Malaysia is one of the fastest-growing economies in Asia, with its Q4 2022 GDP growth surpassing projected figures. According to the World Bank, Malaysia ranks #12 out of 190 countries when it comes to ease of doing business. This, coupled with its abundance of natural resources and industrial facilities as well as comprehensive business laws, makes Malaysia a great place to start or grow a business.
Considering expanding into Malaysia? Check out Links International’s complete and in-depth guide that covers labour laws and company laws which will help ensure you run a compliant business in Malaysia.
Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Malaysia’s employment laws and regulations, please visit the official governmental websites.
The Employment Act of 1955 is Malaysia’s primary legislation for labour law matters. This Act underwent major changes that took effect from 1 January 2023, covering areas such as working arrangements, maternity leave and hiring foreign workers.
The Employment Act outlines obligations that are to be met by employers, such as statutory contributions.
Employers must make the following statutory contributions for their employees:
Employee’s age | Contribution rates for employer & employee |
18 to 60 years of age | 0.2% |
Note: The rate above does not apply to new employees who are 57 years old and above, and have no prior contributions.
Similar to PERKESO contributions, the rate above is capped for monthly salaries of RM5,000 and below. Those earning more than that will be subject to a flat rate of RM9.90 (both employer and employee).
Source: Lembaga Hasil Dalam Negeri
No. of staff | Contribution rate |
Employers with 10 or more Malaysian employees MUST register with HRDF | 1% 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 HRDF | 0.5% of the monthly wages (Total wages or basic salaries + fixed allowances) of each of their Malaysian employees |
For more information on all of the work permits above, refer to the ‘Relevant Links’ section below.
Bonuses or ‘13th month salaries’ are not mandatory in Malaysia – however, they are customary, as most employers will make this payment towards the end of the year.
Employers must submit Form CP22 to the Inland Revenue Board – notifying them that a new employee has been hired.
For other mandatory contributions such as the Employee Provident Fund, PERKESO and Employment Insurance Scheme, refer to the ‘What are the basic requirements for employers in Malaysia?’ section above.
Malaysia does not have specific laws on workplace discrimination, however, Article 8 of the Federal Constitution states:
“All persons are equal before the law and entitled to the equal protection of the law”, as well as “except as expressly authorized by this Constitution, there shall be no discrimination against citizens on the ground only of religion, race, descent, place of birth or gender in any law or in the appointment to any office or employment under a public authority or in the administration of any law relating to the acquisition, holding or disposition of property or the establishing or carrying on of any trade, business, profession, vocation or employment.”
Based on the amendments that were made to the Employment Act, with effect from 1st January 2023, normal working hours have been reduced from 48 to 45 hours a week.
Employees are also entitled to 30 days of rest after 5 consecutive hours of work, and at least 1 day of rest per week.
There is no law on how long a probation period in Malaysia should be. However, most probation periods last between 3-6 months, depending on the agreement between the employer and employee.
The national minimum wage has been increased to RM1,500 a month per the Minimum Wages Order 2022 (“Order”). Employers with 5 or less employees have been given a grace period until 1st July 2023 to increase salaries.
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In the case of retrenchments, employers must notify the Department of Labour by submitting the PK Form at least 30 days before termination. When an employee leaves the company, employers must submit the form CP22A to the Inland Revenue Board for tax clearance purposes.
Based on the Minimum Retirement Age Act 2012 that came into force on 1st July 2013, the minimum retirement age of an employee is 60 years. Employers who retire an employee before they turn 60 would be committing an offence and can be liable to pay a fine of not more than RM10,000 upon conviction.
All labour law disputes can be brought before the Industrial Court. There are 5 industrial courts in Malaysia, located in Kuala Lumpur, Johor, Perak, Pahang, Sabah, and Sarawak. Employees can either seek reinstatement of their employment, or monetary compensation.
PERKESO and EIS are the two mandatory insurances for all private sector workers in Malaysia. As for medical insurance, employers are not obliged to provide employees with this. However, most private sector employers do provide employees with medical insurance.
Employees must produce a medical certificate from a registered medical practitioner or officer. Employees are also granted hospitalisation leave, and the total amount of sick leave and hospitalization leave cannot exceed 60 days.
According to the Employment Act, employees are entitled to 11 gazetted holidays each year.
Employees are entitled to at least 1 rest day per week.
Below are the 2023 national public holidays – excluding state-level ones.
Holiday | Date |
New Year | 1 January |
New Year Holiday Replacement | 2 January |
Chinese New Year | 23 January |
Chinese New Year (national except in Johor, Kedah, Kelantan & Terengganu) | 24 January |
Federal Territory Day (for Kuala Lumpur, Labuan & Putrajaya) | 1 February |
Thaipusam Holiday Replacement (for Kuala Lumpur, Negeri Sembilan, Penang, Perak, Putrajaya & Selangor) | 6 February |
Nuzul Al-Quran (national except in Johor, Kedah, Melaka, Negeri Sembilan, Sabah & Sarawak) | 8 April |
Hari Raya Aidilfitri | 22 & 23 April |
Hari Raya Aidilfitri (national except in Johor & Kedah) | 24 April |
Labour Day | 1 May |
Wesak Day | 4 May |
Agong’s Birthday | 5 June |
Hari Raya Haji | 29 June |
Awal Muharram | 19 July |
Merdeka Day | 31 August |
Malaysia Day | 16 September |
Prophet Muhammad’s Birthday | 28 September |
Deepavali (national except Sarawak) | 12 November |
Deepavali Holiday (national except in Johor, Kedah, Kelantan, Sarawak & Terengganu) | 13 November |
Christmas | 25 December |
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*Please note that all the information listed above are to be used as a general guideline. For more detailed accounts of Malaysia’s employment laws and regulations, please visit the official governmental websites.
Links International is a leading payroll outsourcing provider across Asia Pacific and supports payroll in over 17 countries. Please do not hesitate to contact us.