Malaysia is a very attractive business and investment destination in South East Asia, a more cost-effective alternative to cities like Singapore and Hong Kong. The country’s diverse nature also makes it easier to find the right talent for your workforce, a great place for business ventures. However, doing business in Malaysia can be a challenge when dealing with diverse backgrounds and ethnicities on top of local regulations and labour laws. To help companies prepare themselves for business and foreigners with investment in Malaysia, Links created a legislative page of the main employment laws and best practices. Please note that all the information listed below are to be used as a general guideline, for more detailed accounts of laws and regulations, please visit the official government websites.
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To register a company in Malaysia, the company is required to register with Suruhanjaya Syarikat Malaysia (SSM) and needs at least one director who is at least 18 years of age and is residing in Malaysia.
Requirements to register a sole proprietorship or partnership are:
Every new company must register its Income Tax File with the Inland Revenue Board of Malaysia to obtain a tax reference number. Registration can be done via the e-Daftar website.
Steps as follows:
All documents must be submitted within 14 days from the date of application, otherwise, the e-Daftar application will be cancelled.
To open a corporate bank account in Malaysia, banks will generally require the following items:
Depending on the bank, additional documents may be required, be sure to check carefully with the local bank so you can prepare all the necessary documents beforehand.
Boasting five international airports with air-cargo facilities, seven international seaports, high-quality telecommunication network and vast and well-maintained transportation networks help businesses connect with all parts of the world. Malaysia has some of the best infrastructures in Asia to support the local business community, industrial parks and technology parks are established to support the growth of the manufacturing and advanced tech industry.
Located in the heart of South East Asia, Malaysia is an advantageous location, reachable within a few hours of flight from other major cities and economic hubs. Due to its geographical location, Malaysia is also blessed with abundant natural resources such as petroleum, fertile agricultural land, palm oil, timber and rubber, manufacturing companies can benefit from the locational proximity to raw materials and resources.
The Malaysian government offers many incentives for foreign investors to encourage the growth of foreign direct investment in Malaysia. Below are some major incentives offered.
With a total of 73 universities and over 500 colleges, polytechnics and industrial training institutes, the Malaysian educational and training institutes are generating a large pool of skilled and well-educated professionals for various industries. Local Malaysians, especially younger generations, are often multilingual with a majority speaking English.
Resident employees and employers are obliged to pay a certain amount of the employee’s monthly wage into 3 types of social funds body: Employee Provident Fund (EPF), Social Security Organization (SOCSO) & Employment Insurance System (EIS). Non-resident workers are not mandatory to join or excluded in the above schemes.
For more information, please visit the official website:
Social Security Organization (SOCSO)
Any foreign national who is not a citizen of Malaysia intending to enter and reside in Malaysia as a permanent resident may apply for an Entry Permit in accordance with Section 10, of the Immigration Act and Regulation 4, Immigration Regulations 1963. There are four categories of entry permit applications in Malaysiaー Investors, Expert, Professional and Spouse of Malaysian Citizen. Each application is assessed by a points system following seven criteria, the minimum passing score is 65.
Foreign workers are only permitted to work in specified sectionsー Manufacturing, Construction, Plantation, Agriculture and Services, and must come from approved source countries. If you are engaging foreigners to work please read the terms and conditions on the Immigration Department of Malaysia website.
The current minimum wage is RM1, 200 nationwide.
MINIMUM WAGES RATE
(As per Guidelines on the Implementation of the Minimum Wages )
|RM 1,200||Number of working days in a week||RM 5.77|
The Malaysian Employment Act defines a workweek as 48 hours, with a maximum of 8 working hours per day. An employee shall not be required to work for more than 5 consecutive hours without a break or leisure period of at least 30 minutes.
(Source: Section 60A of the Employment Act, 1955)
Annual leave entitlement depends on the years of service with an employer. One’s years of service begins from the day the employee starts working with the employer.
|Years of Service||Days of Leave|
(every 12 months of continuous service)
|< 2 years||8|
|> 2 years and < 5 years||12|
|> 5 years and more||16|
(Source: Section 60E of the Employment Act, 1955)
(Source: Section 59 of the Employment Act, 1955)
(Source: Employment (Termination and Lay-Off Benefits) Regulations 1980)
According to the Ministry of Human Resources, the following overtime payments apply to anyone with a monthly salary below RM2,000:
Work on a rest day
(a) In the case where an employee employed on a daily, hourly or other similar rates of pay who works on a rest day, he/she shall be paid for any period of work—
(b) In the case where an employee employed on a monthly rate of pay who works on a rest day, he shall be paid for any period of work—
(c) For any work carried out in excess of the normal hours of work on a rest day by an employee mentioned in (a) or (b), he shall be paid at a rate which is not less than two times his hourly rate of pay.
