Hiring Employee in Malaysia

Types of Employment

• Full-Time Workers: Working hours are as specified in the employment contract. According to the Employment Act, working hours are limited to 45 hours per week.
• Part-Time Workers: The normal hours of work of a part-time employee do not exceed seventy percent of the normal hours of work of full-time employees (less than 33).
• Contract Workers: An employment for a fixed period of time. Working hours, remuneration and other benefits should be stated in the contract.
• Freelancers: Project-basis. Freelancers are generally hired to solve a short-term problem and are often paid based on the number of hours worked. They are not considered as employees and statutory deductions are not required.

Legal Requirements

Employers in Malaysia must comply with several legal obligations, including:

• Form CP22 Submission: Notify the Inland Revenue Board of new hires.
• Mandatory Contributions: Make contributions to the Employees’ Provident Fund (EPF), PERKESO, and the Employment Insurance Scheme.

Employee Eligibility

To be eligible for employment in Malaysia, employees must meet certain criteria:

• Age: Minimum of 18 years (or 16 for part-time work).
• Citizenship: Malaysian citizens and permanent residents are eligible. Foreign employees require a valid work permit and visa.
• Qualifications: Must possess the necessary qualifications, skills, and experience.

Employment Contracts

Employment contracts must include crucial terms and conditions:

• Job Roles: Explicit descriptions of job roles and responsibilities
• Salary and Benefits: Details regarding salary, benefits, working hours, and leave entitlements
• Termination Clauses: Clearly defined termination clauses to manage employment relationships effectively

Mandatory Employee Benefits

Employers must provide certain employee benefits and entitlements:

• EPF Contributions: Financial security for employees’ retirement
• SOCSO Contributions: Social protection for employees
• Annual Leave and Sick Leave: Ensure well-being and work-life balance

Employees Provident Fund (EPF)

• EPF is a social security institution formed accordingly to the Laws of Malaysia, which provides retirement benefits for members through management of their savings in an efficient and reliable manner.
• It is a mandatory contribution for both employer and employee who are: Citizens or permanent resident of Malaysia.
• Under the Employee Provident Fund Act 1991 (Act 452)

Objectives of EPF:

1. Promote the saving of employees
2. Provide benefits for employees and their families

Benefits of EPF:

1. Tax free saving
2. Long-Term Financial Security
3. Resign from the company
4. Retirement
5. Death
6. Disabilities of employee
7. Others

Note: Employers are not allowed to calculate the employer’s and employee’s share based on exact percentage EXCEPT for salaries that exceed RM20,000.00. The total contribution which includes cents shall be rounded to the next ringgit.

EPF Treatment

• Employer Registration – For private sector:

Employer is required to complete Form KWSP 1 together with the Copy of the Director/Head of Department’s identification (MyKad/Passport) and submit to any EPF counter to register for employer EPF account. Supporting document like form 49 issued by the Companies Commission or the Business Registration Certificate.

Copy of Certification of Company/Business Registration from SSM  OR

• Section 15 – Notice of Registration
• Section 14 – Application For Registration Of A Company
• Section 17 – Certificate Of Incorporation Of Private Company

Employer must register with EPF within 7 days from the date the employer becomes liable to contribute.

Upon completing registration, employer will receive:

• Employer’s reference number
• Notice of employer registration
• Employer’s registration Certificate (To be displayed at employers’ premises)

• New Hires Registration – For private sector:
  • Form EPF3 – Application of Member Registration
  • An employer must register all employees who have not been registered with the EPF within 7 days from the date of employment by completing form EPF 3 before the first contribution is made
  • Employer must furnish accurate information that must tally with the employee’s identify card
  • If failed, the employer will be liable for imprisonment for a term up to 3 years or a fine up to RM 10,000 or both

*Employer can register new employee via online at i-Akaun portal.

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Malaysia employment laws and regulations, please visit the official governmental websites.

Updated on: April 2025