Page 102 - BPAReport

skilled and those with low skills. The skill levels of construction workers are determined by
the Construction Industry Development Board (CIDB) and regulated by them accordingly.

10. The DRC and the associated tier levels were discussed and agreed upon with all
stakeholders in consultations undertaken throughout 2017 and 2018 during the design stages
and before the adoption of the MTLS. The DRC sets absolute limits in the employment of
foreign workers within each firm and in effect for each of the approved sectors. This absolute
limit is not permanent and has in-built flexibility. At any time, if a firm is at its absolute quota
limit, it will be able to hire additional foreign workers so long as it adds additional Malaysian
workers to its payroll.

The Multi-Tier Levy

11. The multi-tier DRCs agreed with stakeholders will determine the levy to be paid by
each employer for each foreign worker taken into the firm’s payroll. A separate amount of the
levy to be paid has been determined for each tier of the DRC quota. Except for the
manufacturing and construction sectors, in general there will thus be three tiers of levy
associated with the DRC quota. The manufacturing sector has four tiers. The construction
sector has a variation of the levy depending on the skill level of the worker at each DRC
quota level. The amount of this multi-level levy is also shown in Tables 1 to 3 alongside the
DRC to be applied for each tier.

12. Within the MTLS, the formula for calculating the levy was also derived as follows:

Annual
Foreign Contribution of
Levy Rate Workers Employer’s Share
Median of Worker Safety
Wage Net Outlays

However, during the discussions with stakeholders it was agreed that the MTLS will be
initiated using the current level of levies. There will be two base levies. One at RM640 a year
per foreign worker in the agriculture and plantation sectors and another at RM1,850 for the
other approved sectors. The construction sector will have a variation with a RM2,000 base
levy to be applied to an unskilled foreign worker.

The change to the base levy when the DRC quota thresholds are exceeded will trigger a
higher level of levy to be paid by employers for each current or each additional foreign
worker. These different levy levels were also discussed and agreed with stakeholders during
the consultations with industry. A transition period for application of the MTLS will be
agreed upon.

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