Employing Foreign Workers in Malaysia: A Compliance Roadmap for Employers
Malaysia’s economy remains heavily dependent on foreign labour. The Department of Statistics Malaysia (“DOSM”) recorded approximately 2.5 million employed non-citizens in 20241, concentrated in manufacturing, construction, plantations, agriculture, services and mining. For companies operating in these sectors, and for foreign investors entering the Malaysian market, understanding the regulatory framework governing foreign worker employment is not optional. It is a precondition for lawful operation.
This article sets out the key statutory obligations employers must satisfy, and the practical steps companies should take before bringing foreign workers into the workforce.
1. Confirm Eligibility to Employ Foreign Workers
Before any recruitment begins, a company must first establish that its industry falls within a permitted sector. The Immigration Department currently designates manufacturing, construction, agriculture, plantation and services as permitted sectors. At the same time, the Department of Labour Peninsular Malaysia (“JTKSM”) additionally recognises mining and quarrying for its foreign-worker approval framework2.
This is a threshold question. A company operating outside a permitted sector cannot proceed to the later stages of approval, regardless of how compliant its other processes are. In practice, this means a company should not treat sector eligibility as self-evident simply because it has employed foreign workers before, or because a related group entity in the same industry has done so. Sector classifications are reviewed periodically, and the Immigration Department and JTKSM do not always apply identical lists, so a company operating across several business lines, for example, a manufacturer that also runs its own logistics or facilities management, should confirm eligibility separately for each relevant activity.
2. Obtain Prior Approval under Section 60K of the Employment Act 1955
Perhaps the most important procedural requirement is prior approval. Section 60K (1) of the Employment Act 1955 (“EA 1955”) provides that no employer may employ a foreign employee without first obtaining approval from the Director General of Labour3. Employers must secure this approval before employment begins, not regularise it afterwards.
This sequencing matters. Employers, particularly those used to more flexible hiring practices in other jurisdictions, sometimes treat immigration clearance as the only gatekeeping step. Section 60K approval is a separate and independent requirement administered by JTKSM, and it is not a formality that runs automatically alongside an immigration application. An employer that recruits or brings a foreign worker into employment before approval is granted faces liability under the EA 1955, regardless of whether the worker’s immigration documentation is otherwise in order.
From a planning perspective, section 60K approval should be built into the recruitment timeline as an early, not a final, step. Employers should budget realistic processing time for JTKSM’s review, and should avoid entering into binding commitments with recruitment agencies, source-country partners or the workers themselves until approval is confirmed.
3. Conduct an Internal Compliance Check
Section 60K(4) allows the Director General to take into account an employer’s compliance history when deciding whether to approve. This includes outstanding matters or convictions under the EA 1955 and the Employees’ Minimum Standards of Housing, Accommodation and Amenities Act 1990, as well as offences relating to trafficking in persons and forced labour4.
For multinational companies entering Malaysia, or Malaysian entities that have previously employed foreign workers, this creates a practical due diligence point. Before initiating a recruitment exercise, the company should review whether its Malaysian entity has any unresolved employment or accommodation-related breaches that could affect approval. This is particularly relevant in acquisition or corporate restructuring contexts, where the acquiring party inherits the target’s compliance record.
In a share acquisition, this compliance history sits with the target company itself and transfers to the buyer on completion. It is therefore a matter that should be raised expressly in legal due diligence, with specific requests for records of any JTKSM correspondence, enforcement notices, or accommodation inspection findings relating to the target’s existing foreign workforce. In an asset acquisition, by contrast, the buyer employing the workers going forward will in most cases need to obtain its own fresh section 60K approval, so the target’s compliance history becomes relevant to the buyer’s own approval prospects rather than being something it simply inherits. Either structure warrants a documented internal audit before the recruitment or transaction timeline is finalised, rather than treating compliance history as a background assumption.
4. Secure Quota and Immigration Approvals
Beyond section 60K approval, employers must satisfy applicable quota requirements and follow the relevant immigration procedures, including the VDR (Visa with Reference) and temporary employment pass processes administered by the Immigration Department5. Quota approval and section 60K approval operate as parallel, not sequential, requirements, and employers should plan for both in their recruitment timeline.
Quota allocation is also sector and, in some cases, state-specific, meaning an employer’s approved headcount in one location does not necessarily transfer to a new project site or a newly incorporated subsidiary. Where a company is scaling up operations, or where a project involves temporary deployment of workers across more than one site, it is worth confirming with the Immigration Department at the outset whether the existing quota covers the proposed deployment, or whether a fresh or varied quota application is required.
