Malaysia offers cash to local workers and employers to cut dependence on foreign labour

A photo taken in Kuala Lumpur on Aug 31 shows workers hanging Malaysian flags ahead of celebrations for the country’s 62nd anniversary of independence.
A photo taken in Kuala Lumpur on Aug 31 shows workers hanging Malaysian flags ahead of celebrations for the country’s 62nd anniversary of independence.PHOTO: REUTERS

KUALA LUMPUR - The government is introducing a new initiative Malaysians @ Work by giving them cash, in order to entice companies to hire more locals, thus reducing the economy's heavy dependence on foreign labour.

From next year, qualified individuals will be paid RM500 (S$164) a month for two years on top of their salaries.

Companies taking part in the two-year scheme will get up to RM300 a month, for every new local employee.

Finance Minister Lim Guan Eng said in his Budget 2020 presentation on Friday (Oct 11) that the initiative will cost RM6.5 billion over five years.

The move is intended to create an additional 350,000 jobs for Malaysians and reduce foreign worker dependency by more than 130,000, in South-east Asia's third biggest economy.

"Very simply, Malaysians @ Work is divided into four programmes directed at providing both wage incentives for workers and hiring incentives for employers," he said.

Malaysia, with a population of 32 million people, is heavily dependent on foreign labour, who are concentrated in blue-collar work.

There are some 1.76 million foreign workers who work legally in Malaysia, and an estimated 3.9 million to 5.5 million more illegal immigrants.

Mr Lim said the scheme has four components:

- Graduates @ Work is designed for the hiring of college graduates who have been unemployed for more than 12 months.

Those who secure work will receive a wage incentive of RM500 per month for two years, and employers get up to RM300 per month for each new hire for the same duration.

- Women @ Work aims to create 33,000 job opportunities per year for women who have stopped working for a year or more, and are between 30 and 50 years old.

These returning women workers and their employers get similar financial incentives as those in the Graduates @ Work scheme.

Additionally, the current income tax exemption for these women will be extended for another four years until 2023.

- Locals @ Work aims to shift employers away from depending on low-skilled foreign labour.

A Malaysian who is hired to replace a foreign worker gets either RM350 or RM500 per month, depending on the sector that they work in, for two years.

Their employers will get up to RM250 per month for two years.

- Apprentice @ Work is a technical and vocational education and training (TVET) incentive programme, aimed at encouraging more young people to enter its courses.

Each will get an additional RM100 a month on their existing allowances for trainees on apprenticeships.

The government will also extend double tax deduction on expenses incurred by companies participating in the National Dual Training System (NDTS) for another two years.

In addition, the double tax deduction currently given to companies undertaking Structured Internship Programme (SIP) approved by Talent Corp Malaysia will be expanded to include students from all academic fields rather than just engineering and technology.

In addition to these, Mr Lim said that due to the higher cost of living in major urban centres, the government hopes to raise the minimum wage in major cities to RM1,200 per month from next year. Minimum wages were raised to RM1,100 a month just last year.


Responding to the announcement, accounting graduate Asmawati Mahyiuddin called it "a blessing in disguise" for fresh graduates like herself.

"I have been looking for a job for the past six months but to no avail. If the scheme is put in place, it could be the light I have always been waiting for at the end of the tunnel," the 23-year-old said.

"After graduating, I've been surviving by doing a small business online and at most, I get around RM700 a month,"she added.

Nina Mat Salleh, 33, who quit her job two years after giving birth to her son, said she is "tempted to re-enter the workforce", since it provides "several hundred more ringgit".

"This gives companies more incentive to hire people so hopefully this opens up opportunities for me," she said.

Meanwhile, 39-year-old Shahreez Samad said that while the scheme is enticing, he would rather remain a househusband.

"Getting RM350 to RM500 more sounds great but you'd probably need to work as a hard labourer. As it is, the pay is already low. It doesn't really entice me," he said.