Malaysia is expected to roll out the multi-tier levy mechanism (MTLM) for foreign workers in January next year. Human Resources Minister Steven Sim Chee Keong said details of the mechanism, including the thresholds used to calculate levies to be charged, would still need to be ironed out before the mechanism can be presented to the Cabinet. He added that his ministry, along with the Ministry of Economy and other relevant ministries, are in the midst of studying the mechanism. He said the rationale for implementing the mechanism is to provide an “incentive” to entrepreneurs and companies to reduce their dependence on foreign labour and, in turn, employ local labour in line with the government’s current policy direction.
Talks of a multi-tier levy on the employment of foreign workers were brought to the foreground last year after the current government made known its plans to implement the mechanism in its revised Budget 2023. However, calls for the implementation of the mechanism came long before that. A report of an independent investigation commissioned by the Pakatan Harapan government in 2018 was declassified in late 2023 and laid bare the issues of the country’s foreign worker system.
Among its recommendations was to implement the mechanism which the government at that time referred to as the multi-tier levy system (MTLS). The independent committee recommended the implementation of the policy to eliminate discretion and delays in the foreign worker approval process as well as widen the government’s revenue collection. According to the independent report, the MTLS was to revolve around thresholds referred to as the dependency ratio ceiling (DRC) comprising foreign workers over the total workers in the respective sectors based on historical five-year averages. The various DRC thresholds were to serve as tiered limits in foreign worker employment, with employers having to pay higher levies the higher their DRC.
The Edge
