Table of Contents

Malaysia

Table of Contents

Currency

Malaysian Ringgit (MYR)

Payroll Frequency

Monthly

Employer Taxes

19.2% - 22.7%

About Malaysia

Malaysia is a country in South-East Asia bordering Thailand and Singapore, with its capital at Kuala Lumpur and a population of approximately 31 million people. A member of the Commonwealth Nations, Malaysia also has a strong economic record in the region with an increasing GDP for the past 50 years, focused primarily in the areas of natural resources, science, tourism, commerce, and medical tourism. It has a highly diverse ecosystem and is estimated to contain 20% of the world’s animal species, including unique ones such as the Malayan tiger, the proboscis monkey, and oriental hornbill birds. Famous for being a multi-ethnic country, Malaysia is represented by the ethnic Malay with large minorities of Malaysian Chinese and Indians. Although Malaysians speak several languages including English, Chinese, and Tamil, Bahasa Malaysia is the official language. Major religions include Islam, Buddhism, Christianity, Hinduism, Confucianism, and Taoism.

Employment Relationship

• Permanent Employment

In Malaysia, the Employment Act defines employees with contracts for an unspecified duration as permanent employees. There are no special provisions further highlighting the definition of permanent employment.

• Fixed-Term or Specific-Purpose Contracts

In Malaysia, there is no documented limit to the maximum duration (including renewals) of fixed-term contracts. A contract may be made for a specific period of time or for a specific piece of work. When the specified period of time expires, or the specific piece of work is completed, the contract is considered terminated. Fixed-term contracts with a duration exceeding 1 month must be made in writing.

• Temporary Employment Contratcs

The Employment Act of Malaysia does not specify conditions uniquely applicable to temporary employees. However, temporary employee contractors must follow certain requirements when assigning employees to work for third-party employers.

Probationary Period

The labor code of Malaysia offers no provisions for a probationary period. Common practice suggests the average probationary period of 6 months.

Working Hours

Effective January 1, 2023, working hours are 45 hours per week. A full working day is 8 hours but an employer may require an employee to work up to 10 hours depending on business needs. An employer and employee may agree in the employment contract that the employer can require the employee to work in excess of 45 hours per week, but in no case may the average work hours exceed 45 in a 3-week period.  An employee may apply for a flexible working arrangement to vary the hours of work, days of work, or place of work concerning their employment. In cases where there are applicable collective agreements, any application made by the employee must be consistent with the terms and conditions in the collective agreement.

Holidays / PTO

• Statutory Holidays

The National Day (August 31), the birthday of the Yang di-Pertuan Agong (date may vary), the birthday of the ruler of the state in which the employee primarily works, or the Federal Territory Day, as the case may be (date may vary), Worker’s Day (May 1), Polling Day (May 9). The employee is entitled to six additional paid holidays, at the choice of the employer.

• Paid Annual Leave

In Malaysia, an employee is entitled to paid annual leave based on the length of service with their employer: After 12 months of continuous service with the same employer, employees are entitled to 8 days of paid annual leave for the first 2 years of their employment 12 days of leave for 2 to 5 years of service with the same employer 16 days of leave for over 5 years of working for the same employer. Annual leave days are paid at the employee’s ordinary wage rate and can be carried over to the next year.  Annual leave entitlement may be canceled in cases where an employee misses work without the permission of the employer, and without reasonable excuse, for more than 10% of working days during the 12 months of the continuous service cycle.

• Sick Leave

To claim paid sick leave, an employee must be examined by a registered medical practitioner (chosen by the employer, and at the employer's expense), who determines whether sick leave may be granted. The duration of paid sick leave depends on the length of employment with the current employer: 14 days in total per calendar year for less than 2 years of employment 18 days in total per calendar year for 2 to 5 years of employment 22 days in total per calendar year for over 5 years of employment 60 days per year in case of hospitalization, irrespective of the duration of employment Sick leave is paid at the employee's ordinary wage rate. Effective January 1, 2023, hospitalization leave will be a separate leave from sick leave to provide additional protection for workers. Further details will be released pending published changes to the Employment Act approved earlier this year.

• Maternity Leave

Beginning January 1, 2023, female employees in Malaysia are entitled to 98 days of maternity leave. Passed in March 2022, Act 265 increases the length of maternity leave. Additional protections are in place for pregnant employees by prohibiting companies from terminating employees who are pregnant or have pregnancy-related illnesses.  An employee is entitled to a maternity allowance if she has been employed at any time in the 4 months leading up to her confinement, and for a total of at least 98 days in the nine months before confinement. An employee is not eligible for a maternity allowance if, at the time of confinement, she has 5 or more living biological children. The maternity allowance is equal to the daily wages of the employee. The employer pays the total cost of the maternity allowance. Maternity leave can begin no earlier than 30 days before confinement, and no later than one day after confinement.

• Paternity Leave

Effective January 1, 2023, employees who are married are entitled to 7 days of paid paternity leave. The employee must have been employed by the same employer for at least 12 months immediately before paternity leave starts. The employee is responsible for notifying his employer of his spouse's pregnancy at least 30 days from the expected confinement or as early as possible after the birth. 

Termination of Employment

• Notice Period

Per Malaysian labor law, the required notice period must be included in any written contract of employment and must be the same for both the employer and the employee. The minimum statutory length of the notice period must be as follows: 4 weeks if the employee has been employed for less than 2 years 6 weeks if the employee has been employed for 2 years or more, but less than 5 8 weeks if the employee has been so employed for 5 years or more. A notice period is not required for termination of an employment contract in the event of any willful breach of a condition of the contract by the other party or in the event of gross misconduct by the employee.

• Severance Benefits

Malaysian labor law states that employees who are covered under the Employment Act (EA) are entitled to severance benefits if they have been employed for at least 12 months before their dismissal. Covered employees dismissed due to gross misconduct, as well as employees who are rehired within 7 days of dismissal by the same employer, are not eligible to receive severance benefits. Employees are entitled to severance pay on the following scale, according to the duration of their employment: Between 1 and 2 years – 10 days’ wages for every year of employment Between 2 and 5 years – 15 days’ wages for every year of employment Over 5 years – 20 days’ wages for every year of employment