5. Verify Nationality and Age Requirements
Foreign workers must generally be between 18 and 45 years old at the time of application, and must originate from an approved source country6. Sector-specific nationality restrictions also apply. Employers should confirm these requirements early, since a mismatch at this stage can derail an otherwise compliant application.
Source-country approvals are periodically suspended or reinstated due to bilateral arrangements, so a list of approved countries that was accurate when a company last recruited may no longer be current. This is a common point of friction for employers who rely on long-standing recruitment relationships with a particular source country without checking whether that country’s approval status has changed. Employers should verify current source-country status with the Immigration Department or Malaysian counsel immediately before each new recruitment cycle, rather than relying on the terms of a previous approval.
6. Ensure Medical Clearance
Foreign workers are required to undergo a Foreign Workers’ Medical Examination Monitoring Agency (“FOMEMA”) medical examination and be certified fit before receiving a temporary employment pass. Employers are given 30 days after the worker arrives in Malaysia to complete this requirement7. Missing this window can expose the employer to compliance risk, regardless of any issues with the underlying employment terms.
A worker who fails the FOMEMA examination, or whose employer fails to arrange the examination within the prescribed window, cannot lawfully continue in employment, which creates both an immediate staffing gap and a repatriation issue that the employer will usually need to manage and fund. Employers with larger foreign workforces should build a standing medical compliance calendar, tracking each worker’s arrival date and examination deadline, rather than relying on ad hoc reminders, since the consequences of a missed deadline fall on the employer regardless of the worker’s own diligence.
7. Provide Compliant Accommodation
The Employees’ Minimum Standards of Housing, Accommodation and Amenities Act 1990 requires employers to provide accommodation that meets prescribed minimum standards8. This obligation should be factored into the planning stage, well before workers arrive, rather than treated as an administrative task to resolve later.
Employers should determine, in advance:
(a) Where workers will be housed.
(b) Whether the accommodation meets the Employees’ Minimum Standards of Housing, Accommodation and Amenities Act 1990 standards.
(c) Whether a Certificate of Accommodation is required.
(d) Whether the premises have the necessary local authority approvals.
Any deductions from wages for accommodation charges must also comply with both the Employment Act 1955 and the Employees’ Minimum Standards of Housing, Accommodation and Amenities Act 1990. As noted above, an employer’s compliance record can itself affect future section 60K approvals, which makes accommodation compliance a recurring, rather than one-off, obligation.
Accommodation compliance is frequently underestimated because it is treated as a facilities matter rather than a legal one. In practice, local authority approvals for worker housing, particularly for purpose-built centralised accommodation, can take longer to secure than the underlying section 60K or quota approvals, and a shortfall in compliant housing capacity is one of the more common reasons a foreign-worker project is delayed at the deployment stage rather than at the approval stage. Employers should engage in accommodation planning at the same time as they submit their section 60K application, not after approval is granted.
8. Put in Place Occupational Safety and Health Measures
Under section 15 of the Occupational Safety and Health Act 1994, employers owe a general duty to ensure, so far as is practicable, the safety, health and welfare of their employees, including foreign workers9. Depending on the nature of the workplace, additional requirements, such as the appointment of a Safety and Health Officer, may also apply.
Employers should treat this as a pre-deployment obligation. Appropriate training, supervision, safe systems of work, risk assessments and protective measures should be in place before foreign workers begin work, not implemented reactively after an incident.
Language and communication are a practical dimension of this duty that is easy to overlook. A risk assessment or safety induction delivered only in “Bahasa Melayu” or English may not discharge the employer’s duty under section 15 if the workforce does not understand it. Employers with a multilingual foreign workforce should consider translated safety materials, or supervisors who can communicate safety instructions in the relevant languages, as part of demonstrating that safety measures were genuinely practicable and effectively communicated, rather than merely documented on paper.
9. Execute a Written Employment Contract
JTKSM guidance is explicit that employers must provide and sign a contract of service with foreign workers containing the prescribed terms10. This contract should reflect lawful salary terms, including the applicable minimum wage, and should be consistent with any accommodation-related deductions permitted under the Employment Act and Employees’ Minimum Standards of Housing, Accommodation and Amenities Act 1990.
Employers should also keep in mind that a written contract of service is a record the employer will be expected to produce in the event of an inspection or a dispute, whether the dispute is with the worker directly or arises in the course of a section 60K compliance review. A contract that exists only in the source country’s language, or that was never actually explained to and countersigned by the worker, offers limited protection. Best practice is to issue the contract in a language the worker understands, retain a signed copy in the employer’s own records in Malaysia, and ensure the terms match what is actually paid and deducted in practice, since a discrepancy between the contract and actual payroll practice is itself a compliance exposure.
