Malaysia is a newly industrialized market economy and English is the working language in most companies. A decision to hire in Malaysia promises vibrant business opportunities in Southeast Asia.
The Malaysian government is helping local companies transition to comply with environmental, social, and corporate governance (ESG) standards to attract global investments. It further results in the recognition of new workplace rights and flexible working arrangements.
In this blog, we delve into the essential aspects of the hiring process, navigating the unique landscape of Malaysian labor laws.
Malaysian Labor Law
The terms and conditions for all employees in Malaysia engaged in a contract of service are regulated by the Employment Act 1955. Here is an overview of provisions regulating employment in Malaysia.
Working Hours in Malaysia
- Employers can set working hours in Malaysia up to 45 hours per week.
- Further, employers must restrict daily working hours in Malaysia to eight hours.
- Employers in Malaysia can set working hours for part-time employees per Malaysian labor laws at more than 30% but less than 70% of working hours for full-time employees.
Overtime Pay
- Employers can enforce overtime work schedules but pay premiums at:
- 1.5 times the basic pay on normal days
- two times the basic pay on rest days
- three times the basic pay on public holidays
Probation Period in Malaysia
- Employers are not required to enforce probation periods in Malaysia.
- However, Skuad recommends probationary periods of 3-6 months in Malaysia.
Notice Period During Probation
- The statutory minimum is one day, and the maximum is fifteen days.
Employment Termination in Malaysia
- Possible termination in Malaysia can be through mutually agreed exit, employee termination due to poor performance, termination with cause, and termination due to business redundancy.
- Employers shall serve notice periods for most cases per tenure served by the employee:
Employment Duration |
Notice Period |
Less than 2 years |
4 weeks |
2-5 years |
6 weeks |
More than 5 years |
8 weeks |
- Malaysia labor law also allows employers to pay employee salaries instead of serving notice periods.
13th Month Pay
- In Malaysia, 13th month pay is not mandatory.
Payroll and Taxes in Malaysia
Payroll in Malaysia includes salary payments after deducting social security contributions and withholding tax, and reporting dues directly to the authorities. Here is an overview of the payroll process in Malaysia:
Calculate employee salaries:
- Employers must determine salaries for full-time employees in Malaysian Ringgit (MYR, RM). Salary calculations must be above statutory minimum wages and include paid leave benefits and other applicable bonuses.
- The current minimum wage in Malaysia is 1,500 RM (US$341) per month.
Tax deductions & social security contributions:
- Employers must undertake employee registration in the Social Security Organization (SOCSO) to extend statutory benefits in Malaysia.
- The statutory employer contribution rate is 13% of the employee’s monthly wages below RM5,000 (US$1,150) and 12% above RM5,000.
- Employers must also deduct employee share of social security premiums at 11% of the monthly wages.
- The employer contribution varies for individuals above 60 years of age. Additionally, employers need not contribute towards social security for foreign employees.
Payroll frequency:
- Payroll frequency in Malaysia is usually monthly. You can pay salaries through direct deposit, cheque, or cash.
- The typical payout date in Malaysia is the 28th of every month.
Complying with local regulations to extend statutory benefits in Malaysia may be resource-draining. Here is where an HR and payroll platform like Skuad can help you manage your payroll in Malaysia with just the click of a button!
