Employers in Malaysia must not deduct foreign workers levy from wages

Author: PM editorial | Date: 11 Jan 2017

New regulation aims to prevent exploitation of workers from overseas

Malaysian organisations hiring migrants must now pay the foreign workers levy themselves rather than deducting it from employees’ wages.
A new law effective from 1 January was announced by Malaysian home minister Datuk Seri Ahmad Zahid Hamidi, who said it would make employers fully responsible for their foreign employees.
The aim is to prevent abuse of foreign workers, who are often subject to human trafficking. The levy, and a fee for accommodation, have been known to cost workers on the minimum wage more than 20 per cent of their earnings.
There have been instances of employers confiscating passports and restricting the movement of migrant workers without paying the minimum wage.
“The policy … in the past has exposed workers to exploitation,” Angela Sherwood, a refugee and migrant rights researcher at Amnesty International told The Guardian. “One positive effect of removing the permission given to employers to extract levy fees directly from workers’ salaries may be eliminating such opportunities [for] unscrupulous employers.”
While millions of migrant workers in Malaysia will welcome a boost to their earnings, the Malaysian Employers Federation (MEF) has asked the prime minister to intervene, claiming that almost all of Malaysia’s industries are against the new law.
The cost of wages for employers will rise, which may hurt workers from overseas if Malaysian organisations are hesitant to hire them, it claimed.
The new regulation is part of a host of reforms announced by the home minister that will prepare Malaysia for joining the Trans-Pacific Partnership (TPP) trade agreement. But the MEF has pointed out that president-elect Donald Trump is opposed to the TPP and has vowed to withdraw America from it, potentially threatening its viability.
The state of Sarawak has already been exempted from the new policy. It had faced strong protests from employers in the region, such as the Sarawak Oil Palm Plantation Owners Association (SOPPOA), which released a statement expressing relief over the exemption.
“It is actually in the interest of Malaysia's economy that the levy is borne by the foreign workers. It is a shocking decision to force employers to pay the annual levy for foreign workers,” it said.