The Federation of Malaysian Manufacturers (FMM) said it supports the government’s decision to defer the enforcement of the 80:20 local-to-foreign worker employment ratio. In a statement, FMM said the decision recognises the manufacturing sector’s ongoing struggles with labour shortages and the mismatch between local workforce skills and industry requirements, pending the implementation of the multi-tier levy mechanism (MTLM). “The deferment is both practical and timely, ensuring continuity in operations and protecting Malaysia’s global competitiveness while providing industries with a transition period to prepare for the structural changes required,” it said.
The 80:20 policy, while aiming to reduce reliance on foreign workers, presents significant challenges for manufacturers in labour-intensive and low-skilled sectors, where local participation remains limited despite efforts to improve wages and benefits. The deferment enables the industry to focus on long-term strategies, including increasing automation, modernising production processes, and investing in upskilling and reskilling local workers to meet the demands of higher-value roles.
“The 80:20 policy, while aiming to reduce reliance on foreign workers, presents significant challenges for manufacturers in labour-intensive and low-skilled sectors, where local participation remains limited despite efforts to improve wages and benefits,” FMM president Tan Sri Soh Thian Lai. “The deferment allows the industry to adopt long-term strategies such as increasing automation, modernising production processes, and investing in the upskilling and reskilling of local workers to meet the demands of new, higher-value roles,” he added.
Once implemented, the MTLM will provide a structured, demand-driven approach to labour management. With tiered levies encouraging industries to reduce reliance on foreign labour, it will allow companies to hire based on operational needs. This will support a gradual and sustainable transition to a more balanced workforce model. “In this regard, FMM reiterates its call for the early release of details on the MTLM implementation. Ideally, the details should be announced six months in advance of implementation to give industries sufficient time to adapt to the upcoming changes, particularly since the implementation will have cost implications and require adjustments to budgets and business operations,” Soh said.
On Monday, the Investment, Trade and Industry Ministry (Miti) announced that the suspension of the 80:20 employment ratio requirement for the manufacturing sector will continue until the Multi-Tiered Levy Mechanism (MTLM) is fully implemented. The 80:20 policy refers to the employment condition that mandates a ratio of 80% local workers and 20% foreign workers in certain sectors, especially in manufacturing. The MTLM is an incentive for employers to reduce dependence on foreign workers and increase the hiring of local workers, which is in line with the current government policy. Meanwhile, Miti stated that it will continue to focus on improving the skills of local workers as one of the key steps to ensure that the local workforce can compete in an increasingly high-tech global economy. “This skills enhancement aims to provide more capable workers who can contribute to dignified incomes and drive sustainable economic growth. “Miti will also continue to collaborate with the industry to ensure that the manufacturing sector can continue to grow more sustainably and contribute to the country’s economic growth,” it added. Miti said the government is continuously encouraging the manufacturing sector to transition to automation and technology in line with the aspirations of Malaysia Madani and the New Industrial Master Plan (NIMP 2030).
During the 2025 Budget presentation, the Prime Minister announced that the government will implement MTLM in early 2025 to promote automation and gradually reduce dependence on foreign workers. For the manufacturing sector, the MTLM will replace the 80:20 policy under the conditions of the manufacturing licence. The government also announced that the levies collected will be channelled back to the industry to enhance the use of technology and automation, increase productivity, reduce dependence on foreign workers, and ultimately contribute to enhancing Malaysia’s global competitiveness.
– Bernama
