Hire in Malaysia

Here’s where you get started with human resources best practices and hiring in Malaysia.

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Last updated at June 16, 2022
beautiful scenery in the country of malaysia


Malaysian Ringgit (MYR)


Kuala Lumpur

Time Zone


Key Country Facts


Located near the equator, Malaysia’s climate is categorized as equatorial, being hot and humid throughout the year. The average rainfall is 250 centimeters (98 in) a year and the average temperature is 27 °C (80.6 °F). The climates of the Peninsula and the East differ, as the climate on the peninsula is directly affected by wind from the mainland, as opposed to the more maritime weather of the East. Malaysia is exposed to the El Niño effect, which reduces rainfall in the dry season. Climate change is likely to have a significant effect on Malaysia, increasing sea levels and rainfall, increasing flooding risks and leading to large droughts. Malaysia faces two monsoon winds seasons, the Southwest Monsoon from late May to September, and the Northeast Monsoon from October to March. The Northeast Monsoon, originating in China and the north Pacific, brings in more rainfall compared to the Southwest Monsoon, which originates from the deserts of Australia. March and October form transitions between the two monsoons


The culture of Malaysia draws on the varied cultures of the different people of Malaysia. The first people to live in the area were indigenous tribes that still remain; they were followed by the Malays, who moved there from mainland Asia in ancient times. Chinese and Indian cultural influences made their mark when trade began with those countries and increased with immigration to Malaysia. Other cultures that heavily influenced that of Malaysia include Persian, Arabic, British. The many different ethnicities that currently exist in Malaysia have their own unique and distinctive cultural identities, with some crossover.

Official Language

The official language of Malaysia is known as Bahasa Malaysia/ Malay language. Malay is spoken by most of the country and is taught extensively in the country’s public education system. Aside from Malay, English, Mandarin and Tamil is also very commonly spoken in Malaysia.

Malaysia HR at a Glance

Employment Law

Employment law in Malaysia is governed by the Employment Act (EA) 1955. The EA sets out certain minimum benefits that are afforded to applicable employees. However, the Act only applies to certain employees (mainly, those engaged in manual labor or those whose wages do not exceed MYR 2,000 a month). Other employees are governed by their respective employment contracts. Nevertheless, those earning from MYR 2,001 to 5,000 still basically covered by the Act, and those earning more than MYR 5,000 will be more dependent on the employment contract terms (which would normally be in excess of the basis provisions). There are also laws related to statutory contributions, i.e. EPF, SOSCO, IRB and EIS. The minimum wage is RM1,500 effective 1st May 2022.


Employment Contract

Contracts must be in writing and must include a provision for termination.

Non-EA employees will be governed by the terms of their employment contracts and subject to any other applicable statutory requirements (e.g. minimum retirement age, SOCSO and EPF, etc.). In other words, employers are mostly free to set any benefits for non-EA employees, on the assumption that those employees agree to those benefits by accepting and signing the employment agreement. That being said, most employers still use the EA benefits as a guideline or “bare minimum,” even for non-EA employees.

Contracts can be in any language, as preferred by the employer. However, they are generally in English, and courts can use an English version if there is a dispute.

Standards are similar to those that would apply in other jurisdictions and are adjusted for local requirements.

The minimum retirement age is 60 in Malaysia based on Retirement Act 2012.

Work Rules

Registration of work rules is not required. However, it is good to establish and implement work rules, policies, procedures, employee handbooks, etc. that are duly acknowledged by employees during the acceptance of an employment offer.

Probation Period/Trial Period

There is no legal requirement to put an employee on probation before they are hired, although this is recommended as a best practice. There is also no fixed minimum or maximum probationary period that needs to be imposed, although a probationary period in the range of 3-6 months is common. It is best business practice to utilize a three-month period for non-executive and non-management employees, and a six-month period for executive and management employees. The purpose of instituting a probationary period is to protect your company, in the event an employee covered by the EA brings a complaint of dismissal without justification or excuse. In recent years, the ability for employees to lodge a complaint of dismissal without justification or excuse has led to a series of case law on the legality of termination of employment. If the EA stated there is a probationary clause for the employee, then the confirmation letter / extension letter must be distributed.