10. Use only Licensed Recruitment Agencies
Where a company engages an external recruitment agency to source foreign workers, that agency must be licensed under the Private Employment Agencies Act 1981. For non-citizen employees specifically, the relevant licence category is Licence C11. Engaging an unlicensed agency exposes the employer to downstream compliance risk, even where the agency, rather than the employer, is technically the party in breach.
Employers should verify an agency’s Licence C status directly with JTKSM before engaging it, rather than relying on the agency’s own representations or marketing materials. This is particularly important where recruitment is arranged through a chain of intermediaries in the source country, since Malaysian authorities will generally look to the Malaysian employer as the responsible party if the recruitment process is later found to have involved an unlicensed intermediary or improper fee arrangements, regardless of where in the chain the breach occurred.
11. Understand the Ramifications of Non-Compliance
Each of the obligations above is backed by its own enforcement regime, and the consequences of a breach are not limited to a fine on the employer. Depending on the statute, they extend to imprisonment, personal liability for directors and officers, refusal of future approvals and, for export-oriented businesses, loss of access to key overseas markets. The principal exposures are summarised below.
(a) Employing Without Section 60K Approval
An employer who employs a foreign employee without the prior approval of the Director General commits an offence under section 60K of the EA 1955 and is liable on conviction to a fine not exceeding RM100,000, imprisonment for a term not exceeding five years, or both12. The offence is complete once the worker is employed, and obtaining approval afterwards does not cure it. Where a company has historically managed its foreign workforce on the strength of immigration documentation alone, the exposure may extend across a significant part of that workforce.
(b) Immigration Offences
Separately, section 55B of the Immigration Act 1959/63 makes it an offence to employ a foreigner who does not hold a valid pass. The penalty is a fine of not less than RM10,000 and not more than RM50,000 for each foreigner employed, imprisonment of up to 12 months, or both. Where more than five such foreigners are employed, the employer faces a mandatory term of imprisonment of at least six months, and up to six strokes of whipping13. Because the fine is calculated per worker, the exposure scales directly with the size of the workforce: a lapse affecting 50 workers carries a potential fine of up to RM2.5 million before imprisonment is considered. Workers can fall out of status without the employer noticing, for example where a pass lapses during renewal, a worker absconds, or a worker is deployed to an employer other than the one named on the pass.
(c) Accommodation Breaches under Act 446
Since the amendments to the Employees’ Minimum Standards of Housing, Accommodation and Amenities Act 1990 came into full enforcement on 1 September 2020, an employer that provides accommodation without a Certificate for Accommodation, or that houses workers in accommodation that does not meet the prescribed minimum standards, faces a fine of up to RM50,000 for each offence14. JTKSM has indicated that, following the initial grace period, it will no longer show leniency and will instead open investigations and take non-compliant employers to court. A conviction under Act 446 is also one of the matters expressly relevant to section 60K(4), so an accommodation breach can directly affect the employer’s ability to obtain future approvals.
(d) Occupational Safety and Health
The Occupational Safety and Health (Amendment) Act 2022, which came into force on 1 June 2024, increased the maximum fine for breach of an employer’s general duties under section 15 from RM50,000 to RM500,000, with imprisonment of up to two years also available15. A single serious incident involving foreign workers, particularly one where safety training was not delivered in a language the workers understood, can therefore result in a substantial penalty.
(e) Forced Labour and Trafficking
The Employment (Amendment) Act 2022 also introduced a specific forced labour offence into the EA 1955. An employer who, by threat, deception or force, compels an employee to work and prevents that employee from leaving the place where the work is carried out is liable on conviction to a fine of up to RM100,000, imprisonment of up to two years, or both. Practices sometimes treated as routine, such as holding workers’ passports for “safekeeping”, making excessive deductions, or allowing workers to carry recruitment debt, are recognised indicators of forced labour, and retaining another person’s passport is itself an offence under the Passports Act 1966. More serious cases fall under the Anti-Trafficking in Persons and Anti-Smuggling of Migrants Act 2007, which carries substantial custodial sentences. Critically, a conviction for an offence relating to trafficking in persons or forced labour is one of the matters the Director General may take into account under section 60K(4), so a single conviction can impair the company’s ability to obtain or renew approvals for its entire foreign workforce.
