Higher salary requirements for employing foreign professionals could improve domestic wage structures, encourage hiring of Malaysians
KUALA LUMPUR: The government’s new expatriate employment policy, which raises minimum salary thresholds and introduces fixed employment limits to encourage the hiring of more local talent in the workforce augurs well for Malaysians, say labour economists.
Socio-Economic Research Centre executive director Lee Heng Guei told theSun that higher salary requirements for hiring foreign professionals could help improve local wage structures while encouraging companies to consider Malaysians first.
“If hiring a foreign expert requires paying RM10,000 or RM20,000, employers would naturally consider hiring locals who have the capability.
“Expatriates are usually in senior or mid-to-high management positions. In sectors like IT and banking, their salaries often exceed RM10,000 and can reach RM20,000 or more.
“These positions are classified under the expert category, so local wages would also need to increase accordingly.”
Lee acknowledged that some industries still depend on foreign expertise due to skills gaps.
“For certain sectors in which local talent is not available, companies have no choice but to rely on foreign expertise. This is not unique to Malaysia. Every country must balance localisation with the need for foreign talent.
“The government wants to avoid cases in which locals are available but not given opportunities as companies continue to hire expatriates. Raising the salary threshold ensures that foreign hires are limited to specialised, high-value roles.”
Lee said the new five to 10-year cap on employment duration is reasonable as it gives companies enough time to train local successors to take over the roles that were previously handled by expats.
Putra Business School Masters and Doctorate Course director Prof Dr Ahmed Razman Abdul Latiff said the policy could help correct labour market mismatches without harming business growth.
“Malaysia has more low-skilled workers than medium-and high-skilled ones. This policy could help more qualified locals access better-paying roles previously offered to expatriates.
“As it is implemented gradually, with expatriates still allowed to work for up to 10 years, employers have time to plan without disrupting operations.”
In contrast, Williams Business Consultancy director Prof Geoffrey Williams said the policy was based on misconceptions about expatriate employment.
“Malaysia does have a strong pool of high-skilled local professionals but it is notnecessary to replace expatriates. The claim that expatriates are taking jobs from locals is not true.
“Firstly, there are too few expatriates to make that claim meaningful. Secondly, it is already costly to pay for visas, so they are not competitive in a cost sense. Thirdly, expatriates are employed for very specific reasons based on experience and expertise. This will not change.”
Williams cautioned that the new rules could influence how foreign professionals and investors view Malaysia.
“The economic risks of the new Home Ministry rules are that they give a very bad signal that Malaysia is unfriendly to foreigners. This will harm not just employment but also investment.”
Under the new policy announced by the Home Ministry, minimum monthly salary thresholds for expatriate employment pass holders will increase from June 1.
Category 1 minimum salaries will rise from RM10,000 to RM20,000, Category 2 salaries of RM5,000- RM9,999 will increase to RM10,000-RM19,999, and Category 3 of RM3,000-RM4,999 will rise to RM5,000-RM9,999, with a higher floor of RM7,000 for manufacturing-related services.
Expatriate employment pass categories are determined mainly by the salary offered and the seniority of the role, with higher-paying positions classified as higher categories.
Previously, expatriate employment did not have a fixed maximum duration.
Under the new framework, Category 1 and 2 holders may work for up to 10 years while Category 3 holders are limited to five years, all with mandatory succession plans for local replacements.
The government said the policy aligns with the 13th Malaysia Plan objective to reduce reliance on foreign labour and prioritise qualified local talent over the hiring of expatriates.
