Learning & Development Asia 2024 Singapore
Analysis: How Malaysia’s eased rules on foreign workers’ hiring impact employers and the economy

Analysis: How Malaysia’s eased rules on foreign workers’ hiring impact employers and the economy

In industry interviews, HRO’s Arina Sofiah uncovers the implication of the move on the skills gap, purchasing power, and the need for zero-cost hiring.

Malaysia has temporarily eased its rules on hiring foreign workers in the first quarter of 2023, in a bid to facilitate the entry of foreign workers in specific sectors with high demand, namely:

  • Manufacturing,
  • Construction,
  • Plantations,
  • Agriculture, and
  • Food & beverage.

The decision to accelerate the influx of foreign workers, announced by Minister of Home Affairs Datuk Seri Saifuddin Nasution Ismail, is estimated to help the national economy Gross Domestic Product (GDP) by 1%.

To support this, the Government has introduced the Relaxation of Foreign Workers Employment Plan — employers with exemptions and conditional approval for the first quarter of 2023 will be allowed to employ foreign workers from 15 source countries based on the employer's capabilities and needs without having to go through the prerequisites of employment qualifications and quota qualifications.

So what does the easing of rules mean to the sector impacted, and what are some aspects to look out for? Diving deeper into this, Human Resources Online spoke to an HR leader and two legal experts to get a more comprehensive understanding of the implications of this decision.

A welcome relaxation amidst ongoing sectoral challenges

From an HR point of view, the relaxation of rules is most welcomed by lifestyle property developer, Selangor Dredging Berhad (SDB).

As Siti Rahmah Zainol Abidin, Human Resources Manager, explains, various sectors including the property and construction industries had faced workers’ shortage, especially during the COVID-19 movement restriction period. This challenge continues in the post-pandemic period, particularly with low-paying jobs.

“This was a segment that was mainly filled by foreign workers – so it is not like the interest in these jobs has dropped, rather a whole segment of the foreign workforce was no longer here,” she says, citing the phenomenon of foreign workers returning to their families, and others who faced trouble getting approval to return to Malaysia.

The other challenge that plagues such impacted sectors is that Malaysians have been reluctant to take on what are perceived as low-wage, manual jobs. The lack of attraction has, thus, always pushed employers to turn to hiring foreigners to fill up these positions.

Due to the shortage and difficulty faced in getting foreign workers, companies have tried to advertise these jobs to locals. Solutions include looking at temporary workers instead of full-time, accepting higher turnover from contingent workers as they move on to further their studies, or to other jobs, and to automating their operations – such as how some fast-food chains and plantation companies are embarking on.

However, new challenges have also appeared on the horizon.

As Siti has observed, employees gained a new perspective on work during the pandemic. Now, they are looking for jobs from companies with a great culture. They want a job that gives them more flexibility, in a company that looks out for their wellbeing, and provides career advancement opportunities, rewards and recognition, and better compensation and benefits.

In a related manner, the gig economy, emerging technologies and emerging trends have also disrupted the employment market, especially for jobs that are considered as low paying.

As an example, people who were previously in the RM2,000 per month wage bracket can now earn just as much – if not more – from working as ride-sharing drivers. “What makes this work appealing is the flexible work location and hours, with the straightforward objective of getting from one location to another in a timely fashion,” Siti shares. They are also able to choose the areas and time they want to work in – and do not have bosses to report to.

In this scenario, companies - including those in the property development, hospitality and construction industries – continue to face difficulties in filling up job positions that are considered as low-paying jobs.

Ruling provides areas of opportunities and growth

Apart from offering the promise of resolving the talent shortage in impacted industries, Siti also finds others areas of opportunities for employers to capitalise on during this Q1 2023 – plugging skills gap being the foremost.

She explains: “Some of the gaps that can be addressed through foreign workers include technical skills, especially from foreign workers with specialised technical skills, such as engineering or IT; language skills from foreign workers who speak multiple languages to communicate with a diverse range of stakeholders; and to address the shortage of workers in certain industries that are facing shortages of local workers, such as agriculture and construction, in which foreign workers can help to fill the gap.”

Such a development also, in her view, contributes towards the building of a world-class workforce.

Addressing this requires recruiting from non-traditional labour pools, by providing training, and collaborating with educational and training institutions to improve graduate employability, as well as hiring foreign talents or locals who have overseas working experience.

For example, SDB’s hospitality arm – Hotel Maya in Kuala Lumpur across KLCC – is spearheaded by its GM who has experience working overseas, including in Singapore. As a result, she has brought in numerous global best practices to the hotel and implemented processes that have resulted in greater productivity, efficiencies, and higher guest satisfaction levels.

As such, Siti addresses how to strike the right balance between upkeeping a company’s local workforce, and bringing in foreign workers to meet business needs.

