28th February 2022

Malaysia is predominantly a country where foreign workers come to work. Foreign workers seeking higher-paying jobs have filled relative labour shortages in certain sectors of the economy. The majority of the foreign workers are from neighboring South East Asian countries (Indonesia, Vietnam, Cambodia, the Philippines, and Myanmar) as well as South Asian countries (Nepal, India, and Bangladesh). In the plantation, agriculture, construction, the services sector, as well as domestic work, foreign workers are engaged in low- and semi-skilled positions.

Labour migration in Malaysia is handled through temporary programs, as it is in most other destination nations in the area, and is mostly for "low-skilled" work, which is commonly referred to as "3D" - dirty, dangerous, and degrading. In Malaysia, migrant workers have been subjected to a variety of abuses perpetrated by recruiting agencies and employers, ranging from high recruitment fees to major violations of job terms and conditions, among other things. Despite the government's efforts and promises of future actions to solve the challenges faced by foreign migrant workers, the above-mentioned loopholes in the legislation and its application continue to make it difficult for employees to assert their legal rights. As a result, workers' organisations and other civil society organisations must strengthen their ability to educate foreign migrant workers on their individual and collective labor rights, as well as campaign on their behalf to assist them to secure such rights.

In some circumstances, laws are broken – whether intentionally or unintentionally – and the consequences are severe.

The laws that are broken could relate to the recruitment fees; employment contracts; withholding of personal documents; working hours; deduction of wages; provision of benefits such as annual leave, access to secure salary payout system, public holidays, and paid sick leave; access to grievance procedures and redress mechanisms; accommodation and work environments; and restriction of freedom of association and movement. These difficulties have an immediate and evident impact on foreign workers, but they also have ramifications for businesses and the country as a whole.

Hiring Foreign Workers: Government Policy and Procedures

- The foreign worker must be between the ages of 18 and 45.
- The foreign worker is not permitted to bring his or her family into the nation to live.
- Without approval from the Ministry of Home Affairs, a foreign worker cannot change jobs or employers.
- The foreign worker is permitted to work for a maximum of five years. The period may be extended to a total of ten years (5 + 5).
- The foreign worker is allowed to stay in the nation for the duration of the contract.

VP(TE). To ensure continued validity, the VP(TE) should be submitted for renewal to any Immigration office three months before the expiry date of the VP(TE).

- The deposit and visa fees to Malaysia's Immigration Department are completely the responsibility of the employer.
- This payment is returned only if the business provides proof that foreign workers had departed the country or changed jobs with the permission of the Immigration Department.
- The foreign worker should be repatriated to his place of origin upon completion of labour, dismissal, or when the PL (KS) has expired, revoked, or the foreign worker has failed to receive a clean bill of health. A foreign worker is prohibited from marrying a local citizen or migrant worker in the country.
- If a foreign worker is hired, the company is responsible for notifying the Immigration Department.

In the case that worker has absconded from his or her place of work:

- If the foreign worker violates the PL (KS), the approval may be revoked or withdrawn.

Malaysia's Immigration Department has imposed conditions.

- A migrant worker in Malaysia is not permitted to work on the front lines.
- Working in fast food outlets is prohibited for foreign workers.
- Approvals for migrant workers are based on a company's complete actual requirements.
- If an employer and a migrant worker want to prolong a contract, there is a 3-month 'cooling-off period.

If the period of work is beyond 10 years, there may be challenges in Applying and Renewal of Work Permits of Foreign Workers.

Foreign workers confront several hurdles while applying for and renewing work permits. They are as follows:

- Procedures that are lengthy and ambiguous.
- Procedures that are always changing.
- Permit application delays.
- Poor customer service at the counter.

