Guide to employment, payroll and benefits in

Malaysia

Rivermate offers complete payroll, benefits and compliance services for

Malaysia

01. Overview

Last updated: 

August 19, 2021

Currency
Malaysian Ringgit
Capital
Kuala Lumpur
Ease of doing business
81.5
Language
Malay
Population
32365999
GDP growth
5.90%

02. Grow your team in

Malaysia

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Malaysia

, particularly if you don't have established local relationships. You can hire employees in

Malaysia

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Malaysia is a Southeast Asian republic. The federal constitutional monarchy is made up of thirteen states and three federal territories that are divided into Peninsular Malaysia and Borneo's East Malaysia by the South China Sea. Peninsular Malaysia borders Thailand on land and sea, as well as Singapore, Vietnam, and Indonesia on the sea. East Malaysia is bordered on the land and sea by Brunei and Indonesia, as well as a maritime boundary with the Philippines and Vietnam. The national capital and largest city is Kuala Lumpur, while the federal government's seat is Putrajaya. Malaysia is the world's 43rd most populous nation, with a population of over 32 million people. Tanjung Piai is the southernmost point of continental Eurasia. Malaysia is one of 17 megadiverse countries in the tropics, home to a host of endangered species. Malaysia has its roots in the Malay kingdoms, which were part of the British Empire in the 18th century, along with the protectorate of the British Straits Settlements. In 1946, Peninsular Malaysia was united as the Malayan Union. In 1948, Malaya was restructured as the Federation of Malaya, and on August 31, 1957, it gained independence. On September 16, 1963, Malaya, North Borneo, Sarawak, and Singapore merged to form Malaysia. Singapore was expelled from the union in 1965. The country is multi-ethnic and multi-cultural, which has an effect on politics. The Malay ethnic group makes up about half of the population, with minorities of Chinese, Indians, and indigenous peoples. Malaysian, a standard version of Malay, is the country's official language. English is still used as a second language. While the constitution recognizes Islam as the country's official religion, it also grants non-Muslims religious freedom. The legal system is based on common law and the government is modeled after the Westminster parliamentary system. Every five years, an elected monarch is chosen from among the nine state sultans to serve as the country's head of state. The Prime Minister is in charge of the government. Malaysia's GDP rose at an annual rate of 6.5% for nearly 50 years after independence. The economy has historically been fueled by natural resources, but science, tourism, trade, and medical tourism are all growing. Malaysia has a newly industrialized market economy, which is the third-largest in Southeast Asia and the world's 33rd-largest. It is a founding member of ASEAN, EAS, and the Organization of Islamic Cooperation, as well as APEC, the Commonwealth, and the Non-Aligned Movement.

04. Public holidays

05. Types of leave

Paid time off

Up to two years of employment: 8 days per yearBetween 2 to 5 years: 12 days per year5+ years: 16 days per year

Public holidays

There are six mandatory public holidays and ten optional public holidays in the Malaysia (employer should choose at least 5 of these but it is common for offices to close on all). State day is a federally mandated public holiday that differs by state. All other holidays are observed on a national level.

Sick days

Up to two years of employment: 14 days per yearBetween 2 to 5 years: 18 days per year5+ years: 22 days per year

Maternity leave

If a female employee has been employed in the past four months and has worked for the same company for at least 90 days in the nine months previous to childbirth, she is covered in full by the employer for at least 90 days.

Paternity leave

In the commercial sector, there are no provisions for paternity leave; however, in the public sector, dads are entitled to 7-14 days.

Parental leave

Parental leave is not specifically indicated in Malaysian labor laws.

Other leave

06. Employment termination

Termination process

Employees may be terminated for misconduct or poor performance on the job. Termination may be challenged by an employee as an unfair discharge. It is advised that adequate protocol (notice, time, and guidance to improve performance) be followed to minimize the possibility of an unfair dismissal claim.

Notice period

There is no set amount, but it should be fair to both employee and employer.

Severance pay

The following are the minimum termination benefits available to employees who are terminated for reasons unrelated to misconduct. For the first two years of employment, severance pay is equal to the total compensation received for ten days of service per year. Severance pay is calculated on the basis of the total pay received during the first two to five years of employment. Severance pay is calculated on the basis of the total pay received from 20 days of service per year for employees with more than 5 years of service.

Probation period

Probation is optional in Malaysia. The common practice is to have one to three months' long probation periods. The Employment Act does not distinguish between employees on probation and permanent employees.

07. Working hours

General

In Malaysia, the regular workweek cannot exceed 48 hours, spread across six days with eight-hour workdays. However, if less than eight hours are worked on one or more days throughout the week, the remaining days may surpass eight hours, up to a maximum of nine hours in a single day and 48 hours per week.


Women face additional restrictions, including protections for female agricultural employees. Between the hours of 10 p.m. and 5 a.m., women are not permitted to work.

Overtime

Overtime, defined as hours worked in excess of the employee's normal work hours, is compensated at a rate of at least one and a half times the employee's regular wage. An employee may work a maximum of 104 hours of overtime per month.

08. Minimum wage

General

Since February of 2020, the minimum wage in Malaysia has increased to 1,200 MYR per month in urban areas, 1,100 MYR per month in rural areas.

09. Employee benefits

General

Malaysia provides universal healthcare that is financed by payroll taxes and the general budget. There is also the option of paying for private health care. Malaysia's public healthcare system is very excellent, but it often has lengthy lineups, which is why some people choose to pay a premium for private treatment.

The 13th-month bonus is not required by law, but it is customary practice. In Malaysia, performance-based incentives are also popular. Some businesses also provide Group Private Health Insurance, Group Life Insurance, and Group Accident Insurance to their employees.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Malaysia

to hire a team takes time, money, and effort. The labor law in

Malaysia

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Malaysia

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Malaysia

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Malaysia

via our Employer of Record / PEO solution.

Ready to get started? Our friendly staff is ready to assist you with all your questions, let's connect.