  • Examples include termination for misconduct and termination for redundancy. However, courts will examine the genuine nature of redundancy dismissals and seriousness of misconduct (e.g. habitual neglect of duties, dishonesty, fraud) with a high degree of scrutiny. Hence, for best business practice, employers should properly document misconduct and be able to support dismissals prior to any termination decisions. The EA doesn’t distinguish between probationers and confirmed employees. However, case law does provide that there is no “automatic confirmation” as a probationer who has not received a confirmation letter is still a probationer, even though the probationary period has lapsed, and the employer continued to retain the employee.
  • A probationer enjoys the same rights as a confirmed employee. Therefore, a probationer’s service must not be terminated without justification or excuse. A probationer continues to be a probationer even at the expiration of the probationary period, if at the end of the period, his/her services had neither been terminated nor confirmed.

Severance Pay

Retrenchment benefit:

  • 10 days wages for employment less than two years
  • 15 days wages for employment more than two years but less than five years
  • 20 days wages for employment more than five years

The best practice is to follow the EA.


Standard working hours: Not exceeding eight hours in one day or 48 hours in one week. If an employee earns below MYR 2,000 per month, he/she will be eligible for overtime and follow provisions of the EA (Maximum 104 hours). If an employee earns more than MYR 2,000 per month, it depends on company policy for overtime per the contract. For EA employees, overtime should be paid according to when the overtime happened.

  • Normal working days: One-and-a-half times the hourly rate of pay
  • Rest days: If the duration does not exceed half the normal hours to work, the employee receives half day’s wages at the ordinary rate of pay; if the duration is more than half but does not exceed the normal hours of work, one day’s wages at the ordinary rate of pay. Two times the hourly rate of pay if exceed normal hours
  • Public holidays: Two times the hourly rate of pay for 1st 8 hours. Three times the hourly rate of pay after exceed 8 hours

Notice Period

According to the EA – Less than 2 years: 4 weeks; 2 to 5 years: 6 weeks; 5 years or more: 8 weeks. It is always better to give more than two months of advance notice.


  • Termination is generally very difficult
  • Terminating employees without valid reason may constitute unfair dismissal. Valid reasons for termination includes but are not limited to poor performance and misconduct. Employers can decide on the notice period required and have this agreed in the contract of employment. In case where the contract is silent on the length of notice period, the notice shall not be less than four weeks’ notice if employed less than two years, six weeks’ notice if employed more than two years but less than five years, eight weeks’ notice if employed more than five years
  • Court case due to unfair dismissal may lead to payment of 24 months of salary


  • Discretionary. Companies in Malaysia usually only pay discretionary performance bonuses
  • At least one month
  • Bonus payment depends on the company, usually after financial year end or during festive season

Directors or Officers (registered)

  • No special tax rules. There are resident versus non-resident rates
  • 30% of taxable income (for 2020) for non-resident rates. The tax calculations will be considered as resident if stay more than 182 days in Malaysia

Other Standard Items

  • Basic salary. Common job allowances, such as parking/petrol allowance, handphone allowance, etc.
  • Generally subject to income tax. Basic salary and fixed allowances are taxable

Statutory Costs

The following statutory benefit schemes apply in Malaysia to employers and employees, irrespective of whether they are an EA employee or a non-EA employee:

EMPLOYEES PROVIDENT FUND (EPF): EPF is a social security institution setup to provide retirement benefits to Malaysian workers. It still covers the pension funds, but now employees can withdraw their savings for specific purposes like house ownership and medical purposes. All employers and employees (except foreign workers) must contribute to EPF at the minimum rates of 12% to 13% (threshold is MYR 5,000 per month) by employers and 11% by employees of the monthly wages (applies to basic pay, fixed allowances and annual bonus).

Foreigners holding an Employment or Visit Pass and whose monthly salary exceeds MYR 2,500 are exempted from the compulsory contributions. All others contribute 11% of their monthly wage while the employer pays MYR 5 per person per month.

With effect from 1st Jan 2021 until 30th June 2022 (extended from 31st December 2021 after Budget 2022), the contribution for employee will be reduced from 11% to 9%. Employee can choose to remain at 11% by filling up the form KWSP 17A (Khas 2021).

SOCIAL SECURITY ORGANIZATION (SOCSO): SOCSO is a social insurance scheme that offers protection to employees who are Malaysian citizens and permanent residents. It covers industrial accidents, occupational diseases, accidents, invalidity or death. For employees who are less than 60 years of age (Category I), contributions payable by employers and employees are for the Employment Injury Scheme and Invalidity Scheme, where employer’s contribution is 1.75% and employee’s contribution is 0.50% of the employee’s monthly wage (capped at MYR 5,000).

All employees who have not reached the age of 60, must contribute under the First Category except for those who have attained 55 years of age and have no prior contributions before they reach 55 due to non-eligibility under the Employees’ Social Security Act, 1969.