“We believe that the term 'glocalisation' (globalisation + localisation) is being brought to life in an increasingly competitive economy.”

As she explains, in property development, the developer could outsource, say, the architecture aspects to world-renowned architects who may be more experienced, talented, and have a global view of the architectural scene. Once the blueprint is set, the local team could then take it on, and build accordingly given their knowledge and expertise of the local environment.

How the decision impacts the bigger picture of economic growth

Bringing experience in arbitrations & mediations, collective bargaining, and implementing terms & conditions of service, Mohammad Adzam Khodzin, Senior Specialist Consultant, Industrial Relations & Human Resources, ADAMAS Integrated Venture PLT, calls the decision a “relief for employers” in the five industries affected.

However, he takes pains to point out the impact of the decision beyond the five industries that are benefitting from the measure.

Firstly, according to Adzam, this decision does not appear to reduce employers’ manpower costs on foreign workers’ recruitment as most employers use foreign workers’ recruitment agents to acquire their supply of workers. As such, the fees charged by the agencies does not seem to be reduced by the relaxation. “Therefore, the relaxation of this rules would benefit foreign workers’ recruitment agents rather more than it would the employers,” he points out.

Meanwhile, although this easing may contribute to Malaysian economic revival in critical sectors and industries, thereby boosting the economy in general, Adzam cautions, it does not seem to offer short-term solutions for economic relief to individual unemployed Malaysians.

“The recent pandemic caused the enforcement of MCO in March 2020. The year 2020 was also the year where the new generations of workers were to enter the employment market – Gen-Z, specifically, as the year coincided with the first batch of Gen-Z graduating from tertiary educations.

“Unfortunately, employment opportunity was scarce due to the pandemic.”

Exacerbating the issue, the pandemic also caused loss of jobs to many Malaysians, making the unemployment pool even larger. As a result, employers are now presented with a large pool of labour market.

However, the pool remains expensive because those who have lost their jobs during the pandemic are most likely to demand at least their previous salary (which was likely already at the higher salary band), especially considering how Gen-Z prioritises monetary needs.

Hence, employers are left with the option to employ foreign workers, which allows for slightly lower costs.

“Still, while the capability to acquire sufficient cheaper manpower expediently would enable employers to improve productivity, such increase in productivity does not contribute to the strengthening of Malaysian economy in general if the purchasing power of general Malaysians is still low.”

With the unemployment rate among Malaysians still high, and those who are able to secure employment earning lower salaries, Malaysian purchasing power may not be strong enough to balance the economic equilibrium required by the country to revive and strengthen the national economy rapidly, Adzam foresees.

For instance, the benefits package offered to foreign workers may differ from that of Malaysian employees, and this may include contributary factors to other economic sectors such as medical care, retail, and housing amongst others.

“The demand for those sectors, merely relying on foreign workers purchasing power, is unwise.”

Consequently, employers may eventually be burdened with a product surplus that would force the economic mechanism to reduce their price values of their products, potentially ending up with high manpower and operational costs.

Important steps in the execution process

With the decision underway, experienced HR director and Co-Founder of Malaysia HR Forum, Arulkumar Singaraveloo, offers advice in the effective implementation of this policy decision, such that the process is carried out thoughtfully and ethically.

Agreeing this move may be necessary to ease the severe labour shortage in Malaysia; however, to not allow lapses to happen, he cautions that applications, and the capacity of the employers, must be vetted thoroughly to ensure the foreign workers do not fall into forced labour.

He adds: “One aspect which the Government must not give in is the need to have the accommodations approved and ready prior to the application or at least get an undertaking from the employers to have the accommodation ready and approved by a specific period before the arrival of the workers.”

Further, the Government should ensure the workers recruited are hired on zero-cost basis as enshrined in the Protocol of 2014 to the Forced Labour Convention of which Malaysia is now a signatory.

As Arulkumar elaborates, giving employers a blank cheque to hire by bypassing the quota requirement may be counterproductive to the efforts undertaken to eliminate forced labour practices. “If the employers do not have the capacity to ensure compliance to ILO’s guideline, then it may be risky to even allow them to recruit the foreign workers.”

Overall, employers could take the opportunity to fill their labour gaps immediately and return to pre-pandemic levels within a short time frame. However, it is important to be wary of those employers or parties who may exploit this opportunity.

Lead image / Provided (Interviewees pictured above L-R: Siti Rahmah Zainol Abidin, Mohammad Adzam Khodzin, Arulkumar Singaraveloo)

Follow us on Telegram and on Instagram @humanresourcesonline for all the latest HR and manpower news from around the region!


Follow us on Telegram and on Instagram @humanresourcesonline for all the latest HR and manpower news from around the region!

Free newsletter

Get the daily lowdown on Asia's top Human Resources stories.

We break down the big and messy topics of the day so you're updated on the most important developments in Asia's Human Resources development – for free.

subscribe now open in new window