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Compliantly hire and expand your business in Malaysia
When it comes to employing and managing employees in Malaysia, there are specific procedures and regulations that must be followed.
Malaysia is a country in Southeast Asia. The federal constitutional monarchy consists of 13 states and three federal territories, separated by the South China Sea into two regions: Peninsular Malaysia and Borneo’s East Malaysia. With a population of over 33 million, the country is the world’s 43rd-most populous country. Malaysia is tropical and is one of 17 megadiverse countries; it is home to numerous endemic species. Tanjung Piai in the Malaysian state of Johor is the southernmost point of continental Eurasia.
Kuala Lumpur
Capital
$13,913
GDP per Capita
$465.541 billion
Total GDP
33,200,000
Total Population
0.803
Human Development Index
UTC +8
Time Zone
Malay
Official Language
Malaysian Ringgit
Currency
330,803 km2 (127,724 mi2)
Land Area
Here's what you need to know
Employing workers in Malaysia involves complying with specific regulations and procedures. However, partnering with a local expert in employment and payroll can simplify the process and help ensure that you’re meeting all the necessary legal requirements while creating a favorable work environment for your employees.
Employment contracts are not mandatory in Malaysia, but highly recommended. They should clearly outline:
Job title, duties, and responsibilities
Salary and benefits
Working hours and overtime pay
Leave entitlements (annual leave, sick leave, etc.)
Termination terms (notice period, severance pay)
Confidentiality clauses (if applicable)
Minimum Wage
Malaysia has a national minimum wage, currently set at RM1,500 per month (variations apply depending on location for a period in 2022).
Payroll Terms
Salaries are typically paid monthly and must be within seven days of the end of the salary period. Employers are required to provide itemized payslips with details of gross pay, deductions, and net pay.
Taxes
Malaysia operates a progressive income tax system. Employees pay income tax based on their annual earnings, with rates ranging from 0% to 30%. Employers are required to withhold income tax at source and remit it to the government.
Statutory Deductions
Employers are required to make mandatory contributions to several social security schemes on behalf of employees:
Employees Provident Fund (EPF):
Employee contributes 11% (capped amount), Employer contributes 13% (capped amount).
Social Security Organisation (SOCSO):
Employer contributes 1.25% (capped amount).
Employment Insurance System (EIS) (optional):
Employer contributes 0.2% (capped amount).
Malaysia has standardized leave entitlements mandated by the Employment Act:
Annual Leave
Minimum of 8 days per year, increasing with service duration (up to 16 days).
Sick Leave
Up to 14 days per year, increasing with service duration (up to 60 days).
Maternity Leave
Up to 60 consecutive days of paid leave for female employees (first five children).
Paternity Leave
Not mandatory, but some employers offer 1-3 days of paid leave.
Public Holidays
11 paid public holidays per year.
Probationary Period
There's no mandatory probationary period in Malaysia. However, employment contracts often include one, typically lasting between 3 and 6 months. During this time, termination can be easier for both employer and employee.
Termination of Employment
Termination of employment should follow the terms outlined in the contract or the Employment Act. Notice periods vary depending on the employee's length of service and the reason for termination. Severance pay may also be required under certain circumstances.
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