Foreign workers are a familiar part of Malaysia’s economy. They help build homes and infrastructure, keep factories operating, support farms and plantations, and fill essential roles in selected service businesses.

But why does Malaysia continue to rely on foreign labour? Is it simply because foreign workers are “cheaper,” or is the situation more complicated?

The short answer is that Malaysia’s dependence on foreign workers is shaped by labour shortages, the nature of certain jobs, business demand and long-standing structural issues in the economy. At the same time, hiring a foreign worker is not a shortcut to cheap labour. Employers must comply with wage, immigration, employment, accommodation and social-protection requirements.

Foreign workers and non-citizens are not the same thing

Before looking at the reasons, it is important to use the figures carefully.

The Department of Statistics Malaysia estimated that Malaysia had 3.38 million non-citizens in 2025. However, this number covers the wider non-citizen population and should not be described as the number of foreign workers. It may include dependants, children, students, expatriates and other immigration categories, in addition to migrant workers.

In employment discussions, “foreign worker” commonly refers to a non-Malaysian employed under the relevant approval and immigration framework, often in lower-skilled or semi-skilled roles. Expatriates holding an Employment Pass are governed under a different framework.

1. Certain industries face persistent labour shortages

Some Malaysian industries struggle to attract enough local workers, particularly for jobs that are physically demanding, repetitive, conducted outdoors or located far from urban centres.

This is often seen in sectors such as:

• Manufacturing
• Construction
• Plantation
• Agriculture
• Mining and quarrying
• Approved service subsectors

When local recruitment does not produce enough suitable candidates, employers may look to foreign workers to maintain operations. This does not mean local employees should be replaced. In fact, Malaysian labour law prohibits an employer from terminating a local employee for the purpose of employing a foreign employee.

2. Malaysia’s economy still contains many labour-intensive activities

Automation is growing, but not every task can be automated quickly or affordably. Harvesting crops, carrying out particular construction tasks, cleaning facilities and handling production-line work may still require a sizeable on-site workforce.

Small and medium-sized businesses may also face practical limits when investing in new machinery, redesigning workflows or training workers for more technical roles. Foreign labour can therefore help fill an immediate operational gap while companies gradually improve productivity and adopt technology.

However, long-term dependence can create its own problems. Businesses that rely too heavily on manual labour may have less incentive to automate, redesign jobs or improve wages and working conditions. Foreign labour should support genuine workforce needs, not replace productivity planning.

3. Job expectations have changed

As education levels and career expectations rise, many Malaysians naturally seek jobs offering stronger career progression, higher pay, predictable hours, safer working environments and greater flexibility.

This can create a mismatch: vacancies exist, but the available jobs may not match what local jobseekers want or where they live. Employers should not assume that Malaysians simply “do not want to work.” Recruitment difficulties may also point to issues involving wages, working hours, transport, accommodation, job security or the way a role is designed.

Before turning to foreign recruitment, employers should review whether the job can be made more attractive and productive for local workers.

4. Foreign workers help businesses maintain continuity

An insufficient workforce can delay construction, reduce factory output, interrupt agricultural production and affect service quality. These disruptions may increase costs throughout the supply chain and eventually affect customers.

Where a genuine shortage exists and all approvals are obtained, foreign workers can help companies fulfil contracts, stabilise production and meet seasonal or operational demand. Their contribution is especially visible in industries where work cannot simply be postponed.

5. Foreign labour is not automatically “cheap labour”

It is misleading to compare only a worker’s basic salary.

Malaysia’s minimum wage is RM1,700 per month, and it applies to foreign workers as well as local workers, except domestic servants. Employers may also need to account for recruitment-related costs, levy, immigration charges, medical screening, insurance, transport, accommodation, statutory contributions and repatriation responsibilities, depending on the worker and applicable rules.

Once the full cost of lawful employment is considered, hiring foreign workers involves substantial financial and administrative responsibility. An employer must never use recruitment fees, passport retention, wage deductions or restrictions on movement to create debt bondage or forced labour.

What must Malaysian employers comply with?

Foreign-worker policies and application windows can change. Employers should verify the latest sector, subsector, quota and source-country rules before making commitments or paying recruitment costs.

As a general compliance foundation, employers should be aware of the following:

Prior approval under Section 60K

Under Section 60K of the Employment Act 1955, an employer must obtain prior approval from the Director General of Labour before employing a foreign employee. Employing a foreign employee without this approval may result in a fine of up to RM100,000, imprisonment for up to five years, or both.

Valid immigration approval

Workers must hold the correct immigration approval, such as a valid Visit Pass (Temporary Employment), commonly known as a PLKS, where applicable. Employers should follow the approved sector, employer and other conditions attached to the pass.

Fair wages and employment conditions

Foreign workers are protected by applicable Malaysian employment laws. Employers must pay wages lawfully and on time, maintain proper employment records, observe working-hour and leave requirements, and provide a safe workplace.

Suitable worker accommodation

Where accommodation is provided, employers and accommodation providers must comply with the Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990 (Act 446) and applicable certification and regulatory requirements.

Social protection and ethical recruitment

Employers must comply with the applicable PERKESO requirements and should use transparent, lawful recruitment practices. A responsible recruitment process helps prevent deception, excessive fees, document retention and other indicators of forced labour.

Should Malaysia reduce its reliance on foreign workers?

Malaysia’s long-term goal should be a more productive economy with better jobs, stronger wages, greater automation and more opportunities for local talent. That transition, however, cannot happen overnight.

A balanced approach is needed:

• Give Malaysian workers fair access to suitable jobs
• Improve wages, safety, job design and career development
• Invest in automation and employee training
• Approve foreign labour only where there is a genuine need
• Protect foreign workers from exploitation
• Enforce immigration and labour laws consistently

Foreign workers are not the cause of every weakness in the labour market. They often fill gaps created by deeper structural issues. The better question is not simply, “Why are there so many foreign workers?” It is, “How can Malaysia meet its labour needs fairly while building a more productive and sustainable workforce?”

Final thoughts for employers

Foreign workers make an important contribution to Malaysia, but recruitment comes with serious legal and ethical responsibilities. Employers should not treat the process as a quick solution or rely on outdated online guidance. Policies, eligible subsectors and application procedures may change, so every case should be checked against the latest official requirements.

Need guidance on foreign-worker recruitment, documentation, permit renewal or workforce management? Bold Excel Services Sdn Bhd provides practical support to help Malaysian employers manage the process more confidently and responsibly.

This article is for general information only and does not constitute legal advice. Requirements may differ by sector, location, worker category and current government policy. Information reviewed on 27 August 2026.