What is the change? Malaysia will limit the duration of certain Employment Passes based on the foreign employee’s minimum salary.

What does the change mean? Employees working for companies under MSC status and earning less than 5000 Malaysian ringgits (about US$1390) per month will be limited to an initial two-year Employment Pass and two renewals. Also, they may no longer sponsor Dependent Passes and Social Visit Passes for family members.

  • Implementation timeframe: Immediate.
  • Visas/permits affected: Employment Passes.
  • Who is affected: MSC status companies and their foreign employees and family members.
  • Business impact: Companies may find it more difficult to recruit foreign workers in this salary range because of the restrictions on bringing accompanying spouses and children.
  • Next steps: Businesses should plan for the shorter duration of Employment Passes and may have to rearrange work assignments or adjust salaries.

Background: The new rules cap the maximum Employment Pass duration at six years (the initial two-year pass and two possible renewals of two-year durations each) for foreign workers earning less than RM 5000 per month. Previously, Employment Passes were issued initially for up to three years and could be renewed indefinitely.

Last month, we reported that the Immigration Department restricted Employment Pass holders earning less than RM 5000 from applying for new Dependent Passes for spouses or children under 18. Under the recent announcement, those employees will also be prohibited from applying for Long-Term Social Visit Passes for common-law spouses, parents or children over 18. However, restricted Employment Pass holders whose passes were approved before Dec. 31, 2014 may still apply for new Dependent or Long-Term Social Visit Passes.

Current Employment Pass holders who fall below the new salary minimum and who want to renew their family members’ Dependent or Long-Term Social Visit Passes may do so with an approval letter from the Multimedia Development Corporation (MDeC) confirming that the initial passes were approved before the restriction came into effect, and may obtain a maximum of two renewals. The duration of the renewed Dependent or Long-Term Social Visit Passes will match the duration of the sponsoring foreign worker’s Employment Pass.

BAL Analysis: The new curbs will have a negative impact for MSC status companies trying to attract foreign labor at the stated salary levels, as those workers will have to renew more frequently and will not be able to bring their family members with them.

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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