(d) In the case of an employee employed on piece rates who works on a rest day, he shall be paid twice his ordinary rate per piece.
Work on Public Holiday
(Source: Section 60 of the Employment Act, 1955)
Employees who have served the company for at least 12 months are eligible for retrenchment benefits.
An employer is liable to pay termination/ lay-off benefits calculated in accordance with regulations of provisions to an employee who has been employed under a continuous contract of service no less than twelve months under specific conditions.
The amount of severance pay an employee is entitled to is subjected to the provisions of these regulations. In any case, the employer must pay the payable amount to the employee no later than 7 days after the termination date.
(Source: Employment (Termination and Lay-Off Benefits) Regulations 1980)
Benefits In Kind
Employers have a duty to report the value of BIK provided to employees to the tax authority in the respective employees’ EA form, a yearly remuneration statement, as well as the company’s E form annually.
Taxes are collected from employees through a compulsory monthly deduction from their remuneration and submitted to the Inland Revenue Board of Malaysia by the 15th of the following month under the Monthly Tax Deduction (MTD) system.
Gains and profits arising from Employee Share Option Scheme (ESOS) are subject to tax.
If the share option exercised by the employee is received in the form of cash and not shares, tax will be imposed on the date the option is exercised.
An employer must ensure MTD for the perquisite is calculated based on the Additional Remuneration Formula in the month the perquisite is received. For more on MTD Calculation for ESOS, please see the guidelines from IRBM.
For every new employee, you are required to register for a tax number and under EPF, SOCSO and EIS for monthly contributions.
To register, fill in the relevant forms and submit online or over the statutory board counters.
Ministry Of Human Resources (MOHR) is a ministry of the Government of Malaysia that is responsible for skills development, labour, occupational safety and health, trade unions, industrial relations, industrial court, labour market information and analysis, social security.
Employers are expected to follow the guideline from Ministry Of Human Resources (MOHR).
According to the Malaysia Employment Act, every female employee is entitled to 60 consecutive days of maternity leave subject to all maternity leave requirements in the Malaysia Employment Act.
Maternity Leave entitlement for cases below:
(Source: Employment Act, 1955)
Male employees are eligible to 2 working days leave for each birth of their own child up to 5 surviving children. The benefit will not be applicable to the birth of the sixth child and births afterwards.
Malaysia employees who have completed their probation are entitled to paid sick leave.
|Year in Service||Minimum Entitlement|
|1st to 2nd||14|
|3rd to 5th||18|
|6th and above||22|
For further details, please see the Sick Leave section under the Malaysia Employment Act, 1955.
Based on a self-assessment regime, corporations should file a tax return within seven months from the end of the company’s financial year. Assessment of taxable income is on a current-year basis.
Tax payments should be processed electronically and settled in monthly instalments.
EA form & E form
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Salaries are paid electronically via bank giro transfers to the employee bank accounts by producing a file and sending it to the bank. A local in-country bank account is required.
Bonuses are treated as ‘Additional Wages’ along with commissions etc.
The Annual Wage Component is made up of the Annual Wage Supplement (AWS) and any other annual bonuses.
Period covered – January – December.
An employer is to complete the E form and EA form and provide to the employees by 1st March each year. Employees are to file the returns no later than 30th April each year.
Public Holidays may differ depending on the state or territory. Make sure to check according to the location in question. National holidays are as follows:
|New Year’s Day (i)||1 January|
|Chinese New Year||1 February|
|Chinese New Year Holiday||2 February|
|Nuzul Al-Quran (iii)||19 April|
|Labour Day||1 to 2 May|
|Hari Raya Aidilfitri||3 May|
|Hari Raya Aidilfitri Holiday||4 May|
|Wesak Day||15 to 16 May|
|Agong’s Birthday||6 June|
|Hari Raya Haji||10 to 11 July|
|Awal Muharram||30 July|
|Merdeka Day||31 August|
|Malaysia Day||16 September|
|Prophet Muhammad’s Birthday||9 to 10 October|
|Deepavali (v)||24 October|
|Christmas||25 to 26 December|
(i) except Johor, Kedah, Kelantan, Perlis & Terengganu
(ii) except Johor & Kedah
(iii) except Johor, Kedah, Melaka, Negeri Sembilan, Sabah & Sarawak
(iv) except Johor, Kedah, Kelantan & Terengganu
(v) except Sarawak
General Working Hours: 08:30-17:30
Standard time zone: UTC/GMT +8 hours
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