G-P’s Employer of Record (EOR) model allows your company to start hiring talent in minutes via our global entity infrastructure. Unlike a Professional Employer Organization (PEO), G-P allows your company to expand your global footprint without the hassle of entity setup and management.
Our global employment products, including G-P Meridian Prime™ and G-P Meridian Core™, are backed by the largest team of HR and legal experts in the industry. We handle the growing complexities of compliant global expansion — so you can focus on opportunities ahead.
As a global EOR expert, we manage payroll, employment contract best practices, statutory and market norm benefits, employee expenses, as well as severance and termination. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. G-P allows you to harness the talent of the brightest people in 180+ countries around the world, quickly and easily.
Hiring in Malaysia
The legal framework of the Malaysian employment and industrial relations ecosystem is generally provided by the Employment Act 1955 and the Industrial Relations Act 1967.
The Employment Act establishes minimum statutory benefits and entitlements — and applies to any person who has entered into a contract of service, with the exception of the sections in relation to overtime payments and termination benefits, which do not apply to individuals whose monthly wages exceed RM 4,000.
Employment contracts in Malaysia
It is best practice to put a strong employment contract in place in Malaysia, in the local language, which spells out the terms of the employee’s compensation and benefits, in addition to termination requirements. An employment contract in Malaysia should always state the salary and any compensation amounts in ringgit rather than another currency.
Working hours in Malaysia
The standard Malaysia workweek is 40 hours, with a standard workday of 8 hours. Normal business hours in Malaysia are from 9 a.m. to 5 p.m., Monday through Friday. Workers are entitled to 1 rest day for every 6 days worked and cannot be requested to work on that rest day.
Work hours should not exceed more than 45 hours per week — and the spread-over period of work shall not exceed more than 10 hours per day (exclusive of overtime).
Holidays in Malaysia
Employees in Malaysia are entitled to at least 11 public holidays per year, comprised of 5 compulsory national holidays and 6 elective public holidays designated each year.
The 5 compulsory national holidays are:
- The National Day
- The Birthday of the Yang di-Pertuan Agong
- The Birthday of the Ruler of the Yang di-Pertua Negeri
- Workers’ Day
- Malaysia Day
If a public holiday falls on a rest day, the following working day shall be a paid holiday in substitution.
Vacation days in Malaysia
Employees in Malaysia are entitled to paid annual leave, but the total amount depends on their tenure. Annual leave entitlement is calculated as follows:
- For less than 2 years of service: 8 days for each year of service
- For more than 2 years but less than 5 years of service: 12 days for each year of service
- For 5+ years of service: 16 days for each year of service
If an employee has not completed 12 months of continuous service with the same employer, their entitlement to paid annual leave is proportionate to the number of completed months of service.
Malaysia sick leave
Employees are entitled to paid sick leave, which is also calculated in accordance with their length of service:
- Less than 2 years of service: 14 days
- More than 2 years, but less than 5 years of service: 18 days
- More 5+ years of service: 22 days
Employees may also be eligible for an additional 60 days of paid sick leave per calendar year if hospitalization is necessary, but they must provide a medical certificate. Any employment agreement that attempts to fix less favorable terms than what is provided in the Employment Act will not be enforceable. If no medical certificate is presented or the employer is not informed about the sick leave within 48 hours, the employee will be considered absent without permission, which is a possible justification for termination of employment.
Workers who are not covered by the Employment Act receive sick leave benefits as stated in their employment contracts or in the company’s policy.
Maternity/paternity leave in Malaysia
Pregnant workers get no less than 98 consecutive days of maternity leave and are entitled to a maternity allowance. Maternity leave may commence anytime within 30 days prior to the expected birth date but cannot be later than the day immediately following the birth. Pregnant employees qualify for maternity allowance if:
- The expectant mother was employed within the 4 months prior to her due date.
- The expectant mother was employed for at least 90 days in the 9 months prior to her due date.
Non-birthing employees who are legally married and have completed no less than 12 months of continuous service are entitled to 7 consecutive days of paid paternity leave on the day of birth or immediately after the child’s birth.
Health insurance in Malaysia
Malaysia has compulsory universal healthcare, which is funded through payroll taxes and the general budget. The public healthcare system in Malaysia is quite good, but some prefer to pay a premium for private healthcare.
Malaysia supplementary benefits
In Malaysia, the 13th-month bonus is not legally required but is common. Performance-based bonuses are a standard practice as well. Some companies may offer group private health insurance, group life insurance, and/or group accident insurance.
Termination/severance in Malaysia
Probationary periods are typically between 1 and 3 months in Malaysia. This initial probationary period may be extended for a further 1-3 months; however, the employee must be informed of the extension in writing before the initial period concludes.
An employee may resign by giving notice of resignation to the employer. An employer may also dismiss an employee by giving notice of termination. In both situations, the length of notice is the same, pursuant to the employment contract. If the period of notice is not specified in the employment contract, the following timeframes will apply:
- Less than 2 years of service: minimum 4 weeks of notice
- 2 years but less than 5 years of service: minimum 6 weeks of notice
- 5+ years of service: minimum 8 weeks of notice
It is possible for either the employer or employee to terminate the employment contract without giving the required notice period by paying the other party an indemnity in lieu of notice.
Employees are entitled to the following termination benefits:
- 10 days’ wages for each year of employment if the employee has been employed for less than 2 years.
- 15 days’ wages for each year of employment if the employee has been employed for 2-5 years.
- 20 days’ wages for each year of employment if the employee has been employed for 5+ years.
Employees are not entitled to termination benefits if the worker is employed for less than 12 months on date of termination. Bear in mind that these benefits apply to any termination, except in the case of dismissal for misconduct or resignation.
Paying taxes in Malaysia
Workers (residents or non-residents) are taxable if they earn an annual employment income of at least MYR 34,000 (after the EPF deduction), according to LHDN.
The social security system in Malaysia is called SOCSO and provides financial assistance to employees and their families in the event of an accident resulting in death, disability, or illness. SOCSO provides 2 types of insurance: employment injury and invalidity pension scheme.
SOCSO is funded by contributions from both employers and employees. The amount paid into the scheme depends on an employee’s monthly earnings.
The Employment Provident Fund (EPF) covers pension funds but also allows employees to withdraw their savings for specific purposes like buying a house or for medical reasons. The EPF essentially acts as a savings fund with contributions made by employees and employers.
Employees must contribute to the EPF at the prevailing rate on gross worldwide income. Employers contribute 12% of their employees’ gross monthly wages for workers earning above MYR 5,000 per month, while a 13% contribution is required for employees earning less than MYR 5,000 per month. It is not compulsory for non-Malaysian citizens and non-permanent residents to contribute to the EPF, but they may elect to do so.
Why G-P?
At G-P, we help companies unlock the power of the everywhere workforce through our industry-leading Global Growth Platform™. Let us handle the complex and costly tasks involved in finding, hiring, onboarding, and paying your team members, anywhere in the world, with the speed and guaranteed global compliance your business needs.
Contact us today to learn more.