Engage In Malaysia

Table of Contents

About Malaysia

Capital City

Kuala Lumpur

Population

As of March 2024, the estimated population of Malaysia is 34,308,525.

Currency

The currency in Malaysia is the Malaysian Ringgit (MYR). The currency symbol is RM.

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Overview

Malaysia, located in Southeast Asia, is a captivating country with a rich cultural heritage and diverse landscapes. Comprising two regions separated by the South China Sea – Peninsular Malaysia and East Malaysia – this federation of 13 states and three federal territories offers a blend of modernity and tradition. Kuala Lumpur, the bustling capital city, is renowned for its iconic skyscrapers, such as the Petronas Twin Towers, and vibrant street markets. Malaysia’s natural beauty is equally enchanting, with lush rainforests, pristine beaches, and stunning islands like Langkawi and Borneo. The country is a melting pot of cultures, with Malay, Chinese, and Indian influences evident in its cuisine, architecture, and festivals. Malaysia is also known for its warm hospitality and a harmonious balance between modern development and preservation of its cultural heritage. With a diverse mix of people, landscapes, and experiences, Malaysia offers an unforgettable journey for travelers seeking adventure, relaxation, and cultural imme

Employment Relationship

Permanent Employment

In Malaysia, the Employment Act defines employees with contracts for an unspecified duration as permanent employees. There are no special provisions further highlighting the definition of permanent employment.

Fixed-Term or Specific-Purpose Contracts

In Malaysia, there is no documented limit to the maximum duration (including renewals) of fixed-term contracts. A contract may be made for a specific period of time or for a specific piece of work. When the specified period of time expires, or the specific piece of work is completed, the contract is considered terminated. Fixed-term contracts with a duration exceeding 1 month must be made in writing.

Temporary Employment Contratcs

The Employment Act of Malaysia does not specify conditions uniquely applicable to temporary employees. However, temporary employee contractors must follow certain requirements when assigning employees to work for third-party employers.

Probationary Period

The labor code of Malaysia offers no provisions for a probationary period. Common practice suggests the average probationary period of 6 months.

Working Hours

Effective January 1, 2023, working hours are 45 hours per week. A full working day is 8 hours but an employer may require an employee to work up to 10 hours depending on business needs. An employer and employee may agree in the employment contract that the employer can require the employee to work in excess of 45 hours per week, but in no case may the average work hours exceed 45 in a 3-week period.  An employee may apply for a flexible working arrangement to vary the hours of work, days of work, or place of work concerning their employment. In cases where there are applicable collective agreements, any application made by the employee must be consistent with the terms and conditions in the collective agreement.

Holidays / PTO

Statutory Holidays

The National Day (August 31), the birthday of the Yang di-Pertuan Agong (date may vary), the birthday of the ruler of the state in which the employee primarily works, or the Federal Territory Day, as the case may be (date may vary), Worker’s Day (May 1), Polling Day (May 9).

The employee is entitled to six additional paid holidays, at the choice of the employer.

Paid Annual Leave

In Malaysia, an employee is entitled to paid annual leave based on the length of service with their employer: After 12 months of continuous service with the same employer, employees are entitled to 8 days of paid annual leave for the first 2 years of their employment 12 days of leave for 2 to 5 years of service with the same employer 16 days of leave for over 5 years of working for the same employer. Annual leave days are paid at the employee’s ordinary wage rate and can be carried over to the next year.  Annual leave entitlement may be canceled in cases where an employee misses work without the permission of the employer, and without reasonable excuse, for more than 10% of working days during the 12 months of the continuous service cycle.

Sick Leave

To claim paid sick leave, an employee must be examined by a registered medical practitioner (chosen by the employer, and at the employer's expense), who determines whether sick leave may be granted. The duration of paid sick leave depends on the length of employment with the current employer: 14 days in total per calendar year for less than 2 years of employment 18 days in total per calendar year for 2 to 5 years of employment 22 days in total per calendar year for over 5 years of employment 60 days per year in case of hospitalization, irrespective of the duration of employment Sick leave is paid at the employee's ordinary wage rate. Effective January 1, 2023, hospitalization leave will be a separate leave from sick leave to provide additional protection for workers. Further details will be released pending published changes to the Employment Act approved earlier this year.

Maternity Leave

Beginning January 1, 2023, female employees in Malaysia are entitled to 98 days of maternity leave. Passed in March 2022, Act 265 increases the length of maternity leave. Additional protections are in place for pregnant employees by prohibiting companies from terminating employees who are pregnant or have pregnancy-related illnesses.  An employee is entitled to a maternity allowance if she has been employed at any time in the 4 months leading up to her confinement, and for a total of at least 98 days in the nine months before confinement. An employee is not eligible for a maternity allowance if, at the time of confinement, she has 5 or more living biological children. The maternity allowance is equal to the daily wages of the employee. The employer pays the total cost of the maternity allowance. Maternity leave can begin no earlier than 30 days before confinement, and no later than one day after confinement.

