New Policy on Expat Hiring (EPs): Government Recommending the Hiring of 3 Interns for every 1 Expat

The Ministry of Human Resources (Kesuma), in collaboration with Talent Corporation Malaysia Berhad (TalentCorp), has introduced the 1:3 Internship Policy, a progressive initiative aimed at linking expatriate employment pass approvals with local talent development.

This policy encourages companies to offer structured, paid, and quality internship placements under the National Structured Internship Programme (MySIP) for every expatriate hired.

a) What is the policy about?

Under this policy, once a company obtains approval for an expatriate employment pass, the company should provide internship placements according to the following ratios:

Note: The requirement for internship placements will be capped at 2% of the company’s total workforce.

Benefits: Companies are eligible for double tax deductions on expenses related to internship placements (more details below).

b) When will this policy be implemented?

• Pilot Phase: 15th February 2025 – 31st December 2025

• Full Implementation: Effective 1st January 2026

  
  

During the pilot phase, the policy will apply only to MYXpats-registered companies in Tier 1 and Tier 2 categories (EPI and EPII), primarily comprising multinational companies, government-linked companies, and conglomerates.

c) Which companies are required to comply?

This policy applies to companies who have been granted expatriate employment passes by:

• Malaysia Expatriate Service Centre (MYXpats)

• Malaysia Digital Economy Corporation (MDEC)

Exemptions apply to the following:

• New companies operating in Malaysia for less than two (2) years.

• Representative or Regional Offices (RERO).

• Companies with tax exemptions, especially in key sectors like digital and energy.

• Additional exemptions may be granted based on feedback from the pilot phase.

d) Will this affect expatriate employment pass approvals?

Companies are required to fulfill the internship placement quota only after obtaining employment pass approval. This requirement will not interfere with the employment pass application process and is not a precondition for approval. Therefore, the timeline and approval criteria for expatriate employment passes remain unaffected.

However, according to Kesuma and TalentCorp, companies that meet the internship placement quota will be given greater consideration for subsequent employment pass approvals. While the term “greater consideration” is not explicitly defined, it suggests that compliance with the quota could strengthen a company’s future applications.

Therefore, our interpretation is that the internship placement quota is not a condition for employment pass approval - fulfilling the requirement may strengthen the company’s position for future employment pass applications, increasing the likelihood of subsequent approvals.

e) Is there a time limit for Companies to fulfill the internship placement quota after obtaining employment pass approval?

Currently, neither Kesuma nor TalentCorp has specified a formal timeline for fulfilling the internship placement quota following the approval of an employment pass.

f) What happens if companies do not comply?

No penalties will be imposed for non-compliance. Instead, this policy is designed to encourage active participation in national talent development. Companies that adhere to the policy will benefit from:

• Greater consideration for future expatriate employment pass approvals [as discussed at d) above].

• Enhanced contributions to the local talent pool.

• Eligibility for double tax deductions on internship-related expenses.

g) What is the benefit of double tax deductions?

Companies will be eligible to claim for double tax deduction from the Inland Revenue Board (LHDN) on expenses incurred during internship such as allowances, logistics, data and communication and training.

h) How do Companies meet the internship placement quota?

Internship placements must qualify under MySIP, which includes the following requirements:

• A minimum internship period of 10 weeks.

• A minimum monthly allowance of RM600 for master’s degree, bachelor’s degree, Advanced Skills Diploma (DLKM) and Professional Certificate or equivalent.

• A minimum monthly allowance of RM500 for diploma/Malaysian Skills Certificate (SKM) Level 1 to Level 3, Diploma Kemahiran Malaysia (DKM) or equivalent.

  
  

For more information on how to qualify an internship placement under MySIP, you can visit this website: National Structured Internship Programme (MySIP)

Having reviewed the details of the 1:3 Internship Policy, you may still have questions or uncertainties about its implementation. This is entirely understandable, as the policy is still in progress. More details are expected to be provided by Kesuma and TalentCorp once the pilot phase begins on 15th February 2025, and further amendments may follow based on feedback during this phase.

You may reach out to our Consultants if you wish to have a discussion on this subject matter.