Representatives from multiple companies have expressed dissatisfaction with the length of time it takes to renew the workers' permits. They must line up early before the Immigration Department opens to obtain a numbered ticket for the permit renewal process. Daily, a limited amount of wait tickets are distributed. According to the AP, the processing time for a Calling Visa/Visa Dengan Rujukan (VDR) application has increased to 30 working days, up from one week previously. In practice, however, clearance takes much longer (>3 months). Work permits might take anywhere from two weeks to more than a month to renew. The processing time for applications involving more than five workers is more than two months.

e-Wages system to ensure foreign workers get paid in ‘real-time’

The government has developed an e-Wages system to ensure that foreign workers receive their wages, with authorities monitoring monthly payments. The e-Salaries system will monitor monthly salary payments made by employers in "real-time" to ensure that wages are paid to foreign workers before the seventh of each month, as required by the Employment Act of 1955. The establishment of the e-Wages system will ensure transparency and prevent any attempts by rogue companies to manipulate monthly wage payments. Following an instance in which a Pakistani foreign worker allegedly committed suicide after his employer failed to pay his wages for five months, the decision to introduce the e-Wages system was made.

There are three categories of work permits issued by the Malaysian government:

Professional Visit Pass - Foreigners employed by an international company but working for a Malaysian company are awarded a Professional Visit Pass. Technical specialists and trainees are usually eligible for this permit. The Professional Visit Pass is usually only good for a few months to a year.

Temporary Employment Pass Unskilled or semi-skilled workers in manufacturing, agriculture, construction, and services are eligible for a Temporary Employment Pass. This pass might last anywhere from three months to two years, depending on the term of the contract. Quota permission from the Ministry of Foreign Affairs' Local Centre of Approval is required before the work permit may be issued.

Employment Pass for people who want to work in Malaysia and have specified abilities, usually in technical or managerial roles. It is valid for at least two years. The Expatriate Committee or the applicable regulatory agency must approve the foreign worker's employment before the Employment Pass can be issued.

The Macroeconomic Costs of Foreign Workers

Importantly, the easily available pool of low-skilled imported employees distorts domestic factor prices, discouraging industrial upgrading. It renders labour relatively inexpensive in comparison to capital, weakening incentives for businesses to replace labour with technology or to engage in higher-value-added activities using higher-skilled labour. Grants and incentives for automation and technology adoption are beneficial, but they are insufficient in and of themselves to motivate businesses to progress up the value chain. The government has already allocated roughly RM8 billion to assist with technology adoption and commercialisation activities since 2008.

Malaysia's transformation to a high-income, developed country is jeopardised as long as businesses continue to engage in a 'race to the bottom in terms of labour costs, unwilling to pay more despite comparable productivity advances. While cultural issues and the inherent nature of the work play a part in preventing local participation, it might also be claimed that local pay conditions are a factor. The majority of the 200,000 daily commuters from Malaysia to Singapore are in mid- to low-skilled jobs, primarily motivated by higher pay. This covers jobs such as plant and machine operators and assemblers, cleaners, and labourers, which are frequently avoided in Malaysia. In other words - if earnings were higher, Malaysian employees would not avoid 3D jobs.

Paying the salary of foreign workers

1. When to pay

You must pay your employee's monthly salary no later than 7 days after the final day of the month. The salary period cannot be more than one month.

2. How to pay

You can pay the salary in cash or by straight depositing the funds into the employee's bank account. If you and the worker agree to retain the bank account book, you must allow the worker to check it to ensure that payments are made regularly. You must keep track of your monthly salary and be able to produce the salary payment slips if necessary.

3. Salary adjustments

As a reward for good performance and service commitment, you might consider raising your employee's wage regularly. A contract gratuity, in addition to monthly compensation, may be offered to your employee as an incentive. The number of tips should be discussed with the employee. You can pay it when you finish an agreed-upon time of employment, which should be before your Work Permit expires.

Salary payments are an important aspect for migrant workers and the employers that recruit them. In fact, many of these workers don’t have the same basic financial necessities as the locals. Access to a secure salary payout system is crucial, and EVOLET aims to provide all the payment capabilities for migrant workers, unbanked communities and employers with outdated salary processes through digital applications and integrated features.

EVOLET is a digital wallet app for migrant workers.

Learn more at https://evolet.io/