Paternity Leave

Effective January 1, 2023, employees who are married are entitled to 7 days of paid paternity leave. The employee must have been employed by the same employer for at least 12 months immediately before paternity leave starts. The employee is responsible for notifying his employer of his spouse's pregnancy at least 30 days from the expected confinement or as early as possible after the birth. 

Termination of Employment

Notice Period

Per Malaysian labor law, the required notice period must be included in any written contract of employment and must be the same for both the employer and the employee. The minimum statutory length of the notice period must be as follows: 4 weeks if the employee has been employed for less than 2 years 6 weeks if the employee has been employed for 2 years or more, but less than 5 8 weeks if the employee has been so employed for 5 years or more. A notice period is not required for termination of an employment contract in the event of any willful breach of a condition of the contract by the other party or in the event of gross misconduct by the employee.

Severance Benefits

Malaysian labor law states that employees who are covered under the Employment Act (EA) are entitled to severance benefits if they have been employed for at least 12 months before their dismissal. Covered employees dismissed due to gross misconduct, as well as employees who are rehired within 7 days of dismissal by the same employer, are not eligible to receive severance benefits. Employees are entitled to severance pay on the following scale, according to the duration of their employment: Between 1 and 2 years – 10 days’ wages for every year of employment Between 2 and 5 years – 15 days’ wages for every year of employment Over 5 years – 20 days’ wages for every year of employment

Social Security

Pension

All employers are required to register with the Employees Provident Fund’s Board. Contributions are made by both employers and employees, at rates tied directly to the wages paid per month, for any amount over MYR 10 (Malaysian ringgits). In 2020, the Malaysian government increased the scope of EPF coverage. All employees hired on a contractual basis are now eligible for EPF. The government has also increased the scope of the Self-Employment Social Security Scheme. Now persons employed in the fishing and farming industries are also eligible to receive social security compensation. There is no fixed retirement age for employees. They may choose to retire at the age of 55 years or continue to work until they are 100.  Members of the Fund can begin withdrawing from their pension funds upon attaining the age of 55 in the form of a lump sum or annuity. Employees who continue to contribute after they turn 55 can withdraw funds they contributed after 55 years only when they attain the age of 60 years.

Dependents/Survivors Benefit

In Malaysia, a member of the Employees Provident Fund may nominate another person to be the recipient of any outstanding credit in the event of the employee’s death or incapacitation. Social Security Fund pays survivors pension if the deceased was under 60 years of age and had made monthly insurance contributions for at least 24 out of the 40 months preceding their death or was in receipt of an invalidity pension. Payments are made to the widow or widower for life, and each child until the child either marries or turns 21, whichever occurs earlier. The dependents are entitled to receive a pension at the rate of 50% of their average assumed monthly wage, increased by 1% for every 12 months’ contributions that are paid in excess of the first 24 months, limited to a maximum of 65%. Contributions to the scheme are paid by both employees and employers.

Invalidity Benefit

Employees under 60 years old who are incapable of engaging in any substantially gainful activity due to a morbid condition of permanent nature are eligible for pension if they have paid at least 24 monthly contributions during the 40 months prior to the onset of disability. The pension is paid as 50% of the average monthly wage of the employee in the last 24 months, increased by 1% for every year of contributions after the first 24 months, limited to a maximum of 65%. For temporary disability due to work accidents or diseases, benefits are paid after four days as an amount equivalent to 80% of the average daily wage. For permanent disability, 90% of the average salary is paid as a pension. Contributions to the scheme are paid by both employees and employers.

Taxation of Compensation and Benefits

Personal Income Tax

In Malaysia, the year of tax assessment runs from January 1 through December 31. Tax rates for residents are income-based and vary between 0% and 30% of the taxable income. Non-residents are liable to pay tax with a rate that depends on the type of income, ranging from 10% to 30%.

Immigration

Types of Visas

The Government of Malaysia issues the following types of visas: Single entry visa – issued for social or business purposes and valid for 3 months. Multiple entry visa – valid for a period of 3 to 12 months for business or inter-governmental affairs Transit visa – issued to foreign citizens who need a visa for a temporary stopover in Malaysia before continuing their flight to another country

Work Permit

Malaysia recognizes 2 categories of non-citizen employees: expatriates and foreign workers. Generally, expatriates are skilled workers, and foreign workers are unskilled laborers. All non-citizens who wish to work in Malaysia must apply for an employment pass, which must be issued before employment commences. The pass is valid for up to 5 years and may be extended or renewed. In order to hire foreign nationals, the employer must inform the government of the details of employment. Applications are submitted to the Expatriate Committee.

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