Employment in Malaysia
Employment in Malaysia

After gaining independence in 1957, Malaysia worked towards diversifying its economy and became the fourth largest economy of South-East Asia. With technology taking center stage in Malaysia, global tech giants have started to see the potential there and are investing substantially in the Malaysian market. 

It is undoubtedly a great time to expand your base in this Asian nation. So here’s everything one must know about the Malaysian employment laws and how to set up a subsidiary in Malaysia.

General Information

Currency: Malaysian Ringgit (MYR) 1 RM = 0.24 USD

Economic Capital: Kuala Lumpur

Spoken Language: Malay, English, Mandarin, Tamil

GDP: 4.7% growth rate (2018)

Time Zone: UTC (+8:00)

Entitlements

Minimum Wage: 1,200 ringgits (US$283) per month (Source: ASEAN Briefing)

Payroll Cycle: Monthly 

Pay Date: 7th of the following month

Working Hours: 45-48 hours per week, with a maximum of 8 working hours per day and six working days per week.

Overtime Compensation: Only EA employees are entitled by law to overtime pay. The amount must be equal to or more than 1.5 times the employee’s hourly pay.

Leaves

Public Holidays: Here is a list of national and regional holidays in Malaysia.

HolidayRegionCelebrated On
New Year’s Day All regions except Johor 1 January
Birthday of the Sultan of Negeri Sembilan Negeri Sembilan 14th January
Chinese New Year National Movable Date
Federal Territory Day Kuala Lumpur, Labuan & Putrajaya 1st February
Thaipusam Johor, Kuala Lumpur,Negeri Sembilan, Penang, Perak, Putrajaya &Selango Movable Date
Installation of Sultan Terengganu Terengganu 4th March
Israk and Mikraj Kedah, Negeri Sembilan, Perlis & Terengganu Movable Date
Birthday of Sultan of Joho Johor 23rd March
Good Friday Sabah & Sarawak Movable Date
Declaration of Malacca as a Historical City Malacca 15th April
Beginning of Ramadan Johor, Kedah & Melacca Movable Date
Birthday of the Sultan of Terengganu Terengganu 26th April
Labour Day National 1st May
Wesak Day National Movable Date
Nuzul Quran All regions except Johor Movable Date
Harvest Festival Labuan & Sabah 30th or 31st May
Hari Gawai Day (Dayak Festival) Sarawak 1st & 2nd June
Birthday of Agong National First Monday of June
Birthday of Sultan of Kedah Kedah Third Sunday of June
Georgetown Heritage Day Penang 7th July
Birthday of the Raja of Perlis Perlis 17th July
Sarawak Day Sarawak 22nd July
Birthday of the Sultan of Pahang Pahang 30th July
Hari Raya Haji National Movable Date
Awal Muharram National Movable Date
Merdeka Day National 31st August
Malaysia Day National 16th September
Hari Hol Almarhum Sultan Iskandar Johor Movable Date
Birthday of the Governor of Sabah Sabah First Saturday of October
Birthday of the Governor of Melaka Melaka Movable Date
Birthday of the Governor of Sarawak Sarawak Movable Date
Prophet Mohamad’s Birthday National Movable Date
Birthday of the Governor of Perak Perak First Friday of November
Birthday of the Governor of Kelantan Kelantan 11th November
Deepavali All regions except Sarawak Movable Date
Birthday of Sultan of Selangor Selangor 11th December
Christmas National 25th December

Annual Leaves: Full-time employees are entitled to 11 gazetted public holidays in one calendar year. Apart from that, employers usually follow the below tenure criteria to provide paid leaves:

Years of serviceNumber of leaves
<2 years of service 14 days
>2 but <5 years of service 18 days
>5 years of service 22 days

Sick Leaves: On provision of a medical certificate, employees are entitled to the following number of paid sick leaves: 

Years of serviceNumber of leaves
<2 years of service 8 days
>2 but <5 years of service 12 days
>5 years of service 16 days

Maternity Leave: 60 days to a full-time female employee if she has worked with the employer for at least four months. Of late, companies are granting 90 days of maternity leave. 

