Malaysia’s 1:3 Internship Policy: What Companies Hiring Expatriates Must Do (2026)

What does the 1:3 Internship Policy require?

The Ministry of Human Resources calls it the Progressive Policy on Expatriate Contribution to Local Talent Development, and TalentCorp runs it. The idea is simple. A company that brings in expatriate talent also trains Malaysian students. For every Employment Pass approved, the company provides internship placements according to the pass category.

• Category I (basic monthly salary of RM20,000 or more): 3 placements per approval.
• Category II (RM10,000 to RM19,999): 2 placements per approval.
• Category III (RM5,000 to RM9,999): 1 placement per approval.

The salary bands are ESD’s revised Employment Pass categories, in force since 1 June 2026. Our guide to Malaysia Employment Pass salary thresholds in 2026 covers them in full.

TalentCorp’s FAQ says the ratio applies to new and renewal applications. Some law firm commentary has said renewals are not covered, so confirm the position with TalentCorp when its email arrives for a renewal.

A company with a small workforce can appeal to cap its placements at 2% of total headcount. This is now an appeal, subject to approval. It is not applied automatically.

When did it start, and is it mandatory?

The pilot began on 15 February 2025. ESD extended it twice, first to 31 March 2026 and then to 31 May 2026. Full implementation started on 1 June 2026 and covers all tiers and Employment Pass categories. Many pages still quote 1 January 2026 or 1 April 2026; both dates were overtaken.

The policy is a requirement, not a guideline. TalentCorp says it will not interfere with current approval processes, and its FAQ says there is no immediate punitive action during the initial rollout. The same FAQ warns that persistent non-compliance may affect future Employment Pass considerations.

ESD is now chasing. On 30 October 2026 it sent a second reminder telling all companies employing expatriates to complete their onboarding on MyNext and fulfil their internship requirements, following an earlier communication in May 2026.

Who can appeal for an exemption?

TalentCorp lists three cases that may appeal for an exemption, subject to approval: companies that have been in Malaysia for less than two years, representative and regional offices, and tax-exempt companies in key sectors. None of these is automatic. You apply, and TalentCorp decides.

This matters for founders. A new Sdn. Bhd. set up by a Singapore or other overseas parent, hiring its first expatriate manager, is usually under two years old. Raise the exemption at the start, when TalentCorp first writes, rather than after the placements fall due.

What must an internship look like?

• At least 10 weeks long.
• Structured and paid.
• Endorsed under MySIP, TalentCorp’s structured internship programme.
• For Malaysian students.
• A minimum monthly allowance of RM500 for diploma or certificate students and RM600 for bachelor’s or master’s students.

You can post internships on MyNext or declare an intern you recruited directly, but the placement has to be MySIP-endorsed to count toward the ratio. A short work-shadowing week or an unpaid placement will not count.

What happens after an Employment Pass is approved?

1. TalentCorp emails the company after the Employment Pass approval.
2. The company onboards on MyNext and appoints an internship person-in-charge.
3. The company posts its internships under MySIP, or declares interns it recruited directly.
4. The company submits each intern’s details and, at the end, the placement feedback on MyNext.
5. TalentCorp issues an endorsement letter, which supports the double tax deduction.

Fill the placements within the period TalentCorp sets in its email. Published sources differ on whether that is six or twelve months, so work to the date in your own letter.

What does it cost a small company? An illustration

Take a Sdn. Bhd. with one Category I and one Category II Employment Pass approved after 1 June 2026. That is five placements. At the minimum RM600 a month for degree students, each 10-week internship costs about RM1,400 in allowances, so roughly RM7,000 for all five, before supervision time.

Allowances and other qualifying internship costs can attract a double tax deduction once TalentCorp issues its endorsement letter. That reduces the net cost, but only if the paperwork is in order. Confirm the current year of assessment coverage with your tax adviser before you rely on it.

What most guides get wrong

• “It started on 1 January 2026.” Full implementation started on 1 June 2026, after two pilot extensions.
• “The 2% cap applies automatically.” It is now an appeal, subject to approval.
• “Missing the ratio blocks your Employment Pass.” TalentCorp says the policy does not interfere with current approvals. The risk is to future Employment Pass considerations if non-compliance persists.
• “Any intern counts.” Only MySIP-endorsed placements of at least 10 weeks count toward the ratio.

How VIVOS can help

VIVOS (M) Sdn. Bhd. in Kuala Lumpur handles Employment Pass applications and renewals for foreign-owned companies, and sets up and runs the Sdn. Bhd. behind them. We build the internship requirement into your Employment Pass timeline and help you prepare an exemption appeal where your company qualifies. See our Employment Pass and immigration services, or contact the Kuala Lumpur team on WhatsApp at +60 12-810 7525.