Capital
Kuala Lumpur
Population
33.1 million
Languages
Malay
Timezone
UTC +8
Work week
45 - 48 hours
Employer taxes
6.25% - 15.95%
Currency
Malaysian Ringgit (MYR)
Payroll cycle
monthly
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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 periods are optional. Most employers request a probation period between one and three months.
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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.
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.
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.
In May 2022, the national minimum wage rose to MYR 1,500 per month – before, it was fixed at MYR 1,200.
Under Malaysia’s Employment Act, employee sick leave entitlements are regulated as follows:
Length of service
Without hospitalisation
Hospitalisation leave
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.
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):
Employers
24%
24% corporate tax rate
6% service tax and 10% sales tax (VAT standard rates)
Employees
up to 30%
individual income tax rates:
up to 30% *
Employers
up to 15.95%
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%
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
* Read more
Individual income is taxed progressively based on the following tax brackets (percentage rates given only apply to income exceeding the respective tax bracket threshold):
MYR 0 to 5,000 - 0%
MYR 5,001 to 20,000 - 1%
MYR 20,001 to 35,000 - 3%
MYR 35,001 to 50,000 - 8%
MYR 50,001 to 70,000 - 11% (down from 13%)
MYR 70,001 to 100,000 - 19% (down from 21%)
MYR 100,001 to 250,000 - 24%
MYR 250,001 to 400,000 - 25% (up from 24.5%)
MYR 400,001 to 600,000 - 25%
MYR 600,001 to 1,000,000 - 26%
MYR 1,000,001 to 2,000,000 - 28%
over MYR 2,000,000 - 30%
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.).
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.
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
There are no legal provisions for parental leave.
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:
Length of service
Notice period
Severance pay
Payment in lieu of notice is possible.
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