Employing foreign workers

Employing foreign workers in Malaysia entails specific obligations for employers, encompassing visa requirements, salary computations, and statutory deductions.

Adherence to these regulations ensures legal compliance and fair treatment of foreign employees.

Visa and Work Permits

Before employing a foreign worker, employers must secure the appropriate work permit or visa. The primary categories include:

Employment Pass (EP)

For expatriates in managerial, executive, or technical positions with specific salary thresholds.

Temporary Employment Visit Pass

For unskilled or semi-skilled workers in approved sectors.

Professional Visit Pass: For foreign professionals providing services or undergoing training for short durations.

The application process involves obtaining approval from relevant authorities, such as the Immigration Department of Malaysia and, in certain cases, the Ministry of Home Affairs.

Employers should ensure that foreign employees possess valid work permits throughout their employment tenure.

Salary Computations

Foreign workers are entitled to the same minimum wage standards as local employees.

As of the latest regulations, the national minimum wage is RM1,500 per month, applicable to companies in the private sector with five or more employees.

Employers must ensure that salary calculations reflect any mandatory deductions and comply with Malaysian labor laws.

Statutory Deductions

Employers are responsible for making specific statutory deductions from foreign employees’ salaries:

Social Security Organization (SOCSO)

All employers hiring foreign workers must register them with SOCSO. The contribution rate is 1.25% of the insured monthly wages, paid solely by the employer.

Employment Insurance System (EIS): Foreign workers are generally exempt from EIS contributions.

Employees Provident Fund (EPF)

Foreign workers are exempt from mandatory EPF contributions.

However, they can opt to contribute voluntarily.

Monthly Tax Deduction (MTD)

Employers must deduct income tax from foreign employees’ salaries under the MTD system.

The tax rate for non-resident individuals is a flat 30% of their total monthly remuneration.

Additional Obligation

Employment Contracts

Provide clear employment contracts outlining terms and conditions, including job responsibilities, salary, and benefits.

Record-Keeping

Maintain accurate records of employment details, including personal information, salary payments, and statutory contributions.

Compliance with Labor Laws

Ensure adherence to the Employment Act 1955 and other relevant regulations concerning working hours, rest days, and leave entitlements.