Employee Benefits in Malaysia
Public Holiday
Employers in Malaysia must grant several mandatory paid holidays listed below:
Malaysia Public National Holidays 2024
Date |
Holiday |
States |
1 Jan |
New Year's Day |
National except in Johor, Kedah, Kelantan, Perlis & Terengganu |
10 Feb |
Chinese New Year |
National |
11 Feb |
Chinese New Year Holiday |
National |
12 Feb |
Chinese New Year Holiday |
National except in Johor & Kedah |
28 Mar |
Nuzul Al-Quran |
National except in Johor, Kedah, Melaka, Negeri Sembilan, Sabah & Sarawak |
10 Apr |
Hari Raya Aidilfitri |
National |
11 Apr |
Hari Raya Aidilfitri Holiday |
National |
1 May |
Labour Day |
National |
22 May |
Wesak Day |
National |
3 Jun |
Agong's Birthday |
National |
17 Jun |
Hari Raya Haji |
National |
7 Jul |
Awal Muharram |
National |
8 Jul |
Awal Muharram Holiday |
National except in Johor, Kedah, Kelantan & Terengganu |
31 Aug |
Merdeka Day |
National |
16 Sep |
Prophet Muhammad's Birthday |
National |
16 Sep |
Malaysia Day |
National |
17 Sep |
Malaysia Day Holiday |
National |
31 Oct |
Deepavali |
National except in Sarawak |
25 Dec |
Christmas Day |
National |
Malaysia State Holidays 2024
Date |
Holiday |
States |
14 Jan |
YDPB Negeri Sembilan's Birthday |
Negeri Sembilan |
15 Jan |
YDPB Negeri Sembilan's Birthday Holiday |
Negeri Sembilan |
25 Jan |
Thaipusam |
Johor, Kuala Lumpur, Negeri Sembilan, Penang, Perak, Putrajaya & Selangor |
1 Feb |
Federal Territory Day |
Kuala Lumpur, Labuan & Putrajaya |
8 Feb |
Israk and Mikraj |
Kedah, Negeri Sembilan, Perlis & Terengganu |
20 Feb |
Independence Declaration Day |
Melaka |
4 Mar |
Installation of Sultan Terengganu |
Terengganu |
12 Mar |
Awal Ramadan |
Johor, Kedah & Melaka |
23 Mar |
Sultan of Johor's Birthday |
Johor |
29 Mar |
Good Friday |
Sabah & Sarawak |
26 Apr |
Sultan of Terengganu's Birthday |
Terengganu |
17 May |
Raja Perlis' Birthday |
Perlis |
22 May |
Hari Hol Pahang |
Pahang |
23 May |
Hari Hol Pahang Holiday |
Pahang |
30 May |
Harvest Festival |
Labuan & Sabah |
31 May |
Harvest Festival Holiday |
Labuan & Sabah |
1 Jun |
Hari Gawai |
Sarawak |
2 Jun |
Hari Gawai Holiday |
Sarawak |
16 Jun |
Arafat Day |
Kelantan & Terengganu |
18 Jun |
Hari Raya Haji Holiday |
Kedah, Kelantan, Perlis & Terengganu |
30 Jun |
Sultan of Kedah's Birthday |
Kedah |
7 Jul |
Georgetown World Heritage City Day |
Penang |
9 Jul |
Georgetown World Heritage City Holiday |
Penang |
13 Jul |
Penang Governor's Birthday |
Penang |
22 Jul |
Sarawak Day |
Sarawak |
30 Jul |
Sultan of Pahang's Birthday |
Pahang |
24 Aug |
Melaka Governor's Birthday |
Melaka |
1 Sep |
Merdeka Day Holiday |
Kelantan & Terengganu |
29 Sep |
Sultan of Kelantan's Birthday |
Kelantan |
30 Sep |
Sultan of Kelantan's Birthday Holiday |
Kelantan |
5 Oct |
Sabah Governor's Birthday |
Sabah |
12 Oct |
Sarawak Governor's Birthday |
Sarawak |
1 Nov |
Sultan of Perak's Birthday |
Perak |
11 Dec |
Sultan of Selangor's Birthday |
Selangor |
24 Dec |
Christmas Eve |
Sabah |
Leave Benefits in Malaysia
Employers may offer the following benefits per the statutory leave policy in Malaysia.
Annual leave:
- Employers in Malaysia can offer annual leaves based on the tenure of the employee:
Employment Duration |
Annual Leave Entitlement |
Less than 2 years |
8 days for every 12 months of continuous service |
2-5 years |
12 days for every 12 months of continuous service |
More than 5 years |
16 days for every 12 months of continuous service |
Sick leave:
- Sick leave per Malaysian labor law depends on the tenure of the employee:
- Between 1-2 years of employment: 14 days per year
- Between 2-5 years: 18 days per year
- More than five years: 22 days per year
- Employers can take 60 days of hospitalization leave along with statutory sick leave. Employees are required to present a relevant medical certificate.
