Hire employees in Malaysia

Malaysia offers internationally recruiting companies a well-educated workforce and the Malaysian Government is continuously investing in human resource development. This, together with the country’s low employment costs and the generally high proficiency in English, makes Malaysia a top hiring destination.

According to the 1955 Employment Act, any employment agreement which is set to exceed one month requires a written employment contract outlining the basic terms of employment such as:

• Identification of both parties

• Date of commencement (and employment duration for temporary contracts)

• Workplace

• Job description, duties and responsibilities

• Basic salary as well as other compensation or benefits

• Payment conditions

• Probation period

• Working hours

• Total number of holidays

• Notice periods and formalities of employment termination

• Clauses relating to health and safety

Employees in Malaysia can either be employed for a fixed period or permanently.

Probation Period

Probation periods are optional. Most employers request a probation period between one and three months.

Employment in Malaysia is mainly regulated by the 1955 Employment Act which also sets the basic rules of employment such as working hours, sick leave and holidays.

Following Employment (Amendment of First Schedule) Order 2022, the Employment Act now applies to all employees regardless of their earnings - before, it only covered employees with salaries under MYR 2,000 per month.

Working Hours and Breaks

A standard working week in Malaysia comprises 45 hours - reduced from 48 hours in 2022. Every employee needs to have one full day of rest per week. After five hours of consecutive work, employees are entitled to a 30-minute break.

Overtime

Any work beyond 48 hours is considered overtime and needs to be remunerated at a rate of 150% of the employee’s normal salary – this applies to overtime work on regular working days only.

Employees in Malaysia have to be paid at least once a month. Payments must be made by the 7th of the following month.

Minimum Wage

In May 2022, the national minimum wage rose to MYR 1,500 per month – before, it was fixed at MYR 1,200.

Sick Pay

Under Malaysia’s Employment Act, employee sick leave entitlements are regulated as follows:

Sick leave days as stated above are fully paid – only upon presentation of a medical certificate not older than 48 hours.

Following a revision of the sick leave rules in 2022, the 60-day hospitalisation leave entitlement can be taken on top of the regular outpatient sick days - before, the outpatient sick leave was part of the 60 days.

Bonuses

There is no legal requirement for a 13th salary but performance-based bonuses are quite common.

Employees and employers in Malaysia are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

24%

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24% corporate tax rate

6% service tax and 10% sales tax (VAT standard rates)

Employees

up to 30%

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individual income tax rates:

up to 30% *

Social security

Employers

up to 15.95%

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• 1.75% for workers under 60 and 1.25% for workers over 60 to Social Security Organisation (SOCSO)

• 0.2 % to Employment Insurance System (EIS)  – only for workers aged 18 to 60

• 12% or 13% for workers under 60 and 4% or 6.5% for workers over 60 to Employees Provident Fund (EPF)

• 0.5% or 1% of employee’s salary to Human Resources Development Fund (HRDF) for companies with more than ten employees

Employees

up to 11.7%

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• 0.5% to Social Security Organisation (SOCSO) – only for workers aged 18 to 60 

• 0.2 % to Employment Insurance System (EIS) – only for workers aged 18 to 60 

• 11% Employees Provident Fund (EPF) – different rates apply for workers over 60

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

The number of paid vacation days an employee can claim depends on the employee’s length of service:

• less than two years: eight days

• between two and five years: twelve days

• more than five years: sixteen days

During their first year at the company, employees receive a prorated share of their annual leave.

Furthermore, employees are entitled to additional paid days off on public holidays. Malaysia counts various public holidays on the national as well as on the regional level. Employees should receive paid time off on at least eleven of them.

Maternity Leave and Paternity Leave

Following a revision of Malaysia’s Employment Act, female employees now have the right to take 98 days of maternity leave during which she receives a maternity allowance. However, the following conditions must be fulfilled:

• The employee must have worked for the employer during at least 90 days out of the nine months before birth

• The employee must have been employed by the company at any time in the four months before the start of maternity leave

• The employee has not already had more than four children

Since March 2022, fathers are entitled to 7 days of paid paternity leave if they fulfill the following conditions:

• They must be married to the mother in question 

• They must have worked for the same employer for at least 12 months 

• They must notify the employer at least 30 days before the beginning of the leave

Parental Leave

There are no legal provisions for parental leave.

Additional Leave and Benefits

In addition to the leave entitlements mentioned above, employers usually grant extra leave in the following cases:

• death of a close friend or family member

• marriage

• need to prepare for exams

In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, employment may be terminated due to one of the following reasons (non-exhaustive list):

• redundancy, collective dismissal and business-related reasons

• misconduct or breach of employment contract

• constant underperformance and incapability

Statutory notice periods are the same for employees and employers and depend on the employee’s length of service (see table below). Severance pay is reserved for employees who are covered by Malaysia’s Employment Act and who have not been dismissed due their own personal behaviour. Amounts are set as follows:

Payment in lieu of notice is possible.