A Progressive Policy on Expatriate Contribution to Local Talent Development
The 1:3 Internship Policy announced by the Ministry of Human Resources (“KESUMA”) on 15 January 2025, which was scheduled to take full effect on 1 January 2026, has been deferred to 1 April 2026. The initial pilot phase, originally set to conclude in December 2025, has been extended to end of March 2026 to provide employers with additional time to familiarise themselves with the policy requirements.
By way of background, the 1:3 Internship Policy (“Policy”) is a government-led initiative implemented by KESUMA and administered by TalentCorp. Consistent with the recent revisions to the Employment Pass (“EP”) salary policy, the Policy links expatriate hiring approvals to local talent development. Employers are required to offer structured, paid and quality internship placements under the National Structured Internship Programme (“MySIP”) for each expatriate hired, which aims to strengthen the local talent pool by enhancing skills development and improving workforce readiness.
Who This Policy Applies To
The Policy applies to all employers that have been granted EP approvals under the Malaysia Expatriate Service Centre (“MYXpats”), the Malaysia Digital Economy Corporation (“MDEC”) and the Iskandar Regional Development Authority (“IRDA”).
It applies to all categories of EP applications, including both new and renewal applications under EP Category 1, Category 2 and Category 3.
During the pilot phase, now extended until 31 March 2026, the Policy will apply only to MYXpats-registered employers under Tier 1 and Tier 2, which primarily comprise multinational corporations, government-linked companies and large conglomerates. Employers under Tier 3, Tier 4 and Tier 5 remain excluded from the pilot implementation. The Policy will be applied to MDEC- and IRDA-registered employers in accordance with the applicable rollout phases, with further updates on the next phase of implementation to be communicated in due course.
The Policy provides exemptions for (i) new companies operating in Malaysia for less than two (2) years, (ii) companies with Representative or Regional Offices (RERO), and (iii) companies that receive government-granted tax exemptions.
Understanding the Key Features of the Policy
Compliance with the 1:3 Internship Policy is mandatory for all employers that have been granted EP approvals.
During the pilot implementation, companies hiring expatriates registered with the Expatriate Services Division (“ESD”) are required to offer structured internship placements to local students from public and private higher education institutions, as well as Technical and Vocational Education and Training (“TVET”) institutes. The applicable internship ratios vary depending on the EP category:
- Internship Placement Ratio: For every EP approved, companies are required to offer internships placement based on the following ratios (1:3 for EPI; 1:2 for EPII; 1:1 for EPIII). This does not apply to EP renewal. Notably, interns are not required to report directly to the expatriate or work within the expatriate’s function. Internship placements may be offered in any relevant field within the organisation.
| No. | Employment Pass Category | Proposed Ratio | Company Requirement |
| 1. | Employment Pass (EPI) | 1:3 | 1 EPI approval, 3 internship placements establishment |
| 2. | Employment Pass (EPII) | 1:2 | 1 EPII approval, 2 internship placements establishment |
| 3. | Employment Pass (EPIII) | 1:1 | 1 EPIII approval, 1 internship placement establishment |
| 4. | In the scenario where internship placement over the number of organisation manpower is more than 2%. | Companies’ internship placement quota will be set at 2% of the total organisation manpower. | |
- Timeline For Hiring Interns: Internship quotas will be notified upon EP approval. Employers must hire interns within six (6) months from receipt of notification by TalentCorp regarding their participation in the Policy and thereafter complete the prescribed registration process (refer below).
- Structured, Quality & Paid Internships: To qualify under the Policy, internships must be structured and include:
- Defined learning outcomes.
- A named supervisor or mentor.
- Minimum duration of 10 weeks.
- Monthly allowance meeting MySIP thresholds (a minimum of either RM500 or RM600 per month according to the level of study).
- End-of-internship evaluation.
- Double Tax Deduction: Companies may claim a double tax deduction on costs incurred for interns under MySIP.
Consequences of Non-Compliance
While the Policy does not impose immediate punitive measures (including invalidation or delay of EPs that have already been approved), it adopts a progressive enforcement approach. The Policy is intended to encourage active industry participation in national talent development, which will benefit the industry’s future talent pipeline.
Compliance will be a key consideration in the government’s holistic assessment of future EP applications, including workforce planning considerations. Although approved EPs will not be cancelled and no retrospective penalties will be imposed, persistent non-compliance may adversely affect an employer’s ability to secure subsequent expatriate pass approvals.
Importantly, the policy does not cancel approved EPs, impose retrospective penalties and replace existing immigration requirements. Rather, it mandates employer contribution to local talent development through structured internships.
Key Steps for Companies to Implement the Policy
- Onboarding of the Company
Upon the grant of an EP approval, TalentCorp will issue an onboarding email to the company outlining the required steps for registration on the MyNext platform.
- Activation of the Company on MyNext
Once the company account is registered and activated on MyNext, employers may create internship postings under MySIP to advertise available internship placements.
- Posting and Advertising Internship Opportunities
Internship opportunities must be advertised on MyNext under MySIP Advertised, regardless of whether interns are recruited through MyNext or via direct hiring. Where recruitment is conducted directly through educational institutions, placements should be declared under MySIP Direct Hiring. Employers are required to fulfil internship commitments in accordance with the prescribed ratios.
- Feedback and Evaluation Form
Both interns and employers must submit their feedback and evaluation at the end of internship placement.
- Verification from TalentCorp and Double Tax deduction claim
Upon the conclusion of the internship placement, TalentCorp will verify the details before issuing a Letter of Endorsement that enables the company to apply for the double tax deduction benefits with the Malaysian Inland Revenue Board.
For any immigration-related inquiries, please contact Ms. Suganthi Singam at suganthi@shearndelamore.com or Ms. Siow Wei Qing at weiqing.siow@shearndelamore.com.
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