The levy for foreign worker in Malaysia is an important aspect of the country’s labour market regulations. It serves as a financial contribution made by employers who hire foreign workers.
This article aims to provide a comprehensive understanding of the levy for foreign workers, including its purpose, calculation methods, and the qualifications of the workers. By delving into these details, employers and individuals can gain insights into the implications of this levy system in Malaysia.
What is Levy for Foreign Workers?
The levy for foreign employees in Malaysia is a mandatory financial obligation imposed on employers who engage foreign workers in their businesses or organisations. This levy is a form of fee that employers must pay to the government for the privilege of employing foreign workers.
The primary objective of this levy system is to regulate and manage the inflow of foreign labour while protecting the interests of the local workforce. It also acts as a measure to control the dependency on foreign labour and encourage the recruitment of local workers.
How is the Foreign Worker Levy Calculated?
To regulate the number of foreign workers in Singapore, the Singaporean government utilises foreign worker quota restrictions and imposes a foreign worker levy.
The levy for foreign worker rates are determined by several factors, including the sector of employment, the skill level of the worker, and the duration of their employment contract.
1. Sector of Employment
Different sectors have different levy rates. The Malaysian government classifies sectors into three categories: manufacturing, construction, and services. Each sector has its own levy rate structure to reflect the demands and needs of the industry.
2. Skill Level
The skill level of the foreign worker is another crucial determinant in levy calculation. The Malaysian government has classified skill levels into four categories: high-skilled, semi-skilled, low-skilled, and domestic help.
Each skill level corresponds to a specific levy rate. Higher skilled workers generally have higher levy rates compared to lower skilled workers.
3. Duration of Employment
The duration of the employment contract also influences the levy calculation. Typically, the longer the duration, the higher the levy amount. This encourages employers to consider employing local workers for long-term positions.
To calculate the levy for foreign workers, employers need to multiply the applicable levy rate for the sector and skill level by the number of years the worker will be employed. The resulting amount is the levy payable per worker.
It is important for employers to stay updated on the latest levy rates and guidelines issued by the Ministry of Manpower to ensure accurate calculation and compliance with the regulations. Failure to pay the levy or underpayment can lead to penalties and legal consequences.
Levy Payment Rates in Malaysia
Levy for foreign worker payment rates in Malaysia for foreign workers vary based on the sector. Based on Ministry of Home Affairs, here are levy payment rates in Malaysia:
Levy (per year)
West Malaysia (RM)
Mining and Quarrying
Foreign Workers Permits in Malaysia
In Malaysia, foreign workers who wish to be employed by a company must go through a review process by the relevant government agencies, such as the Ministry of Manpower.
The sponsoring company is responsible for working with the government to ensure the worker’s entry approval. The Malaysian government issues different types of work permits for foreign workers:
1. Employment Pass
The Employment Pass enables foreign workers to work under a contract of service with an organisation in Malaysia. There are three categories for the Employment Pass:
Category I: Requires a monthly base salary of 10,000 ringgit or more, an employment contract of up to 60 months, and allows the worker to bring eligible dependents and/or foreign domestic helpers.
Category II: Requires a monthly base salary above 5,000 ringgit and under 10,000 ringgit, an employment contract with a maximum validity period of 23 months, and allows the worker to bring eligible dependents and/or foreign domestic helpers.
Category III: Available for foreign workers on contracts of 12 months or less, with monthly salaries ranging from 3,000 ringgit and under 5,000 ringgit. Workers in this category are not allowed to bring dependents or foreign domestic helpers.
2. Temporary Employment Pass
Malaysian companies requiring the immediate services of semi-skilled foreign workers in specific sectors can obtain a Temporary Employment Pass. This pass, also known as a visitor’s pass, is valid for 12 months, with the possibility of annual extensions for up to 10 years.
There are two types of temporary employment passes: one for workers in the construction, plantation, agriculture, manufacturing, and services sectors, and another for foreign domestic helpers.
These work permits are open only to citizens from approved countries, including Bangladesh (limited to the plantation sector), Cambodia, India (excluding the manufacturing sector), Indonesia (with specific restrictions), Kazakhstan, Laos, Myanmar, Nepal, Pakistan, Philippines (with restrictions for female citizens), Sri Lanka, Thailand, Turkmenistan, Uzbekistan, and Vietnam.
3. Professional Visit Pass
The Professional Visit Pass is granted to foreign workers with the necessary qualifications or skills to work in Malaysia temporarily, for a maximum duration of 12 months.
These workers can provide services to Malaysian companies on behalf of overseas companies but are not eligible to apply for a dependent’s pass.
Foreign workers must ensure they meet the specific criteria and requirements for each type of work permit as outlined by the Malaysian government and Ministry of Manpower.
It is crucial to follow the guidelines and seek updated information to ensure a smooth and compliant application process.
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