Malaysia

Overview

Malaysia has emerged as an industrialized economy, and the country is poised to become the world’s 21st largest economy by 2050 with a GDP of $1.2 trillion. High labor productivity, knowledge-based industries, and integration of cutting-edge technology have made Malaysia one of the most competitive economies in the world. It is a leading exporter of electronic parts, electrical appliances, and natural gas. Malaysia’s economic outlook is favorable, leveraged by a stable labor market and continued economic growth.

Currency: Malaysian Ringgit

Principal language: Malay

Government: Representative Democracy

Capital City: Kuala Lumpur

Major Cities: Johor Bahru, George Town of Penang, Ipoh

Employment Contracts

Fixed-term employment contracts for more than 1 month must be in writing and include the ways in which either party can terminate the contract. The Employment Act doesn’t contain provisions regarding terms and conditions that need to be included in an indefinite term contract, but it also states that a contract can’t restrict the employees’ right to organize, join, or participate in trade unions.

Work/Time Regulations

Regular work schedule should not exceed 8 hours per day or 48 hours per week. An employment contract can have provisions for a work schedule that requires employees to work for more than 8 hours some days and less other days, provided that work schedule doesn’t exceed 12 hour day and 48 hours per week. Employees must get a 30-minute rest period after 5 hours of consecutive work. In the case continual attendance is required, employees must be given a 45-minute rest period after working continuously for 8 hours.

Under the Work Regulation or Part-time Workers 2010, employers are required to give part-time employees benefits provided to full-time employees including annual leave, medical leave, overtime pay, and off on public holidays. Employees who work between 30 and 70% of full-time work hours are classified as part-time employees. Those who fall below 30% are considered casual employees and not covered by this regulation while those who work for more than 70% are considered full-time employees.

Leave

Holidays
The Malaysian law has the following paid public holidays:

  • Chinese New Year
  • Birthday of the Prophet Muhammad
  • Wesak Day
  • Hari Raya Puasa Day (2 days)
  • Hari Raya Haji (2 days in Kedah, Kelantan, Perlis and Terengganu states, 1 day in all other states)
  • Deepavali
  • Aug. 31: National Day
  • June 1: Birthday of Yang di-pertuan Agong
  • May 1: Labor Day
  • Sept. 16: Malaysia Day
  • Dec. 25: Christmas Day

Annual Leave
Employees get paid annual leave if they are:

  • with the current employer for less than 2 years: 8 days' of annual leave for every 12 months
  • with the current employer for 2 to 5 years: 12 days' of annual leave for every 12 months, and
  • with the current employer for 5 years or more: 16 days' of annual leave for every 12 months.

Annual leave may be accumulated and carried over to the next year after it is earned. An employee may voluntarily accept payment in lieu of leave. If leaves are carried over, the vacation must be approved and taken within the first 3 months of the subsequent calendar year.

Maternity Leave
Women employees, under the Employment Act, are entitled to 60 days of paid maternity leave for every child, beginning not earlier than 22 weeks before the expected date of delivery and not later than the day after the childbirth. Employers can require pregnant employees to commence maternity leave up to 14 days before the due date if a doctor certifies that they won’t be able to perform their duties satisfactorily. These provisions apply to a still-birth also if the pregnancy lasts a minimum of 28 weeks.

Sick Leave
Employees are entitled to the following paid sick leaves in total each year if no hospitalization is required:

  • 14 days for less than 2 years of employment
  • 18 days for 2 to 5 years of employment
  • 22 days for 5 or more years of employment

Employees are entitled to 60 days of paid sick leave every year if hospitalization is necessary. A medical practitioner should certify an illness.

Benefits

Social security benefits such as disability, retirement, medical payments, and survivors’ benefits are provided by the Social Security Organization and the Employees Provident Fund. It is mandatory for all employers and employees including temporary, part-time, and probationary employees to participate in these social security programs. Foreign workers, domestic workers, and sole proprietors are not required to participate but can make voluntary contributions to the fund.

Until an employee reaches the age of 54, employers are required to contribute an amount equal to 12% of employees’ wages, and employees must contribute 11%. For employees aged between 55 and 75 years, employers contribute 6% while employees contribute 5.5%. Employees working until the age of 75 can also contribute regardless of whether they have made a partial or full withdrawal from their account.

Retirement Benefits
The normal retirement age is 60. Employees who have reached the age of 75 are encouraged to fully withdraw from their account. If a full withdrawal is not made by 80, the remaining funds are transferred to the Registrar of Unclaimed Monies.

Disability Benefits
Employees with a medical certificate specifying their inability to work, due to a mental or physical incapacitation, can withdraw the full savings from the Provident Fund.

Survivors' Benefits
Employees can nominate 1 or more individuals as their beneficiaries in the case of their death. Beneficiaries aged 18 or more can withdraw the full amount they are entitled to. Guardians of beneficiaries aged less than 18 can apply for making a withdrawal, but the amount must be used for the benefit of the beneficiaries. Or else, beneficiaries are required to wait until they turn 18 to withdraw the funds.

How GPS can Help

With our Global PEO/Employer of Record services, companies can expand into Malaysia and hire their employees without having to establish a branch office or subsidiary in Malaysia.

  • Your candidate is hired via our Malaysia PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
  • Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Malaysia laws.
  • Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
  • With no contractor risks, pass on the compliance burden to Global PEO Services.

Spin Off/M&A Support

  • Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.

24/7 Support in 100+ Countries

  • Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
  • We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.

Easy Visibility into Your Employee Time & Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management and benefits enrollment and managements. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcounts.

Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Lean more about our end-to-end international expansion services.