Labour Market Testing in the Asia-Pacific: Evolving Rules in a Global Talent Race

Across the Asia-Pacific region, governments continue to review and recalibrate their immigration policies, navigating national skills shortages and the geopolitical competition for talent, with a strong desire to protect the local workforce.

One tool that has emerged at the forefront of these policies is Labour Market Testing (LMT). At its core, LMT serves as a crucial mechanism for ensuring local workers are given priority in filling roles before employers seek talent from abroad. However, LMT frameworks must also balance the realities of global labour shortages and the growing need for international talent.

Singapore, Malaysia and Vietnam are among several countries in the Asia-Pacific region that sit at the core of regional supply-chains that run from technology hubs to advanced manufacturing sites and service-delivery centres. All three economies compete for foreign investment yet face intense domestic pressure to ring-fence jobs for their citizens. The result is a patchwork of LMT rules that have tightened since the pandemic but now pivot toward data-driven transparency and skill-shortage targeting instead of blanket protectionism.

Regional LMT Frameworks

As one example, Singapore’s Fair Consideration Framework (FCF), which has been in place for more than 10 years, requires employers to advertise job vacancies on a national job portal for at least 14 days  and consider all candidates fairly before submitting a Work Pass application.

Singapore’s more developed LMT framework has often been a blueprint for neighbouring countries, including Malaysia, which implemented its own framework in 2023, aiming to protect its local workforce in a post-pandemic world. When Malaysia first implemented its framework, it requested employers to advertise job vacancies for at least 30 days but that has since been reduced to 14 days, in an effort to make the process simpler.

In Vietnam, to note, employers have long been required to preserve evidence of their recruitment efforts within the local market, with a focus on providing an employer-led justification when hiring a foreign national. In a move to emulate its regional neighbors, a formal LMT process was adopted in 2024, mandating employers to submit proof of LMT (conducted for least 15 days before seeking to hire a foreign national), adding an additional step to an already protracted process.

Interestingly, while Malaysia and Vietnam only recently started to build out their LMT policies, Singapore has continued to evolve its LMT requirements and added an additional layer in September 2023, as a result of the introduction of the COMPASS points-based system, which sits on top of the FCF (scoring each Employment Pass candidate on diversity, skills match and whether the employer is investing in local workforce development). The effect is a two-layer filter—first a labour-market test focusing on the position, then a complementarity test focusing on the individual applicant and employer.

Digitalisation

While government online portals have always played a pivotal role in managing LMT, over time the process has evolved through enhancements in digitalisation and an increase in data monitoring, particularly in Singapore and Malaysia. This increases transparency, making it easier for authorities to verify compliance.

• • • Job Posting and Application Tracking: In both countries, the portals allow employers to not only post open roles, but also manage job advertisements, including the ability to screen candidates, and even filter applications by skills relevance. Both country portals feature job-candidate matching tools, whereas in Vietnam, job matching is still a largely manual process, requiring job seekers to physically visit local Employment Services Centers to discuss potential open roles.
    • Review Mechanism: Employers across the region are typically required to review applications from local candidates before considering foreign applicants, though their obligations vary across each country. In Malaysia, a Hiring Outcome Report must always be submitted to the Social Security Organisation (PERKESO), even if there was no suitable candidate for a particular role. PERKESO will then issue a letter either supporting or opposing the Employment Pass application, adding an additional layer to the process.
    • Transparency: In Singapore, the Ministry of Manpower has visibility of the portal, job postings and activity and can track employer behaviour behind the scenes, thus creating audit-ready data streams. Employers may be penalised if found to circumvent the principles of the FCF, potentially facing delays or rejections in future Work Pass applications or suspension of Work Pass privileges. In Malaysia, if an employer failed to obtain the supporting letter, an appeal to PERKESO must be made (as it has full control and discretion over the decision made). 

Skills Shortages & Exemptions

One of the primary criticisms of LMT is that it can be an obstacle to businesses seeking to fill talent gaps quickly, especially in fast-moving sectors like technology or healthcare. The process can be time-consuming, costly, and administratively burdensome, requiring extensive documentation and advertising efforts that may delay hiring decisions.

To tackle this, some governments have created simplified pathways or exemptions to LMT. In Singapore and Malaysia, roles may be exempt from the job posting requirement under certain circumstances, including for high-salaried positions and intra-corporate transferees. Short-term work passes and renewals in Malaysia are also exempted from the need to post job advertisements. Singapore also creates exemptions for small companies with fewer than 10 employees, and short-term roles of up to one-month, with renewals similarly exempted.

Governments are also aiming to insulate high-value or hard-to-fill roles from the full weight of LMT, through additional points for skills-shortages occupations via COMPASS in Singapore, or through Australia’s forthcoming Skills-in-Demand visa (as another example). Targeting skills shortages through such points tests, or shortage occupation lists, replaces a one-size-fits-all approach with a more nuanced framework, taking into account the realities of the market.

Ongoing Protection of Labour Market

Governments continue to look at innovative ways to protect the local market beyond LMT. Earlier this year, the Ministry of Human Resources in Malaysia announced a scheme, due to be formally launched in 2026, to require companies to hire local students as interns once they have hired foreign nationals for full-time roles, with the aim to ensure local young talent are workforce-ready and to increase their employability upon completion of their studies. While this isn’t an LMT per se, it is certainly an example of the government trying to balance the need to protect the local market while continuing to attract foreign talent.

Other markets, such as Indonesia, so far omit any explicit LMT requirements while still imposing some knowledge transfer obligations, tying approvals of Work Permits to documented plans for up-skilling locals. This moves the nature of LMT from negative, i.e. proving no local Indonesian exists to fill the role, to positive, i.e. to demonstrate that the company will create even more jobs for locals. Furthermore, the Ministry of Manpower requires a commitment from companies to a particular ‘local-to-foreign' staffing ratio, and reserves certain occupations, such as in human resources, exclusively for citizens.

Looking Ahead

As the global competition for talent intensifies, LMT remains a cornerstone of immigration policy in many countries. However, as businesses and economies evolve, it is clear that the traditional models of LMT will need to adapt to the realities of a more interconnected and technology-driven world.

The Asia-Pacific region showcases two complementary philosophies: a rules-based, portal-centred model designed for transparency and analytics, such as in Singapore and Malaysia, and a case-by-case, plan-based model that emphasises qualitative justification and skills transfer, like in Vietnam and Indonesia. Policymakers are sharpening both approaches to target genuine shortages without stoking domestic resentment.

Governments typically walk a tightrope between attracting foreign talent and ensuring employment opportunities for their citizens - keeping doors open to investment and advanced skills while signaling that citizens remain first in line for available jobs. By embracing more flexible and adaptive LMT processes, countries can remain competitive in the global talent race while fostering an inclusive and dynamic workforce.

For employers, the message is clear: align global talent strategies with local workforce priorities, and stay agile, as governments continue to refine the balance between openness and protection in an era of intense competition for skills.

Need to Know More?

For questions regarding labour marketing testing in APAC, please contact Practice Leader Khalisha Sharifah at [email protected] and Directors Jenny Lee and Maysie Pandor at [email protected] and [email protected], respectively.   

This blog was published on 14 May 2025 and due to the circumstances, there are frequent changes. To keep up to date with all the latest updates on global immigration, please subscribe to our alerts and follow us on LinkedIn, Twitter, Facebook and Instagram.