For eligible new employees who are 55 years of age or 60 years old and above, they must be covered under the second category (Employment Injury Scheme only). PERKESO has also announced that effective from January 1st, 2019, employers in Malaysia who hire foreign workers with valid documents must register their employees under SOSCO and contribute to the Employment Injury Scheme (Second Category), where employer’s contribution is 1.25% and employee is 0%. The deduction amount is based on SOCSO’s contribution table.

EMPLOYMENT INSURANCE SYSTEM (EIS): SOCSO has implemented a compulsory EIS effective from Jan 2018. EIS is implemented as a platform to provide temporary financial assistance and job employment assistance to employees who lost their employment

** Requirements**

  • All employers are required to contribute for each staff (except for government sector, domestic helper and self-employment)
  • Employees from age 18 to 60 years old (except 1st time contributor with age 57 and above)
  • Applicable for local employees only

Monthly Contribution

  • Employers and employees will each have to contribute 0.2% based on the monthly wages
  • The contributions is capped at a salary level of MYR 4,000 a month, which means that although a person may earn more than MYR 4,000 a month, his/her contribution is fixed at 0.2% of MYR 4,000
  • Employers must contribute within the stipulated period, which is on or before the 15th of the month following the wage month
  • Employers must be registered at the respective statutory offices

Human Resources Development Fund (HRDF): This is a mandatory levy payment collected by the HRDF from employers from all industries. It is for employee training and skills upgrading of the Malaysian workforce.

It is mandatory for companies with 10 or more local employees to contribute and the contribution rate is 1% of the monthly wages of each of their Malaysian employees. For companies with 5-9 local employees, it is optional and the contribution rate is 0.5%.

Social Security System Monthly Salary Cap (MYR) Employer Contribution Employee Contribution
Employment Provident Fund (EPF) – Local only No Cap For salary <RM5,000: 13.0% For salary >RM5,001: 12.0% 11.0% or 9.0% (w.e.f. Jan 2021)
Social Security Organization (SOSCO) 5,000 1.75% 0.50%
Employment Insurance System (EIS) 4,000 0.20% 0.20%

*The above rates serve as a broad guideline. Actual rates charged will differ.

Typical Non-statutory Benefits for MNC

  • Companies should at least cover the GP consultation fees under company’s medical benefit
  • Depending on industries, companies may provide accident or life insurance to employees
  • Housing allowance, transport allowance, children school fee, return flight ticket are available for expats

Tax and Social Security


Monthly Tax Deduction (MTD) is a tax collection scheme whereby it is obligatory for each employer to deduct from the salary of each employee following a schedule as determined by the Income Tax authorities for payment of income tax of the employees. The tax deduction is for the income derived in the current year.

  • Income Tax for Resident Individuals: Individuals will be entitled to tax scale rates from 0% to 30% with personal reliefs, subject to physical presence in the country exceeding 182 days.
  • Income Tax for Non-Resident Individuals: Individuals will be taxed at a flat 30% (less than 182 days in a year).

How MTD works is that the estimated monthly tax payable amount is deducted from salary. Employers will pay this amount to Inland Revenue Board (IRB) (a.k.a Lembaga Hasil Dalam Negeri (LHDN)) by the 15th of the following month.

Annual calculation

Taxable Income (MYR) Tax Rate (%)
0-5,000 0
5,001-20,000 1.0
20,001-35,000 3.0
35,001-50,000 8.0
50,001-70,000 13.0
70,001-100,000 21.0
100,001-250,000 24.0
250,001-400,000 24.5
400,001-600,000 25.0
600,001-1,000,000 26.0
1,000,001-2,000,000 28.0
>2,000,000 30.0

Payment of tax is deducted through MTD.

Annual calculation and filings depend on individual earnings and dependents.


Salary Payment

  • In Malaysia, salary is paid once a month, usually any time between the 25th to the end of month and shall not be paid later than the next pay cycle. One is to be paid within 7 days after the last day of any wage period (usually a month)
  • Payment method: Usually by inter-bank Giro directly to the employees’ bank accounts or bank in by cheque
  • Payment is for current month. Arrears for special case(s), e.g. new joiners who missed payroll cut-off
  • The wages must be paid by end of the day on employee’s officially last day (Termination)


Usually online or in PDF, but some companies may still give out carbon-sealed payslips.

Required information includes but is not limited to the below:

  • Company name and address,
  • Month of payslip,
  • Staff personal information, i.e. name, employment ID, position/designation, department, date of join, statutory membership number(s),
  • Monthly earnings, allowances, deductions,
  • Year-to-date earnings, deductions and net pay,
  • Monthly employer’s statutory contribution(s),
  • YTD employer’s statutory contribution(s), and
  • Disbursement details, i.e. employees’ bank account information.


