Employment Law in Malaysia

Types of Employment in Malaysia

• 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 70% 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. Freelances 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.

Employment Contracts

Employment contracts in Malaysia must be provided in writing and include essential details such as:

• Job Description: Outline specific duties and responsibilities.
• Salary: Specify the wage or salary and payment frequency.
• Working Hours: Define standard working hours and any overtime requirements.
• Leave Entitlements: Detail annual leave, sick leave, and other leave policies.
• Termination Conditions: Outline the notice period and conditions for termination.

Overtime

Overtime pay (minimum guideline as per stated in Employment Act 1955)

• Working in excess of normal working hours on a normal work day:  1.5 x HRP (hourly rate of pay)
• Rest Day:
  • Where work does not exceed half his normal hours of work: 0.5 x ORP (ordinary rate of pay)
  • Where work is more than half but does not exceed normal work hours:  1 x ORP
  • Rest day (working in excess of normal working hours): 2.0 x HRP
• Off Day
• Public Holiday
  • Follow normal workings hours: 2 x ORP
  • Excess of normal working hours: 3.0 x HRP

For employees with salary not exceeding RM4,000 a month, the minimum hourly rate can be calculated as:

Gross monthly base salary/26 days/number of hours working per day as per employment contract.

The limit of overtime work shall be a total of 104 hours in any one month, excluding work on rest day and public holiday.

For employees whose salary exceed RM4000 a month, the hours of work and overtime work depend on the terms agreed under their employment contracts.

Employees Provident Fund (EPF)

About 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 stands under the Employee Provident Fund Act 1991 (Act 452).

It is a mandatory contribution for both employer and employee who are:

• Citizens or permanent resident of Malaysia. Effective 1st October 2025, foreign workers is mandatory to contribute to EPF at the rate of 2% for both employee and employer.

An Overview of EPF

• Objectives:
  • Promote the saving of employees
  • Provide benefits for employees and their families
• Benefits:
  • Tax free saving
  • Long-Term Financial Security
  • Resign from the company
  • Retirement
  • Death
  • Disabilities of employee
  • Others

Note:

1. The minimum age to register and contribute as an EPF member is age 14. Meanwhile, maximum age of contribution is 75 years old.
2. 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.
3. Effective for October 2025 salary/wage (November 2025 contribution month).

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:

• 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.

HRD Corp

The HRD Corp is a pool of funds that consists of Human Resources Development levies collected from employers which can be used for talent/workforce development purposes.

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 2026