PETALING JAYA: The recent hike in annual levy for foreign workers will certainly leave a dent in the earnings for companies especially in the construction, manufacturing and plantation sectors.
The move, which was announced by Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi on Sunday, caught many who were unaware. Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan expressed surprise at this move since the Government has taken steps to review its budget in light of the economic difficulty.
“We are surprised that they have done something that is very damaging to the cost of doing business,” he said.
Effective this month, manufacturers and construction companies will have to pay RM2,500, up from RM1,250. Based on the current minimum wage of RM900 (Peninsular Malaysia), the levy will account for 23% of wages.
Those in the services sector will be levied the same amount compared to the RM1,850 previously. Foreign workers in the plantation and agriculture sectors will have to pay a levy of RM1,500, which works out to some 13% of current minimum wage.
The levy for foreign domestic workers remains at RM410.
Although seemingly small in amount per month, it would add to the already burgeoning burden in costs companies have to bear.
Masterbuilders Association Malaysia president Matthew Tee also disagreed with the increase in levy for foreign workers.
He earlier said the increase should be implemented in stages over time.
Currently, some foreign workers are responsible for the levy payment. This, however, will change once Malaysia signs the Trans-Pacific Partnership Agreement (TTPA).
“We know very well that under the TPPA, which Malaysia is signing by Feb 4, within two years, legally we can no longer pass on the levy to employees. It needs to be paid by employers. And currently they are less able to afford it because of the challenging economic situation,” said Shamsuddin.
Ahmad Zahid said the revised levy would bring some RM2.5bil in additional revenue to the Government. He added that the reason for the revision was due to the 2.135 million registered foreign workers who are enjoying benefits meant for locals, such as food subsidies.
“You can see that the damage will be about RM2.5bil a year, and of course at times like this that is a huge amount of money which will impact the cost of doing business,” said Shamsuddin.
A manufacturer within the medical device sector said the implementation came as a rude surprise.
“There was no warning given. We all know that levies will increase over time, but ample notification would enable us to better prepare for it. Although many manufacturers are in the midst of automating their processes, and hence would lead to less labour needed, this could take years to be fully incorporated into our business procedures,” the manufacturer said.
Meanwhile, Shamsuddin said the plantation sector, in which employers typically absorb the levy costs, had not been doing well due to current yields and prices.
“In fact they are struggling to actually survive. Construction is also very slow now, and even the property sector is not moving well because of the stringent loan requirements put in place, among others,” he said.
He added that the Government should reconsider the levy amount so as not to burden businesses in this already trying economic environment. In the first place, he added, the revenue from foreign workers levy should be ploughed back to further develop Malaysia’s human resources.
“This includes upskilling and reskilling to upgrade our employees. But we don’t see it happening despite the proposals made by the private sector,” he said.