Hire in Malaysia

Employer of record in Malaysia

If a lack of speed or local expertise are among your top concerns when expanding to or employing workers in Malaysia, an employer of record may be the best option for achieving your global growth objectives.

An employer of record, sometimes known as an international PEO, enables you to quickly hire and onboard workers in Malaysia―often in as little as two weeks―without having to take on the cost and risk of establishing a local entity.

Learn about the hiring, employment, payroll and benefits requirements for workers in Malaysia and how our employer of record service, EOR, and local HR experts can help you manage your international employment needs.

Hiring in Malaysia

The main source of private sector employment law in Malaysia is the Employment Act of 1955. It covers Peninsular Malaysia and the Federal Territory of Labuan. The remaining states of Sabah and Sarawak in East Malaysia have separate employment regulations.

Other important laws are the Industrial Relations Act and the Employees Provident Fund Act of 1991. These statutes set out minimum requirements that employers and employees may expand on through collective bargaining agreements.

The Ministry of Human Resources is the government agency responsible for employment issues for all of Malaysia, including labor relations, trade unions and occupational safety.

Employment contracts in Malaysia

As you look to hire employees in Malaysia, here are some standard regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.

Working hours

Regular work hours may not exceed eight in a day or 48 in a week. An employment contract may provide for a work schedule in which an employee works more than eight hours some days and less other days, subject to a maximum of 12 hours in a day and 48 hours in a week. After six consecutive hours of work, workers must be granted a 45-minute rest period.

Effective January 1, 2023, the maximum work hours will be 45 hours per week.

If a job requires the employee’s constant presence, work hours may run for eight consecutive hours with a meal break of at least 45 minutes.

Employers must give part-time employees—those who work between 30% and 70% of full-time hours—the same benefits as full-time employees, including overtime pay, annual and medical leave, and paid public holidays.

Every employee is entitled to one rest day per week. If the employee is assigned to shift work, any continuous work period of at least 30 hours requires a rest day, which can vary from month to month.

An employee can be required to work overtime, or on a rest day, under certain conditions:

• Work is essential to the community, national defense, or security.
• There has been a workplace-related accident, or a potential accident is feared.
• Urgent work needs to be done on the office building or equipment.
• There was an unforeseeable interruption of work.

Compensation

As you consider the appropriate salary to offer new employees, keep in mind:

• Effective 1 July 2023, the minimum wage for employees has increased from M$1,200 to M$1,500 per month.
• Overtime work is compensated at 150% of the normal rate and is limited to 72 hours per month.
• Employees who work on a rest day and who are paid by the hour or day are compensated as follows:
• Employees who work on a rest day and who are paid by the month are compensated as follows:
• Collective agreements may regulate the legal salary range.
• Employees who work on a holiday are entitled to three days’ wages.

As your employer of record in Malaysia, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.

Bonuses

Employers must pay employees an annual bonus if provided in the employment contract. Otherwise, there are no laws governing the payment of bonuses, and doing so is entirely at the discretion of the employer.

Probationary period

Probationary periods in Malaysia generally last between three and six months.

Termination and severance

Employment contracts must include how employment can be terminated by either the employer or the employee.

Notification periods are the same for employers and employees, whether it is specified in the employment contract or not. If it is not specified, notification is calculated as follows:

• Four weeks for employees with less than two years of service
• Six weeks for two to five years of service
• Eight weeks for five or more years of service

Employers may pay the employee full wages for the notice period in lieu of notice.

In the case of misconduct, employers can dismiss an employee without notice, demote the employee, suspend the employee for up to two weeks without pay or impose a lesser consequence. The employer must first engage in “due inquiry.” During the inquiry, the employer may suspend the employee for up to two weeks with at least half pay. If the inquiry finds no misconduct involved, the employer must pay the employee the wages withheld.

The Employment (Termination and Lay-Off Benefits) Regulations 1980 provide for severance pay as follows:

• Employees with at least one but less than two years of service: 10 days’ wages per year
• Two to five years of service: 15 days’ wages per year
• Five or more years of service: 20 days’ wages per year

For partial years of service, severance is determined on a prorated basis.

Severance is not required dismissal due to misconduct, retirement, or termination by the employee.

Employee benefits and paid leave in Malaysia

When negotiating terms of an employment contract with a candidate in Malaysia, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.

Maternity leave

Effective January 1, 2023, women are entitled to 98 consecutive days of maternity leave for each child.

