Malaysia Employer of Record

Malaysia Employer of Record

COVID-19 status update

COVID-19 status update: As the situation in Malaysia continues to develop, Safeguard Global will be providing in-country intellect to our clients. As of today, we have not identified any disruption that will impact our ability to provide the service our clients expect. Learn more in our COVID-19 Resource Center.

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, Global Employment Outsourcing (GEO), 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.

Since employment in Malaysia is highly regulated, compliant employment contracts are an essential business need. As your employer of record and PEO in Malaysia, we can ensure that every contract, for every worker, meets all requirements. We can also provide you with guidance about cultural norms and hiring best practices and keep you up-to-date with employment regulations as they change.

Employment contracts in Malaysia

As you look to hire employees in Malaysia, here are some common 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 are limited to eight per day or 48 per week. An employment contract may allow an employee to work more than eight hours some days and less other days, up to a maximum of 12 hours per day and 48 hours per week.

After six consecutive hours of work, employees are entitled to a 45-minute rest period. 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:

  • The 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

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

  • Minimum wage is 1,200 ringgit per month or 5.77 ringgit per hour.
  • 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:
    • A full day’s pay for everything up to a half day’s work
    • Two days’ pay for everything between a half day and a full day
    • Double time for any hours above that
  • Employees who work on a rest day and who are paid by the month are compensated as follows:
    • A half day’s pay for everything up to a half day’s work
    • A full day’s pay for everything between a half day and a full day
    • Double time for any hours above that
  • Collective agreements may regulate the legal salary range.

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.

Unless an employment contract requires one, bonuses are given at the employer’s discretion.

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

In lieu of notice, employers may pay the employee full wages for the notice period.

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 that no misconduct was 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.

As your employer of record in Malaysia, we can work with you to quickly handle the unforeseen event of an employee termination, providing legal guidance and a personalized process that ensures you stay out of labor court.

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 
Pregnant employees are entitled to 60 consecutive days of paid maternity leave for each child, starting as early as 22 weeks and no later than the day after the birth.

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 still-birth 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.

Employees are entitled to paid annual leave as follows:

  • If employed by their present employer 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.

Malaysian law stipulates 12 or 13 paid public holidays, depending on the state. Kedah, Kelantan, Perlis and Terengganu give two days for Hari Raya Haji while other states give only one.

  • Chinese New Year
  • Birthday of the Prophet Muhammad
  • Wesak Day
  • Hari Raya Puasa Day (two days)
  • Hari Raya Haji
  • Deepavali
  • National Day
  • Birthday of Yang di-pertuan Agong
  • Labor 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.

Employees who work on a holiday are entitled to three days’ wages.

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.

A medical practitioner must certify an illness.

Health coverage
Tax-paying residents in Malaysia qualify for public healthcare that is funded by employers, residents and the government. Though public healthcare is inexpensive, wait times can be long, so some opt for private medical care and private health insurance. Employers often offer private health insurance as part of their benefits package.

Employers must enroll all foreign employees in the Foreign Worker Hospitalization Scheme.

As your employer of record in Malaysia, we may be able to provide optional supplementary medical insurance coverage for professionals and their dependents at a more cost-effective rate.

The retirement age for men and women is 60. Employers, as well as most employees, must pay into Malaysia’s social security program, which provides retirement and other benefits.

Contributions are as follows:

  • Up to age 54: the employer contributes 12% of an employee’s wages, and the employee contributes 11%
  • From 55 to 75: the employer contributes 6% and the employee contributes 5.5%

Additional contributions may be made voluntarily. Children and spouses also may contribute.

At age 75, participants are encouraged to make a full withdrawal. If a participant has not made a full withdrawal by 80, the remainder of the money is transferred to the Registrar of Unclaimed Monies.

Employers may also establish additional voluntary retirement plans.

Employers who hire foreign workers must also register them with the social security program.

Workers’ compensation
Malaysian employees are entitled to benefits for work-related injury or illness and non-work-related disability.

Contributions are made as follows:

  • Employees younger than 60: employer and employee both contribute
  • Employees older than 55 who first contributed at 50 or older: only employers contribute

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.

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 Malaysia 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 Global Employment Outsourcing (GEO) to expand and hire in over 179 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—in more than 150 countries 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.

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.

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