimum wages, as well as anti-trafficking and forced labour.

The Labour Department has clarified that an approval letter will be issued for every successful application. The DGL's prior approval also appears to be required before an employer can proceed to commence the application process with other relevant agencies (such as the Immigration Department) to procure the work passes for such Foreign Employees, although further clarifications are still pending from those relevant agencies on how this will be implemented in practice.

Change of Employer

Based on the Labour Department's guidance, any changes of employers for any Foreign Employees are also subject to the Prior Approval Requirement. However, for change of employers, approvals will only be granted in specific circumstances, such as restructuring of the company, closure of business, and the death of employer.

Notification Requirement

Under the EA, there has been a requirement to notify the DGL of any employment and termination of Foreign Employees ("Notification Requirement").

However,  given the expanded scope of application of the Amended EA, effective 1 January 2023, the Notification Requirement extends to all Foreign Employees regardless of their monthly salary or nature of work. All notifications are to be done by way of submission of the prescribed forms to the Labour Department, and the timing of notification depends on the reason for notification (i.e., whether it is for notification of employment, of employer-initiated or employee-initiated termination).  

Consequences of Non-Compliance

Failure to comply with the Prior Approval Requirement and Notification Requirement are offences under the EA, which will, upon conviction attract financial penalties and imprisonment sentence. In the case of a body corporate, any person who is a director, manager, or other similar officer of the body corporate is deemed to have committed the offence and may be charged jointly or severally.

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