If a doctor certifies that an employee is unable to perform her duties due to advanced pregnancy, an employer may require that she begin maternity leave up to 14 days before the due date. This also applies to a stillbirth if the pregnancy lasts at least 28 weeks.

To be eligible for paid leave, pregnant employees must meet the following requirements:

• Have worked for the employer at some time during the four months before the due date.
• Have worked for the employer for at least 90 days out of the nine months before the due date.
• Have four or fewer living children of any age.

Employees on maternity leave cannot be terminated. If an employee cannot return to work after leave ends due to medical reasons, they cannot be terminated until 90 days have passed and they are still unable to work.

Vacation

Employees are entitled to paid annual leave as follows:

• If employed by their present employer for less than two years: eight days’ leave for every 12 months of continuous service.
• If employed by their present employer between two and five years: 12 days’ leave for every 12 months of continuous service.
• If employed by their present employer for five years or more: 16 days’ leave for every 12 months of continuous service.
• If employed by their present employer less than 12 months: days are prorated based upon the number of months of employment.

Unless an employee is dismissed for misconduct, they are entitled to full pay for all accrued leave upon termination.

Leave may be carried over within 12 months after it is earned. An employee may voluntarily accept payment in lieu of leave.

Holidays

Malaysian law stipulates the following paid public holidays, depending on the state.

• Chinese New Year
• Birthday of the Prophet Muhammad
• Wesak Day
• Hari Raya Puasa Day (two days)
• Hari Raya Haji (two days in Kedah, Kelantan, Perlis, and Terengganu states, one day in all other states)
• Deepavali
• Labor Day
• Birthday of Yang di-pertuan Agong
• National Day
• Malaysia Day
• Christmas Day

States may require additional paid holidays as well.

If a public holiday falls on a rest day, the next working day is considered a paid holiday. If an employee is on sick leave or annual leave during a holiday, the employer must grant another day as a paid holiday.

Sick leave

Employees are entitled to the following amount of annual paid sick leave:

• For those employed less than two years: 14 days
• For those employed between two and five years: 18 days
• For those employed for five years or more: 22 days

If hospitalization is required, an employee is entitled to 60 days of annual paid sick leave per calendar year.

A medical practitioner must certify an illness.

Health coverage

Social security benefits—covering such things as retirement, disability, survivors’ benefits and medical payments—are provided under the Employees Provident Fund and the Social Security Organization. Participation is mandatory for employers and most employees throughout Malaysia, including part-time, temporary and probationary employees.

Additional benefits

In addition to healthcare benefits, employees in Malaysiaare entitled to pension, which is funded by government tax revenues, as well as workers compensation, which is covered through mandated employer insurance.

Employer social costs will cover a large portion of employee benefits in Malaysia, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance if needed.

Updated: February 09, 2024

Employee onboarding with an employer of record in Malaysia

We write and validate all local employment contracts, streamlining the onboarding process for you and your Malaysian employees—all you have to do is provide relevant information and review and approve the employment agreement. As your employer of record in Malaysia, we will:

• Schedule a welcome call to discuss HR and employment information for Malaysia, as well as answer any questions 
• Prepare a customized employment contract in English and in Malay (or other local language)
• Share the employment contract and benefits information with the new employee for signature and review
• Gather tax and banking information from the employee to set up payroll 
• Provide a local point of contact to the employee to answer any questions regarding their employment, local HR or payroll

The entire onboarding process for the employee is often completed in as little as two weeks.

Partner with Safeguard Global as your Malaysia employer of record and PEO

With over a decade of service, we are the longest-serving employer of record and PEO provider in the international market. Organizations around the world rely on EOR, our employer of record solution to expand and hire in over 170+ countries around the world, quickly and compliantly. 

We’ve seen just about every global employment circumstance imaginable—and with our extensive knowledge of local law and culture, we know what it takes to get employment right in Malaysia. We provide written contracts in the local language, salaries in the local currency and HR support in your employees’ time zone.

Additionally, as a global payroll provider, we support payroll administration—including payments, filings and other calculations— all around the world and can accommodate the payroll outsourcing needs of any size organization. 

Whether you’re looking to hire as part of a strategic expansion or to meet specific talent needs, our global solutions advisors can walk you through your international hiring options so you can make the right choice for your organization. Contact us today.

Disclaimer

The information provided on or through this website is for informational purposes only and does not constitute legal advice. Safeguard Global expressly disclaims any liability with respect to warranty or representation concerning the information contained herein, including the lost essence, interpretation, accuracy and/or completeness of the information in transit and language translation.