Parental leave:
- The minimum statutory maternity leave in Malaysia lasts for 98 days.
- Employers may award seven days of paid paternity leave in Malaysia after the birth.
- Employers must also offer childcare leave for six days per year. Malaysian labor law extends this to children less than six years old.
Compassionate leave:
- Malaysian labor law does not prescribe any leave on compassionate grounds.
- However, employers may extend 2-5 days of paid leave per incident.
- Compassionate leave will be approved in the event of the passing of an immediate family member, including but not limited to a spouse, children, siblings, parents, parents-in-law, grandparents, and grandparents-in-law.
Carry Forward of Leaves:
- Unused leave must be used during the next 12 months of service. Otherwise, the leave will be forfeited.
Cost of Hiring an Employee in Malaysia
The cost of hiring in Malaysia varies based on who acts as the legal employer, i.e., whether you form a legal entity or hire employees in Malaysia through Employer of Record (EOR) services. Here is a brief comparison between both approaches:
Establishing a Subsidiary vs. Partnering with EOR company in Malaysia
Parameters |
Forming a Subsidiary |
Partnering with Skuad |
Setup Cost |
Companies incur high admin, legal, and professional fees upfront to register and establish an office in Malaysia. |
No need for a set-up cost, companies can start hiring in Malaysia for a nominal flat fee. |
Setup duration |
Setting up an entity may take weeks or even months to operationalize before you can hire employees in Malaysia. |
Skuad has an established infrastructure in Malaysia, allowing companies to hire within days. |
Operating cost |
Companies need to manage operating expenses like HR, payroll compliance, and office overheads. |
Skuad helps you automate the payroll process while ensuring adherence to local Malaysian regulations. |
Operational Overhead |
Subsidiaries must handle overhead costs, including HR, payroll and others. |
Skuad helps you take care of operating costs at a nominal fee. |
Employment liability |
The subsidiary is liable for compliance risk management. The parent company may be involved. |
Skuad acts as the legal employer and thus assumes all risks related to hiring in Malaysia. |
Best suited for |
Companies with plans of substantial investments and long-term dedication to the Malaysian market. |
Businesses seeking to hire talent in Malaysia and expand their global footprint quickly, without breaking the bank. |
Parameters |
Partnering with Skuad |
Forming a Subsidiary |
Setup Cost |
No need for a set-up cost, companies can start hiring in Malaysia for a nominal flat fee. |
Companies incur high admin, legal, and professional fees upfront to register and establish an office in Malaysia. |
Setup duration |
Skuad has an established infrastructure in Malaysia, allowing companies to hire within days. |
Setting up an entity may take weeks or even months to operationalize before you can hire employees in Malaysia. |
Operating cost |
Skuad helps you automate the payroll process while ensuring adherence to local Malaysian regulations. |
Companies need to manage operating expenses like HR, payroll compliance, and office overheads. |
Operational Overhead |
Skuad helps you take care of operating costs at a nominal fee. |
Subsidiaries must handle overhead costs, including HR, payroll and others. |
Employment liability |
Skuad acts as the legal employer and thus assumes all risks related to hiring in Malaysia. |
The subsidiary is liable for compliance risk management. The parent company may be involved. |
Best suited for |
Businesses seeking to hire talent in Malaysia and expand their global footprint quickly, without breaking the bank. |
Companies with plans of substantial investments and long-term dedication to the Malaysian market. |
Top Job Listing Sites in Malaysia
You can list your job openings on the following platforms to hire in Malaysia:
- JobStreet: the largest job portal in Southeast Asia.
- Hiredly: is a hybrid recruitment platform for sourcing and hiring junior to mid-level talent.
- Maukerja: is a Malaysian job portal that offers a variety of job listings in a wide range of industries.
- MyStarJob.com: is a Malaysian job portal for professional and managerial positions.