  • Depends on the company
  • Scope: Aspects of effort required to deliver work depends on the staff’s grade level

Holiday Allowance

Receive overtime payment for EA employees or depends on agreed contractual terms (or could be replacement time off). The common rate for OT during public holiday is triple the normal rate

Annual Leave

According to Section 60E of the Employment Act 1955, depends on length of service:

  • Less than two years: 8 days per 12 calendar months;
  • More than two years but less than five years: 12 days per 12 calendar months;
  • More than five years: 16 days per 12 calendar months
  • Note: Company can provide more than the above provision by Law.

Annual leave can be pro-rated if an employee has worked less than a full year in that calendar year

Some companies practice pro-rated or earned leave by quarterly basis.

Approval from immediate superior before utilization is required.

Carry-over rule for unused leave: Depends on company policy – some do not allow carry forward; some do but must be utilized within a specified period otherwise will be fortified.

Employers are required to pay out unused leave only in the case of termination/resignation.

Sick Leave

If hospitalization is not required:

  • Length of service of less than 2 years: 14 days
  • More than 2 years but less than 5 years: 18 days
  • More than 5 years: 22 days

When hospitalization is required, EA employees are entitled to 60 days of hospitalization leave per year, provided that the number of sick leave and hospitalization leave per year shall not exceed 60 days in total.

Medical certificate is required for all occasions related to sick/medical leave.

Maternity & Child Care Leave

  • All female employees, including non-EA employees, are entitled to 60 consecutive days of paid maternity leave (employer bears the cost) for birth of up to 5 surviving children.
  • Paternity leave: No statutory requirement, depends on company policy.
  • Maternity leave is granted upon the birth or from the 22nd week of pregnancy (in case of premature birth).

Other Statutory Leave

The following leave may be given at the discretion of the employer:

  • Marriage leave
  • Compassionate leave
  • Examination leave

Trade Unions

Usually relevant to Manufacturing and Banks. No general requirements

Salary Payment

Salary should be paid monthly. It is important to note the Federal Constitution also specifically prohibits salary reduction, except where this is agreed by way of collective bargaining agreement.


A payslip must be provided to the employee by the time of salary payment. The payslip must include details of the pay period, the gross salary for that period, the relevant deductions and the net salary.

Annual Leave

After a qualifying period of 12 months employees are entitled to 30 calendar-days of paid vacation. This should be taken within the subsequent period of 12 months, and at times that are most convenient to the employer. The vacation period may be split provided that the employee agrees. The vacation period can be taken in up to three periods, one of which cannot be less than 14 days and the others cannot be less than 5 days each. Additionally, the employee may trade up to 10 days of their vacation period for the equivalent salary compensation. The vacation remuneration corresponds to the monthly salary plus 1/3 of the employee’s monthly salary as vacation bonus.

Carry over rules

If the vacation it is not taken within the year, employers must pay double salary for the vacation period, as well as allowing the employee to carry over the right to take the vacation to the next year.

Sick Leave

In the event of sickness leave, and with the presentation of an appropriate medical certificate, the employer will be responsible for the employee’s salary during the first fifteen days. After the fifteenth day of absence due to sickness, the Social Security Agency (INSS) will pay a sick leave benefit to the employee. This benefit does not substitute the actual salary but is based on INSS calculations of the last contributions and is capped at approximately BRL 6,100.00. The INSS supported leave will last for the time necessary for the employee to make a full recovery from their sickness without any legal limitation.

During medical leave, the employment contract is suspended and may not be terminated.

Leave of absence

According to the Labour Code, an employee may be absent from work, without any prejudice to his or her salary, in the following situations:

  • marriage: three consecutive days;
  • certified voluntary blood donation: one day each 12-month period;
  • electoral enlistment: up to two days, consecutive or not;
  • military or any other public service: for the necessary period (the employer must continue paying salaries during the first 90 days);
  • university admission tests: on the dates of the exams;
  • participation in court proceedings: for the necessary period required by the authorities;
  • union officers: for the necessary period to meet the duties related to the mandate;
  • accompanying a spouse or partner to medical appointments and follow-up examinations during their pregnancy: two days;
  • accompanying a child of up to six years to a medical consultation: one day per year;
  • certified cancer preventive exams: three days each 12-month period;
  • legal abortion: two weeks;

Collective bargaining agreements may also provide other types of paid leave that must be observed by the company.

