IMPACT – MEDIUM

What is the change? Malaysia will introduce a new employment pass category this month.

What does the change mean? Employment Pass (Category III) will be available to foreign nationals working on contracts of 12 months or less and with monthly salaries ranging from 2,500 to 4,999 Malaysian ringgits (about US$665 to $1,330).

  • Implementation time frame: July 15.
  • Visas/permits affected: Employment passes.
  • Who is affected: Employers and foreign nationals working on contracts of 12 months or less with monthly salaries ranging from RM 2,500 to RM 4,999.
  • Impact on processing times: Category III passes will likely take longer to obtain because of a requirement that applicants secure an exemption letter from the relevant monitoring agency before submitting an application.
  • Business impact: The change will allow businesses to hire qualified foreign nationals at less than the standard minimum salary of RM 5,000 per month.
  • Next steps: More information about the new employment pass category is expected as July 15 approaches.

Background: Employment Pass (Category I) is Malaysia’s regular work permit, while Employment Pass (Category II) is reserved for foreign graduates of Malaysian universities employed by reputable firms in Malaysia. Category III passes will allow some employers to hire foreign nationals for a limited duration and pay them below the normal wage minimum. The July 1 announcement of a third category was unexpected, and officials say the passes will be available beginning July 15.

To file an application in Category III, companies will be required to secure a letter exempting them from paying the normal minimum salary of RM 5,000 per month. The exemption letter must be obtained from either the appropriate monitoring agency or, if the applicant works in an unregulated economic sector, the Ministry of Home Affairs. The letters are then filed with the rest of the application via the Expatriate Services Division online portal.

Holders of Category III passes will not be permitted to sponsor dependents or hire foreign housekeepers. The passes are subject to review and renewable twice. For more information, visit Malaysia’s Expatriate Services Division website.

BAL Analysis: The change was announced as part of a “reclassification” of Employment Pass categories. BAL will update clients on procedures to apply for the new employment passes as information becomes available.

This alert has been provided by the BAL Global Practice group and our network provider located in Malaysia. For additional information, please contact your BAL attorney.

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