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.
Minimum Wage and Pay
The minimum wage in Malaysia varies by region to account for differences in living costs. Employers must ensure that all employees receive at least the minimum wage for their region.
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
- 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.
Workplace Health and Safety
Employers are responsible for providing a safe and healthy work environment. Key requirements include:
- Risk Assessments: Regularly conduct risk assessments to identify and mitigate workplace hazards.
- Training: Provide training on workplace safety and emergency procedures.
- Safety Equipment: Ensure employees have access to necessary safety equipment and protective gear.
Leave Entitlements
Employees in Malaysia are entitled to various types of leave, including:
- Annual Leave: Entitlement based on length of service.
- Sick Leave: Entitlement based on length of service, with additional leave for hospitalization.
- Maternity Leave: Female employees are entitled to 60 consecutive days of paid maternity leave.
- Paternity Leave: Though not mandated by law, some companies offer paid paternity leave.
Termination Procedures
Employers must follow fair and lawful procedures when terminating an employee. Key points include:
- Notice Period: Provide the notice period specified in the employment contract, typically one month.
- Severance Pay: While not mandatory, many companies offer severance pay based on length of service and company policies.
- Unfair Dismissal Protections: Employees are protected against unfair dismissal, requiring valid reasons and fair procedures for termination.
Anti-Discrimination Laws
Malaysian employment laws prohibit discrimination based on race, gender, age, disability, and other protected attributes. Employers must ensure their hiring practices and workplace policies comply with anti-discrimination laws.
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.
| Amendment | Imposed rate of HRD Levy |
|---|---|
| Employers with 10 or more Malaysian employees are COMPULSORY to register with HRD Corp. | 1 per cent of the monthly wages(Total wages or basic salaries + fixed allowances) of each of their Malaysian employees |
| Employers with less than 10 Malaysian employees are given the OPTION to register with HRD Corp and if they choose to register. | 0.5 per cent of the monthly wages (Total wages or basic salaries + fixed allowances) of each of their Malaysian employees |
Compliance and Best Practices
Employers must ensure compliance with all aspects of employment law to avoid disputes and potential penalties. Best practices include:
- Clear Policies: Establish clear policies and procedures for hiring, termination, and other employment matters.
- Regular Audits: Conduct regular audits of employment practices to ensure compliance with current laws and regulations.
- Employee Training: Provide training to HR personnel and managers on labour law compliance and best practices.
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Understanding and complying with employment law in Malaysia is essential for creating a fair and legally compliant work environment. By prioritizing legal compliance and fair treatment of employees, employers can build a motivated and productive workforce.
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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
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