Discover Top Malaysian Professionals
Why Malaysia?
Malaysia is a rapidly growing economy in Southeast Asia, known for its strategic position in international trade and its thriving manufacturing, services, and oil and gas sectors. The legal system is well-established, and English is widely spoken in business environments. Foreign companies enjoy a friendly investment climate, with tax incentives offered for key industries.
Employment in Malaysia is governed by the Employment Act 1955, covering both local and foreign employees. Contracts must clearly state employment terms, including wages, benefits, and termination conditions.
Key Employer Responsibilities
- Employee Provident Fund (EPF): 12-13% of the employee's monthly salary.
- Social Security (SOCSO): 1.75% of the employee's monthly salary.
- Employment Insurance System (EIS): 0.2% of the monthly wage.
Salary and Taxation
Malaysia's taxation follows a progressive system, where higher earnings are taxed at higher rates. Below is a table that details the tax rates:
| Annual Income (MYR) | Tax Rate (%) |
|---|---|
| 5,000 | 0% |
| 20,000 | 1% |
| 35,000 | 3% |
| 50,000 | 8% |
| 100,000 | 19% |
| 250,000 | 24% |
| 400,000 | 25% |
| 600,000 | 25% |
| 1,000,000 | 26% |
| 2,000,000 | 28% |
| Above 2,000,000 | 30% |
Employers are responsible for Monthly Tax Deduction (MTD) for employees, ensuring tax is withheld correctly from salaries.
Leave Entitlement
Employees in Malaysia are entitled to several types of leave, depending on their length of service
| Type of leave & Years of service | Entitlement |
|---|---|
| Annual Leave | |
| Less than 2 years | 8 days |
| 2 - 5 years | 12 days |
| Over 5 years | 16 days |
| Sick Leave | |
| Less than 2 years | 14 days |
| 2 - 5 years | 18 days |
| Over 5 years | 22 days |
| Public Holidays | |
| All Employees | Minimum of 11 public holidays anually |
| Maternity Leave | |
| Female Employees | 98 days of paid leave |
Employers are responsible for Monthly Tax Deduction (MTD) for employees, ensuring tax is withheld correctly from salaries.
Labor Laws
The Employment Act 1955 establishes the legal framework for working hours, overtime, and termination procedures. The maximum workweek is 48 hours, with overtime paid at the following rates:
| Overtime Situation | Rate |
|---|---|
| Regular days | 1.5 x the hourly wage |
| Rest days | 2 x the hourly wage |
| Public holidays | 3 x the hourly wage |
For employees earning more than MYR 2,000 per month, overtime must be mutually agreed upon between employer and employee.
Benefits
In addition to salaries, employees are entitled to statutory contributions from their employers, including:
| Benefit | Employer Contribution |
|---|---|
| Employee Provident Fund (EPF) | 12 - 13% of employee's salary |
| Social Security (SOCSO) | 1.75 - 1.25% of salary |
| Employment Insurance (EIS) | 0.2% |
| Human Resources Development Fund (HRDF) | 1% for certain sectors |
Private companies may also offer additional benefits such as health insurance, transportation allowances, and performance bonuses.
Termination
Termination procedures in Malaysia must comply with the Employment Act, including providing appropriate notice based on the employee's length of service:
| Years of Service | Notice Period |
|---|---|
| Less than 2 years | 4 Weeks |
| 2 - 5 years | 6 Weeks |
| Over 5 years | 8 Weeks |
Employees are entitled to severance pay or termination benefits if they are dismissed due to redundancy or without just cause.
Visa
Foreign employees need a valid work visa to be employed in Malaysia. The type of visa depends on the skill level and duration of employment:
Employment Pass (EP)
Eligibility
Highly skilled employees earning > MYR 3,000
Duration
1 - 5 years
Professional Visit Pass
Eligibility
Short-term professionals
Duration
Up to 12 months
Temporary Employment Pass
Eligibility
Low-skilled workers
Duration
Up to 2 years
Employers must act as sponsors for visa applications and ensure that foreign workers meet all regulatory requirements.
Start Your Hiring Journey
Get in touch today and see how our global solutions can transform your business
Contact Us