FMM president Soh Thian Lai said, ideally, the details of the mechanism should be announced six months in advance.

“This is to give industries sufficient time to adapt to the upcoming changes, particularly since the implementation will have cost implications and require adjustments to budgets and business operations,” he said in a statement.

Once implemented, Soh said the scheme would offer a structured and demand-driven approach to labour management, with tiered levies incentivising industries to reduce dependency on foreign labour while enabling companies to hire based on operational needs.

“This will ensure a gradual and sustainable transition toward a more balanced workforce model,” he added.

He lauded the investment, trade and industry ministry for being pragmatic in deferring the enforcement of a 80:20 ratio of local to foreign workers until the multi-tier levy mechanism was implemented.

Soh acknowledged that the policy aimed to reduce dependence on migrant workers, but said it posed significant challenges for manufacturers in labour-intensive and low-skill sectors.

Local participation remained limited in these sectors despite efforts to enhance wages and benefits, he said.

“The deferment (of the policy) allows the industry to adopt long-term strategies such as increasing automation, modernising production processes and investing in the upskilling and reskilling of local workers to meet the demands of new, higher-value roles.

“This decision reflects a thoughtful approach to addressing the realities faced by the industry, particularly as the manufacturing sector continues to grapple with labour shortages and a mismatch in skillsets between available local workers and the requirements of industry roles.

“The deferment is both practical and timely, ensuring continuity in operations and protecting Malaysia’s global competitiveness while providing industries with a transition period to prepare for the structural changes required,” said Soh.