(f) Personal Liability of Directors and Officers
Liability does not necessarily stop at the company. Under section 52 of the Occupational Safety and Health Act 1994, as amended, where a company commits an offence, its directors, compliance officers, partners, managers, secretaries and other similar officers may be held jointly and severally liable. The burden is on the individual to prove that the offence was committed without their knowledge, consent or connivance, and that they took all reasonable precautions and exercised due diligence to prevent it16. Directors should therefore treat foreign worker compliance as a matter for board-level oversight, and should not assume that responsibility rests solely with the human resources or operations function.
(g) Administrative and Commercial Consequences
Beyond prosecution, non-compliance carries consequences that are often more damaging in practice. These include refusal or non-renewal of section 60K approvals and quota, leaving the business unable to retain or replace its workforce; the risk of the employer being blacklisted by the Immigration Department; the cost of repatriating workers who can no longer lawfully be employed; and loss of market access. Export-oriented businesses face particular scrutiny. In 2020, US Customs and Border Protection issued Withhold Release Orders against several Malaysian manufacturers and plantation companies, citing forced labour indicators affecting their foreign workforces. In the case of Top Glove, the order was modified only in September 2021, after the company had made remediation payments of more than US$30 million to its workers, largely in reimbursement of recruitment fees17.
12. Inheriting Non-Compliance in an Acquisition
The consequences set out above do not disappear when a business changes hands. Foreign worker compliance is nonetheless one of the areas most commonly overlooked in Malaysian acquisitions. It tends to be treated as an operational or human resources matter rather than a legal risk, the relevant records often sit with site managers rather than in the data room, and the liabilities are typically latent at signing, crystallising only after completion when an inspection, a worker complaint or a customer audit brings them to light.
(a) In a Share Acquisition, the Liabilities Stay with the Company
In a share acquisition, the target remains the same legal person after completion. Any offence it committed before completion, whether employing workers without section 60K approval, employing workers without valid passes, or housing them without a Certificate for Accommodation, remains an offence of that company and may still be investigated and prosecuted after the buyer has taken control. Any fine is paid out of the company’s assets, which the buyer now owns, and the cost of remediation, including back-payment of wages and overtime, reimbursement of recruitment fees, upgrading or replacing non-compliant accommodation and repatriating workers, falls on the business in the same way. The company’s compliance history also continues to count against it under section 60K(4), so a pre-completion conviction can affect the buyer’s ability to retain or expand the very workforce it has just acquired.
(b) An Asset Acquisition Is Not a Clean Break
An asset acquisition offers more insulation, since liability for pre-completion offences will generally remain with the seller. It is not, however, a clean break. As noted in section 3, the buyer will usually need its own section 60K approval and quota to employ the workers going forward, and it cannot lawfully take over workers whose immigration status is defective. Practical exposures also travel with the business: accommodation that does not meet Minimum Standards of Housing and Amenities Act 1990 standards becomes the buyer’s problem as soon as the workers are housed in its name, and forced labour allegations or adverse customer audit findings attach to the business and its products regardless of who owned it when the underlying conduct occurred.
(c) Protecting the Buyer in the Transaction Documents
Where due diligence reveals issues, or where the target’s records are incomplete, the buyer should address the exposure contractually rather than through price alone. Common tools include specific warranties on foreign worker, immigration, accommodation and forced labour compliance; a specific indemnity for pre-completion breaches and remediation costs, which is particularly important because fines and penalties, as well as matters disclosed to or known by the buyer, are commonly excluded from warranty and indemnity insurance cover; a retention or escrow from the purchase price to fund remediation; and conditions precedent requiring the seller to regularise identified issues, such as obtaining outstanding approvals or Certificates for Accommodation, before completion. Remediation should be costed as part of the valuation, not discovered as a post-completion surprise.
Practical Takeaways
The framework governing foreign worker employment in Malaysia is not a single-step immigration process. It is a layered compliance structure spanning labour law, immigration law, housing legislation and occupational safety law, administered across multiple agencies including JTKSM, the Immigration Department and the Department of Occupational Safety and Health (DOSH).
Non-compliance at any stage carries consequences beyond the immediate transaction. Because compliance history under both the Employment Act and Minimum Standards of Housing and Amenities Act 1990 can affect future approvals, a single lapse can have effects that outlast the initial hiring exercise. For this reason, foreign worker compliance is best approached as an ongoing governance obligation rather than a one-time administrative task. For buyers, the same logic applies with greater force: in a share acquisition, the target’s foreign worker liabilities and compliance history are inherited along with the business, and should be diligenced, priced and allocated in the transaction documents accordingly.
1. Department of Statistics Malaysia on Labour Force Report, Labour Migration Pathways – Malaysia.
2. Immigration Department of Malaysia, Foreign Worker, https://www.imi.gov.my/index.php/en/main-services/foreign-worker/, listing manufacturing, construction, agriculture, plantation and services as sectors in which foreign workers may be employed.
