Malaysia’s new expat salary rules dubbed ‘ridiculous’, stoking fears of talent drain

An effort to prod Malaysian employers into hiring more locals for white-collar jobs by doubling the minimum salary for foreign staff has caught expatriates cold and stirred anxiety among some firms over a reduced labour talent pool. From June, the salary threshold for expatriate Employment Pass (EP) holders will be substantially raised as the Ministry of Home Affairs tries to reduce reliance on foreign labour and open pathways to work for its own citizens who are plagued by low wages and shrinking opportunities. Under the policy, employers will each month need to pay non-local senior managers US$4,940, up from US$2,470, and skilled workers a doubled rate of US$2,470. For some hires, employers will also have to show how they plan to eventually transition the expatriate-held roles to Malaysians. Discussed since last year, the move has still stunned many foreign workers and businesses reliant on them. The policy is “ridiculous and unacceptable”, a French expatriate based in Malaysia for 15 years told This Week in Asia, requesting anonymity. While his sector – tourism – appears to not be the direct target of the new salary thresholds, it will be affected like many in the seasonal industry, meaning it may become impossible to hire skilled foreigners. “Malaysia makes it so difficult as it is … it is hard to get permits renewed because of the difficult bureaucracy that requires a lot of paperwork,” he said. “This is really demotivating and quite upsetting because I have been here since 2015 and now I will be asked to leave after 10 years.” Malaysia’s move places it among the strictest regimes for expatriate hiring in Southeast Asia, narrowing the gap with Singapore, which has tightened its own EP rules under a point-based system. Thailand applies a lower tiered salary threshold and offers exemptions for high-growth sectors, while Vietnam prioritises skills-based work permits with more flexible durations. Employment ladder Last year, the Malaysian Immigration Department issued 180,812 expatriate passes including new applications and renewals. Malaysia’s need for workers continues to expand with more than 2.28 million skilled jobs requiring a degree, professional certification and specialised expertise like engineers, doctors, managers and IT specialists, roles often staffed by foreigners. The new salary markers are separate to the pay levels of the migrant worker force which staffs building sites, restaurants and farms on official wages as low as US$420 a month. Malaysia has a relatively low unemployment rate. But Prime Minister Anwar Ibrahim has been at pains to reduce dependence on foreign workers, fearing the anticipated job crunch likely to hit the graduate middle class as artificial intelligence is adopted and companies trim costs. In July last year, he said the country wants to slash its foreign workforce by 5 per cent by 2030 from the current 15 per cent. Some Malaysian workers remain unconvinced that the new EP requirements will automatically lead to jobs for them. Fauzi Ibrahim, an IT specialist, said the mandatory 10-year job transition idea may be too slow in a fast-changing labour market. “Companies could just say they are reorganising and with emerging technologies like artificial intelligence,” he said. “Ten years is too long for skills transfer leaving no room for locals to get these jobs.” At the same time, the new salary levels will inevitably bring pain to some businesses. Roger Wong, who works in the creative industries, said the increased salary and fixed employment duration for expatriates will increase the cost of operating his production house in Ampang, Kuala Lumpur. “The cost to hire one expatriate once this comes into effect will be the same as hiring three local workers, so it only makes sense for me to hire locals,” he said. The Malaysian Employers Federation (MEF) said it broadly supports the government’s goal of strengthening local talent and reducing reliance on foreign labour, but warned that the rigid changes could be counteractive. “Expatriates continue to play a critical and catalytic role by establishing and scaling advanced operations, transferring technology, leadership skills and accelerating structured skills and knowledge to Malaysian professionals,” MEF president Syed Hussain Syed Husman said. Without practical and competitive policies to lure expatriates, Malaysia could scare off some foreign investment, he warned, while specialised industries need more time to transition towards hiring more locals. For 30-year-old Edward Cruz from the Philippines, the six-month lead-in until the policy takes effect leaves little room for companies to prepare for the financial hit, casting doubt on future employment. “There is a high chance that my company will not renew my visa as it would be cost effective for them,” the business processing technician, who has worked in Malaysia since 2022, told This Week in Asia. “I am preparing for the worst.”

Malaysia’s new expat salary rules dubbed ‘ridiculous’, stoking fears of talent drain

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The pay threshold for expatriate visas will be doubled to boost local hiring, sparking concern over reduced foreign talent and rising costs

The pay threshold for expatriate visas will be doubled to boost local hiring, sparking concern over reduced foreign talent and rising costs