Global PEO Services (GPS) helps companies hire employees in Malaysia without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Malaysia, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Malaysia labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Malaysia. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Malaysia - Country 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.
Johor Bahru, George Town of Penang, Ipoh
Employment Contracts in Malaysia
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.
Working Hours in Malaysia
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. This is acceptable, provided that the 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 that continual attendance is required, employees must be given a 45-minute rest period after working continuously for 6 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.
Employee Leave in Malaysia
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)
- Aug. 31: National Day
- June 1: Birthday of Yang di-pertuan Agong
- May 1: Labor Day
- Sept. 16: Malaysia Day
- Dec. 25: Christmas Day
Employees get paid annual leave if they are:
- with the current employer for less than 2 years: 8 days’ annual leave for every 12 months
- with the current employer for 2 to 5 years: 12 days’ annual leave for every 12 months, and
- with the current employer for 5 years or more: 16 days’ 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.
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 may require pregnant employees to commence maternity leave up to 14 days before the due date if a doctor certifies that they will not be able to perform their duties satisfactorily. These provisions apply to a still-birth also if the pregnancy lasts a minimum of 28 weeks.
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.
Employee Benefits in Malaysia
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.
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.
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.
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.