10 Notable Points When Hiring in Malaysia

Malaysia offers a diverse talent pool and a thriving economy, making it an attractive destination for businesses seeking growth. In this blog, we will walk you through the essential aspects of hiring in Malaysia, including important employment regulations, mandatory benefits, and other key considerations. Whether you're a seasoned employer or venturing into the Malaysian market for the first time, our comprehensive insights will help you make informed decisions and ensure compliance with local labour laws.

Here are the 10 key points that will help to ensure a successful hiring process in Malaysia:

1. Compliance with Employer Cost You Must Follow

Typically, the employer's cost ranges from 14% - 15% of the employee's salary.

2. Vital Inclusions for Contracts

In Malaysia, when hiring, contracts should be prepared in either English or Malay. They must be in written form and signed by both parties involved. A contract in Malaysia should include the following elements:

• Position offered
• Duration of the contract
• Place of work
• Basic wage & pay date
• Working hours and days
• Other benefits (if any)
• Overtime (if any)
• Annual leave
• Termination clause
• Sick leave and hospitalization leave
• Rest day
• Probationary period
• Notice period
• Duties and responsibilities
• Termination clause
• Statutory deductions and income tax

3. Essential Documents for Onboarding in Malaysia

• Passport/ ID
• Form TP3 Declaration
• CP22 New Employee Form
• EPF Number
• NRIC Number
• Tax Number

When hiring, the onboarding process typically spans five business days.

4. Mandatory Benefits for Employees in Malaysia

In Malaysia, both remote and on-site employees are entitled to receive mandatory benefits, which encompass:

• Employee Provident Fund Contribution
• Unemployment Insurance
• Social Security
• Training Fund
• Private Health Insurance (optional)

5. Compulsory Paid Time Off & Public Holidays

When hiring both full-time and part-time employees in Malaysia, it is essential to take note that they are entitled to paid time off (PTO) based on the length of their service. The number of PTO days granted increases as the employee accrues sufficient tenure. Employees can utilize their accrued PTO as soon as they have accumulated enough days.

In Malaysia, there are 12 national and regional holidays observed throughout the year, with the specific holidays varying based on the location of the employee.

6. Minimum Wage Requirements

The monthly minimum wage in Malaysia is set at MYR 1,200 per month.

7. Overtime Pay & Rules

Overtime payment is obligatory in Malaysia and may be included in the salary if the employee earns less than MYR 2,000 per month. However, for employees earning over MYR 2,000 per month, overtime is not mandatory and must be mutually agreed upon by the employer and employee. Employees are allowed to work a maximum of 104 hours of overtime per month. 

The standard working hours are eight hours per day and 40 hours per week, and the standard workweek runs from Monday to Friday.

• Weekdays - 150% of the employee’s hourly rate
• Weekends - 200% of the employee’s hourly rate
• Public Holidays - 300% of the employee’s hourly rate

8. Individual Income Tax

In Malaysia, the individual income tax is calculated based on progressive rates ranging from 0% to 30%. The tax rates increase as the income brackets rise. The calculation of income tax takes into consideration various factors, including the taxpayer's household status and the number of children, which can have an impact on the overall tax rates applied.

• Up to MYR 5000 - 0%
• Up to MYR 20,000 - 1%
• Up to MYR 35,000 - 3%
• Up to MYR 50,000 - 8%
• Up to MYR 70,000 - 11%
• Up to MYR 100,000 - 19%
• Up to MYR 250,000 - 24%
• Up to MYR 400,000 - 25%
• Up to MYR 600,000 - 25%
• Up to MYR 1,000,000 - 26%
• Up to MYR 2,000,000 - 28%
• Over MYR 2,000,000 - 30%

9. Leave Policies in Malaysia

Maternity Leave

Pregnant employees in Malaysia who have worked for a minimum of 90 calendar days in the last four months are entitled to 60 calendar days of paid maternity leave. The leave can commence up to 30 days prior to the expected date of childbirth. The remaining days of leave can be taken after childbirth and can be divided into two separate periods as per the employee's preference. During the maternity leave, the employee will receive their full salary, and the employer is responsible for providing the payment..

Sick Leave

Both on-site and remote employees in Malaysia are entitled to paid sick leave, and the number of sick leave days granted depends on the length of their employment. The duration of sick leave can range from 14 to 22 days per calendar year. During the sick leave period, employees will receive 100% of their average salary, which is paid by the employer.

In Malaysia, employees are entitled to two months of hospitalization leave per year, in addition to sick leave. During hospitalization leave, employees are eligible to receive their full salary, which is paid by the employer. It is important to note that a medical certificate is required for both sick leave and hospitalization leave.

10. Procedures for Terminating Employees

Terminations in Malaysia can involve complexities, as there is no concept of "at-will" termination for employers. Termination of employment must be done with just cause. Compliant terminations in Malaysia may include:

• Voluntarily by the employee
• By mutual agreement
• By the expiration of the contract
• Unilaterally by the employer based on:
  • probation period
  • objective grounds
  • disciplinary dismissal
• Performance due to unsuitability for the job

Notice Period

In Malaysia, the minimum notice period for termination is four weeks, and it can be extended based on the length of the employee's employment.

For employees who are not covered under the Employment Act in Malaysia, the notice period for termination is typically determined based on the agreement between the employer and the employee. On the other hand, employees covered under the Employment Act are generally those who earn a monthly salary of less than RM 2,000 or are engaged in manual labour.

Severance

In Malaysia, severance pay is generally not mandatory unless the employee's monthly salary falls below RM 4,000. The specific requirement for severance pay depends on the employment agreement and the employee's salary.