In a significant shift that could reshape Malaysia’s labour landscape, the government has announced a new policy allowing foreign workers to change employers across different sectors — not just within the same industry as previously required.
This landmark decision, announced by Home Minister Datuk Seri Saifuddin Nasution Ismail, marks one of the most flexible foreign worker policies Malaysia has introduced in recent years. But what does this mean for businesses, and what new compliance requirements come with it?
What’s Changed? The Old vs New Policy
The Old Rules (Before May 2025):
Previously, foreign workers could only switch employers under very limited circumstances:
- Same sector only — A construction worker could only move to another construction company
- Strict conditions — Job transfers were permitted only when:
- The company was closing down
- Undergoing major restructuring
- Expanding operations and unable to retain the worker
This rigid framework often left workers stuck in unsuitable positions and created labour shortages in sectors desperate for manpower.
The New Rules (From May 2025):
Now, foreign workers can:
- Switch between different sectors — A plantation worker can now move to manufacturing, or a construction worker can transition to services
- Greater job mobility — Workers are no longer locked into a single industry
- More flexibility for employers — Businesses facing worker shortages can now tap into talent from other sectors
Why This Policy Shift Matters
The announcement came after the 13th Joint Committee Meeting on the Management of Foreign Workers, co-chaired by Home Minister Saifuddin Nasution and Human Resources Minister Steven Sim Chee Keong.
Benefits for Different Stakeholders:
For Employers:
- Access to a larger pool of available workers
- Ability to fill critical vacancies faster
- Reduced dependence on new foreign worker quotas
- Better workforce planning flexibility
For Foreign Workers:
- Escape from exploitative or unsuitable work conditions
- Opportunity for career progression
- Better wage prospects in high-demand sectors
- More bargaining power with employers
For the Government:
- Better labour market efficiency
- Reduced illegal worker movements
- Improved foreign worker welfare
- Enhanced economic productivity
3. New Compliance Rules: Check Out Memo (COM) Enforcement
Alongside the sector-switching flexibility, the government is tightening enforcement on another critical aspect: the Check Out Memo (COM) process.
What is the Check Out Memo?
The COM is a formal documentation process that employers must complete when their foreign workers leave Malaysia — either permanently or temporarily. It’s essentially a departure registration to ensure proper tracking of foreign workers.
New Requirements (Effective Immediately):
Employers must now:
- Be physically present at international exit points (airports, land borders, seaports)
- Personally verify their foreign workers’ departure
- Ensure proper COM registration before the worker leaves
Consequences of Non-Compliance:
Saifuddin made it clear that violations will carry serious penalties:
- Quota restrictions — Employers may be barred from applying for new foreign worker quotas
- Immigration sanctions — Other immigration-related applications may be denied or delayed
- Legal action — Repeat offenders could face prosecution under immigration laws
Why This Change?
The stricter COM enforcement is designed to:
- Combat visa overstaying and illegal workers
- Ensure proper tracking of foreign worker movements
- Prevent “runaway workers” who disappear after entering Malaysia
- Hold employers accountable for their foreign workforce
4. What Employers Need to Do Now
If you employ foreign workers or plan to hire them, here’s your action checklist:
Immediate Actions:
- Review your foreign worker contracts — Understand the terms around job changes and sector transfers
- Update HR policies — Prepare for potential requests from foreign workers wanting to switch sectors
- Understand COM procedures — Familiarize yourself with the Check Out Memo process and exit point requirements
- Train HR staff — Ensure your team knows the new compliance requirements
When a Foreign Worker Wants to Leave:
- Plan for physical presence at exit points (airports, borders)
- Allow sufficient time for COM processing
- Keep documentation records for audit purposes
- Coordinate with immigration authorities as needed
Risk Management:
- Non-compliance could result in losing your ability to hire foreign workers
- Maintain detailed records of all worker movements
- Consider designating a compliance officer for foreign worker matters
5. Industry Reactions and Concerns
While the policy has been welcomed for its flexibility, some industry concerns remain:
Potential Challenges:
For Labour-Intensive Sectors:
- Risk of losing trained workers to higher-paying industries
- Increased competition for foreign labour
- Possible wage inflation pressures
For Employers:
- Additional compliance burden with COM enforcement
- Need to invest in worker retention strategies
- Uncertainty about transition procedures
For Foreign Workers:
- Lack of clarity on transfer application process
- Potential fees or administrative costs
- Need for new skills training when changing sectors
6. Common Questions About the New Policy
Q: Can foreign workers switch sectors immediately?
A: The exact implementation timeline and application procedures are still being finalized. Employers should monitor official announcements from the Home Ministry and Immigration Department.
Q: Will workers need new permits when changing sectors?
A: Likely yes — work permits are typically sector-specific. Details on the transfer process will be released by authorities.
Q: Can employers prevent their workers from switching?
A: This depends on employment contract terms, but the policy aims to provide workers with legitimate mobility options.
Q: What if a foreign worker leaves without proper COM?
A: Both the employer and the worker could face penalties. Employers must ensure proper departure procedures are followed.
Q: Does this apply to all foreign worker categories?
A: The announcement didn’t specify exclusions, but implementation details may vary by worker category (skilled vs unskilled, domestic workers, etc.).
Conclusion: A Bold Step Toward Labour Market Flexibility
Malaysia’s decision to allow foreign workers to switch between sectors represents a major paradigm shift in how the country manages its foreign workforce.
While the increased flexibility addresses long-standing complaints about worker immobility and labour market inefficiencies, the simultaneous tightening of COM enforcement shows the government is serious about maintaining control and accountability.
The Bottom Line for Employers:
- Opportunities — Access to a broader talent pool and faster hiring
- Challenges — Increased competition for workers and stricter compliance requirements
- Imperative — Stay informed, update policies, and ensure full compliance with new rules
As implementation details emerge, businesses should proactively engage with relevant authorities and industry associations to navigate this new landscape effectively.
The key to success? Treat your foreign workers well, comply with regulations, and adapt quickly to the new reality.
Sources:
- Home Ministry of Malaysia
- Joint Committee Meeting on Management of Foreign Workers, May 2025