3. Employment Act 1955, s.60K(1), which provides that no employer shall employ a foreign employee unless prior written approval has been obtained from the Director General of Labour: JTKSM, Foreign Workers Employment https://jtksm.mohr.gov.my/en/services/foreign-workers-employment.
4. https://jtksm.mohr.gov.my/en/services/foreign-workers-employment. This approval is distinct from, and in addition to, any immigration or quota clearance obtained from the Immigration Department.
5. Immigration Department of Malaysia, Foreign Worker, https://www.imi.gov.my/index.php/en/main-services/foreign-worker/, setting out the quota approval process and the VDR (Visa with Reference) and temporary employment pass procedures that employers must follow in parallel with JTKSM’s section 60K approval before a foreign worker can be lawfully employed.
6. Immigration Department of Malaysia, Foreign Worker, https://www.imi.gov.my/index.php/en/main-services/foreign-worker/, which sets the general age band for foreign worker applicants at 18 to 45 years, together with source-country and sector-specific nationality restrictions that vary by industry and are updated periodically by the Immigration Department.
7. Immigration Department of Malaysia, Foreign Worker, https://www.imi.gov.my/index.php/en/main-services/foreign-worker/. Employers are allowed 30 days from the worker’s date of arrival in Malaysia to complete this examination.
8. Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990, and its subsidiary legislation, which prescribe minimum standards for housing provided to employees, including foreign workers, covering matters such as space, sanitation, fire safety and amenities. See JTKSM, Employees’ Housing, Accommodation and Amenities, https://jtksm.mohr.gov.my/en/services/foreign-workers-employment.
9. Occupational Safety and Health Act 1994, s.15, which imposes a general duty on every employer to ensure, so far as is practicable, the safety, health and welfare at work of all employees, including foreign workers.
10. Employment Act 1955, read together with JTKSM’s Foreign Worker Employment FAQ, https://jtksm.mohr.gov.my/en/services/foreign-workers-employment, which states that employers must provide and sign a written contract of service with each foreign worker setting out the prescribed terms, including wages, working hours and other core terms of employment, before the worker commences work.
11. Private Employment Agencies Act 1981, which requires any person carrying on the business of a private employment agency to hold a valid licence. For agencies placing non-citizen employees specifically, the applicable category is Licence C.
12. Employment Act 1955, s.60K, as amended by the Employment (Amendment) Act 2022, in force from 1 January 2023. “New Guidelines on the Employment of Foreign Workers in Malaysia“.
13. Immigration Act 1959/63, s.55B. See “Stricter penalties for employers who hire illegal immigrants”, New Straits Times, September 2015, https://www.nst.com.my/news/2015/09/73999/stricter-penalties-employers-who-hire-illegal-immigrants.
14. Employees’ Minimum Standards of Housing, Accommodations and Amenities Act. “No more compromise on workers’ housing Act, says govt”, The Vibes, 26 November 2020, https://www.thevibes.com/articles/news/7479/no-more-compromise-on-workers-housing-act-says-govt.
15. Occupational Safety and Health (Amendment) Act 2022, in force from 1 June 2024. See Herbert Smith Freehills Kramer, “Compliance check: Malaysia – recent updates to statutory health and safety duties at work”, May 2024, https://www.hsfkramer.com/notes/employment/2024-05/compliance-check-malaysia-recent-updates-to-statutory-health-and-safety-duties-at-work.
16. Occupational Safety and Health Act 1994, s.52, as amended by the Occupational Safety and Health (Amendment) . See AZMI & Associates, “Key Changes to Occupational Safety and Health Law”, https://www.azmilaw.com/insights/key-changes-to-occupational-safety-and-health-law/.
17. United States Department of Labor, “Example in Action: Top Glove WRO and Subsequent Modification”, https://www.dol.gov/agencies/ilab/sourcingstrong/steps-to-a-social-compliance-system/step-6-remediate-violations/example-in-action-top-glove-wro-and-subsequent-modification. See also “Top Glove to pay RM136m to migrant workers as remediation for recruitment fees”, The Edge Malaysia, https://theedgemalaysia.com/article/top-glove-pay-rm136m-migrant-workers-remediation-recruitment-fees.
Written by:
Amir Fahmi Annas (Managing Associate) amirfahmi@azmilaw.com
Siti Nazatul Nadia Mohd Ridzuan (Legal Executive) nazatul.nadia@azmilaw.com
Corporate Communications, Azmi & Associates – 20 October 2026