Employing Foreign Workers: The Compliance Framework for Malaysian Employers

Under section 60K of the Employment Act 1955, an employer must obtain the prior approval of the Director General of Labour before employing a foreign employee, and must comply with immigration quota, levy and pass requirements — with foreign employees entitled to the same minimum wage and core statutory protections as locals.

What approvals are required before hiring?

Two regimes operate in parallel. The immigration regime governs quotas, levies and the issuance of passes — Employment Passes for expatriates and Visit Passes (Temporary Employment) for foreign workers in approved sectors. The labour regime, under section 60K of the EA as amended in 2022, additionally requires the Director General of Labour’s prior approval before a foreign employee is employed, with applications made in the prescribed manner.

Employing a foreign worker without the required approval is an offence carrying substantial fines and potential imprisonment, alongside immigration law consequences for harbouring or employing persons without valid passes.

What employment terms apply to foreign employees?

Foreign employees within the scope of the Employment Act enjoy the same core protections as locals: the RM1,700 minimum wage, statutory leave, rest days, hours limits, and access to the Labour Court. Statutory housing and amenities standards under the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446) apply to accommodation provided to workers, with certification requirements for accommodation.

Employers must also notify the Director General of the termination of a foreign employee’s service — including termination by expiry of the employment pass or repatriation — within 30 days, and section 60M requires foreign employees in similar capacities to be retrenched before local employees in any redundancy exercise.

Where do employers most often go wrong?

Common failure points include deploying workers in sectors or job scopes different from those approved; passing levy and recruitment costs to workers in breach of policy; substandard accommodation without Act 446 certification; and retaining workers’ passports, which exposes the employer to allegations of forced labour — a risk with export and supply-chain consequences well beyond Malaysian penalties.

Forced labour indicators are now an enforcement focus internationally; Malaysian exporters have faced import bans abroad over labour practices. A documented ethical recruitment policy, direct payment of wages into workers’ own accounts, and freedom-of-movement safeguards are baseline controls.

Key Takeaways for Employers

• Section 60K requires DGL approval before employing any foreign employee, on top of immigration passes.
• Foreign workers get the minimum wage and core EA protections equal to locals.
• Terminations of foreign employees must be notified to the DGL within 30 days.
• In retrenchment, foreign employees in similar roles must go before locals (s.60M).
• Passport retention and cost-passing are forced-labour red flags with severe commercial consequences.

Frequently Asked Questions

Can a foreign worker be paid below minimum wage?

No. The RM1,700 minimum wage applies equally to foreign employees in the private sector. Levies and deductions cannot lawfully reduce basic wages below the floor except within permitted deduction categories.

What is section 60K approval?

It is the Director General of Labour’s prior approval that every employer must obtain before employing a foreign employee, introduced in strengthened form by the 2022 amendments. Employing without it is an offence.

Who must be retrenched first — local or foreign employees?

Section 60M of the Employment Act requires the employer to terminate foreign employees in a similar capacity before terminating local employees on grounds of redundancy.