Paternity Leave: No statutory law dictates employers to provide paternity leave. The government sector usually provides 3 to 14 days off (paid or unpaid). 

Marriage Leave: 3 days for self

Adoption Leave: 1-2 days

Childcare: 1-5 days

Death: 3 days

Taxes

Personal Income Tax: For resident full-time, contract, or freelance employees, the net taxable income after the tax exemptions and tax reliefs is subjected to the progressive tax rate starting from 1-30% on income > RM 5,000. For non-resident employees, a flat tax rate of 30% applies to the total taxable income.

Income Tax Return (ITR): Employers must provide Form EA by the last day of February. The deadline for resident individuals to file their taxes is 30 April (for offline channels) and 15 May for e-Filing.

Corporate Income Tax (CIT): For both resident and non-resident companies, the current CIT rates are:

Company TypeChargeable Income (RM)CIT(%) for 2019 & 2020
Resident Company 24
Resident Company with: Paid up capital < RM 2.5 Mn and gross income < RM 50 Mn. Does not control, directly or indirectly, and is not controlled either by company with paid up capital of more than RM 2.5 Mn On the first RM 600,000 17%
In excess of RM 600,000 24%
Non - resident Company 24%

Service Tax: 6% on any taxable service provided by a registered business in Malaysia. 

Employee Statutory Benefits

Social Security Organisation (SOCSO): Divided into two schemes – Employment Injury Insurance Scheme (EIIS) and the Invalidity Pension Scheme (IPS). Employer and employee contribute RM 69.05 and RM19.75 towards EIIS and IPS, respectively. 

Employment Insurance System (EIS): It protects workers who have lost their employment. It helps individuals upskill and train to enhance their employability. Both the employer and employee make monthly contributions of 0.2% of the employee’s wage up to RM 7.90. EIS covers only Malaysian citizens and permanent residents.

Employee Voluntary Benefits

Bonus: At the employer’s discretion

Optional Voluntary Benefits: Payment for Long Service, allowances for housing and transport, medical insurance schemes, and retirement or pension schemes. 

Retirals

Retirement Age: 60 years minimum. Organizations have the liberty to decide any feasible number > 60 for their employees. 

Employees’ Provident Fund (EPF): Retirement saving scheme mandatory for all Malaysians and permanent residents employed in Malaysia. It is optional for expatriates and non-Malayasian residents. The contributions are as follows:

retire-scheme-contributions-in-malaysia

This scheme provides old-age, survival, and disability benefits. EPF members may withdraw funds at age 55. A voluntary social insurance system for low earners provides disability and work injury benefits.

Termination

Probation Period: Organisations usually follow a 3-6 months probationary period. 

Termination Procedure: Both the employee and the employer have the right to terminate the contract. It is recommended that both sides follow the prescribed protocol. An employee must lawfully resign, serving the minimum notice period as mentioned in the agreement. The employer cannot terminate the contract without “just cause and excuse,” which means only reasons such as poor performance, misconduct, or redundancy shall be accepted.

Notice Period: As mentioned in the contract

Separation Payment: Severance pay for employees terminated for reasons not connected to their conduct are as follows: 

  • 10 days wage for every year if employed up to 2 years
  • 15 days wage for every year if employed 2 to 5 years
  • 20 days wage for every year if employed for more than five years

Office Setup in Malaysia

Types of Business: Limited Liability Partnership (LLP), Private Limited Company (Sendirian Berhad), Public Limited Company (Berhad), Sole Proprietorship, Partnership.

Coworking Cost: Major coworking spaces are located in the Klang Valley. Low-cost coworking space like a hot desk costs around RM 400 per month. A fixed desk coworking space costs around RM 600 per month. Private offices are an excellent choice for teams for their flexibility in optimizing the workstations. They cost around RM 1000 per month.

Visa: For employers planning to set up business in Malaysia, a multiple entry visa is the most viable option. Foreign employees can get an employment pass with a maximum of 5 years validity. Organizations with vetted interests should note that employment passes are offered to foreign employees when qualifications brought in by them cannot be fulfilled by Malaysian citizens. 

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