Employee Benefits in Malaysia

Bonuses and additional payments

In Malaysia, while not mandated by law, it is customary for employers to provide a 13th-month payment, typically equivalent to one month’s wage, paid at the end of the year. This bonus is often stipulated in employment contracts or company policies and is subject to standard tax and social security deductions. Employers must apply the same calculation method for all eligible employees to ensure compliance with labor regulations.

Annual leave

Employees in Malaysia are entitled to paid vacation leave after completing 12 months of continuous service. The statutory entitlement varies by tenure: eight days for one to two years of service, 12 days for two to five years, and 16 days for more than five years. This leave is fully paid and can be taken throughout the leave year, as agreed between employer and employee.

Additional leave may be offered as part of an employment contract or collective bargaining agreement, though it is not required by law. Many employers offer enhanced leave policies to stay competitive and improve retention.

Unused statutory leave may be carried over to the following year with employer approval. Payment in lieu of unused leave is only permitted upon termination of employment.

Sick leave

In Malaysia, personal and sick leave are governed by the Employment Act of 1955. Employees are entitled to paid sick leave, with the number of days depending on their length of service: 14 days per year if employed for less than two years, 18 days if employed two to five years, and 22 days if employed for more than five years. Additionally, employees are entitled to up to 60 days of paid hospitalization leave per year, which includes the aforementioned sick leave entitlements. Employees must obtain a medical certificate from a registered medical practitioner to qualify for paid sick leave.

Parental leave

Employers must provide 98 consecutive days of paid maternity leave, which can commence up to 30 days before the expected delivery date, for each pregnancy, including adoptive and surrogacy-commissioning mothers. Pregnant employees who have been employed for at least 90 days in the nine months preceding confinement are eligible for maternity allowance, with written notice and medical documentation required to be submitted to the employer confirming the pregnancy and expected delivery date.

Additional benefits

In addition to the above, employers in Malaysia are required to provide several statutory benefits under national labor law. 

• Employees Provident Fund (EPF): Employers contribute 12%–13% of the employee’s salary, while employees contribute 11%, covering: 
• Pension scheme: Provides retirement income.
• Social Security Organization (SOCSO): Employers contribute 1.75% of the employee’s salary, while employees contribute 0.5%, covering:
• Medical care: Offers comprehensive healthcare services.
• Disability insurance: Provides income support in case of disability.
• Employment Insurance System (EIS): Employers contribute 0.2% of the employee’s salary, while employees contribute 0.2%, covering: 
• Unemployment insurance: Supports employees during periods of involuntary unemployment.  

Many employers also offer supplemental benefits, such as meal allowances, transportation subsidies, private health insurance, or annual bonuses. These additional benefits help improve retention and employer branding.  

As your employer of record in Malaysia, we help design compliant and competitive benefit packages that align with statutory obligations and local market expectations.