Compassionate & Bereavement Leave

Two consecutive days paid leave for death of a spouse, ascendant, descendant, sibling or person who, declared in his or her labour booklet, lives under his or her economic dependence.

Maternity & Parental Leave

All female employees are eligible for maternity benefits. The maternity benefit is subsidised by the INSS to the employee for a period of 120 days. This period may commence up to 28 days before the due birth date. The employer is responsible to pay this benefit, they can then deduct the relevant amount from the social security contributions due to the INSS.

Male employees are entitled to 5 days of paid paternity leave.

Under certain circumstances the maternity leave may be extended to 180 days and the paternity leave to 20 days, provided some requirements established by the government program are observed.

Parents adopting are also entitled to the same 120 days for female employees and five days for male employees.

Public Holidays

Employees are entitled to paid leave from work on public holidays. Local (Municipal or State) holidays may also apply, depending on where the company is based. If the employer demands the employee to work on a holiday, the remuneration paid with respect to the worked holiday must be at least double the regular compensation. Applicable collective bargaining agreements may establish a higher rate for the holiday remuneration.

Benefits to the Employee in Malaysia

Statutory Benefits

The social security authority provides the following insurances to workers who have contributed to the system, individual allowances will depend on the number of contributions made and, on the amounts, involved in each contribution. The main insurances provided by the social security authority are: 1) retirement allowance; 2) accident/illness allowance; 3) disability allowance; and 4) maternity allowance.

Other Benefits

Typically, employees in senior roles are offered supplementary benefit packages, which typically may include:

  • Supplementary Private pension programs
  • Employers are not required to offer private healthcare to their employees, but it is very common
  • Collective bargaining agreements may establish additional benefits to employees and, therefore, employers must comply with the conditions set forth and grant such benefits to its employees
  • Meal vouchers
  • Transportation

Visas and Foreign Workers


Work permits last between six months and five years, depending on the duration of the work contract and the type of visa. Applications for Malaysian work permits are done within Malaysia.

The Malaysian government issues three different types of work permits:

  • Professional Visit Pass is issued to foreigners employed by an overseas company but working with a company in Malaysia. This pass is appropriate for technical experts and trainees, as well as volunteers. The Professional Visit Pass is valid for short periods of around six months to a year.
  • Temporary Employment Pass is for unskilled or semi-skilled workers in the manufacturing, agriculture, construction and services fields, with a salary of less than MYR 5,000. The pass is valid for two years, with extensions available on a yearly basis. Before the work permit can be issued, quota approval needs to be granted from the Local Centre of Approval, Ministry of Foreign Affairs.
  • Employment Pass applies to those wanting to work in Malaysia and having specific skills, generally in technical or managerial positions. It is usually issued for a minimum period of two years. Before the Employment Pass can be issued, the employment of the foreign worker must be approved by the Expatriate Committee or the relevant regulatory agency.

Currently, there are restrictions on the number of foreign workers a Malaysian company can employ. To hire foreign workers, company will have to prove to the government that the potential employees and their positions are of vital importance and that the job cannot be filled by a local. The approval of the employment will be granted by different regulatory agencies in conjunction with the Immigration Department, depending on the industry and nature of work the foreigner will be undertaking. Once the approval for the appointment has been granted, the company can then begin the application process for the work permit on behalf of the expat.

Foreigners and expatriates who wish to work in Malaysia are required to possess permitted passes from the Immigration Department of Malaysia with a minimum salary of MYR 5,000 and with at least a two-year employment contract. Entry into Malaysia is in accordance with the Immigration Act 1959/63, Passport Act 1966, and Immigration Regulations 1963.

Average application timeframe is usually 2-3 months, but it could be shorter or longer, depending on completeness of the required documents.

Public Holidays in 2022

S.No Occasion Date
1 New Year’s Day January 1st
2 Thaipusam January 18th
3 Federal Territory Day February 1st
4 Chinese New Year February 1st – 3rd
6 Nuzul Al-Quran April 19th
7 Labour Day* May 1st
8 Hari Raya Puasa May 3rd – 4th
9 Vesak Day* May 15th
10 Agong’s Birthday June 6th
11 Hari Raya Haji* July 10th
12 Awal Muharram July 30th
13 Merdeka Day August 31st
14 Malaysia Day September 16th
15 Prophet Muhammad’s Birth* October 9th
16 Deepavali October 24th
17 Christmas Day* December 25th
* If a public holiday that falls on a rest day (typically Sunday) or another public holiday, the next working day shall be a holiday in substitution.