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.
In Malaysia, employees with contracts for an unspecified duration are considered permanent employees. Such a contract remains in force until terminated by either party. There are no special provisions further highlighting the definition of permanent employment.
In Malaysia, the law requires a written contract:
If the service provided or the determined time of employment is longer than 1 month
If no time is specified, but the time reasonably required for the specified work to be completed may exceed 1 month.
Every written contract must include a provision for termination of the agreement by either party, and be registered (stamped) through the Stamp Assessment and Payment System
Employment contracts executed, renewed, or amended from January 1, 2026, are subject to stamp duty, and late stamping will be subject to a penalty.
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.
Employee contractors must conclude all contracts for their employees contracted to third-party employers in writing. The contractor must also maintain a register of all employees and their information. These contracts and registers must be kept and made available to the Labor Director General in the event of an inspection.
The labor code of Malaysia does not provide for a probationary period. Common practice suggests an average of 6 months.
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. In case of shift work, an employer may require an 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.
Generally, an employee in Malaysia cannot be required to work more than 5 consecutive hours without a break of at least 30 minutes. If the work, by its nature, must be carried on continuously and requires continual attention, an employee may be required to work for up to 8 consecutive hours. In this event, an employer has to provide a break of at least 45 minutes, during which an employee must be allowed to eat a meal.
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.
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 employees. If hospitalization is required, as certified by a registered medical practitioner or officer, an employee is entitled to a total of 60 days of paid leave per calendar year in addition to the sick leave.
Beginning January 1, 2023, female employees in Malaysia are entitled to 98 days 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 90 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.
Effective January 1, 2023, married employees are entitled to 7 days of paid paternity leave for each delivery. This leave is available for a maximum of 5 times, irrespective of the number of spouses. The employee must have been continuously 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.
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 the employment contract in the event of any willful breach by the other party of a condition of the contract. A contract can also be terminated without notice after due inquiry in the event of gross misconduct by the employee.
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
Employees are entitled to receive written termination benefits amount and its calculation method. Termination benefits must be paid no later than 7 days from the termination date.