- StartUpJobs.Asia: is a job portal for tech startups in Southeast Asia.
However, to hire employees in Malaysia of foreign-origin, employers must advertise all jobs on the MyFutureJobs portal to ensure local candidates get the first preference.
Compliance Risks of Hiring Employees in Malaysia
Employers need to be aware of and manage compliance risks to hire in Malaysia legally:
- Hiring foreign employees: Employers can hire foreigners to work in Malaysia in some sectors only. Additionally, they must obtain a quota from the immigration department before deciding to hire employees in Malaysia. There may be many other procedural complications involving work permits in Malaysia.
- Data privacy: Malaysian labor law obliges employers to safeguard employee data against unauthorized usage. Employers must duly communicate the use of personal data for employment purposes beforehand in Malay or English. Failure to comply may lead to legal disputes.
- Employee Classification: Employers must correctly classify their workers as full-time or part-time employees or independent contractors. This distinction significantly affects employment rights, taxes, and social security contributions.
- Termination Procedures: Employers must inform the labor department of the termination using the “PK Form” in case of business downsizing or closure in Malaysia. Unfair dismissals can result in compensation claims and reputation damage.
How to Hire Talent in Malaysia
You have three choices when looking to hire employees in Malaysia:
Option 1: Become a Legal Employer
- Set up a subsidiary in Malaysia to hire resident or non-resident employees.
- This approach may suit multinational corporations making substantial investments in Malaysia and seeking direct oversight over employees' day-to-day activities.
- However, forming a local business entity is expensive. Subsidiaries are legally liable for workforce management and employment-related compliance.
Option 2: Hire Independent Contractors
- Companies may engage local or foreign individuals, including freelancers and remote workers, through project-based contractual arrangements.
- Hiring contractors saves costs incurred by employers to extend statutory benefits in Malaysia, such as paid leave entitlements, social security benefits, and more.
- However, hiring independent contractors may limit control over their daily activities.
Option 3: Partner with an Employer of Record
- In recent years, companies have embraced EOR solutions to mitigate the cost of hiring in Malaysia.
- An Employer Of Record (EOR) service provider such as Skuad acts as the legal employer for your employees in Malaysia, without you needing to set up a local entity.
- Skuad can manage payroll and employee benefits in Malaysia while assuming all employment-related compliance risks.
Latest Hiring Trends in Malaysia
Robert Walters Malaysia report expects employers to offer 15-20% salary hikes to retain top talents in Malaysia. The increments could go up to 30% for niche skill sets. Further, professionals act more conservatively in switching jobs.
The report also noted that companies have realized the need to hire in Malaysia beyond technical capabilities. Companies have engaged contract staffing agencies to hire talents with hybrid skill sets. The agency not only helps you hire employees in Malaysia but also manages responsibilities like payroll in Malaysia and benefits management.
Even though emerging practices like "job sharing," "hot desking," menstrual leave, wellness days, and mental health breaks are to be incorporated under the Malaysian labor laws, more companies are defining the terms of such practices in the employment contract.
Simplify Hiring in Malaysia Using Skuad
Skuad helps companies quickly and easily hire employees in Malaysia without worrying about multi-currency payroll, local compliance, or other hassles. We enable you to handle onboarding, payroll, benefits, taxes and more compliantly with Malaysian labor laws.
Speak to our experts today!
FAQs
How to hire in Malaysia?
To hire employees in Malaysia, ensure your employment contracts comply with local laws, including clear terms for salary, benefits, and working hours. Familiarize yourself with mandatory benefits like EPF and SOCSO. Also, understanding local workplace culture is important for successful employment in Malaysia. This approach aligns with Malaysia employment standards and helps in effectively navigating the important question of how to hire employees in Malaysia.
What is the recruitment process in Malaysia?
The recruitment process in Malaysia typically follows a structured series of steps involving advertising jobs, shortlisting candidates, skill assessment and interview, and extending job offers. Once the recruitment process is over, the employee onboarding process commences. You can simplify the onboarding process with EOR solutions and even stay compliant with Malaysian labor laws.
How much does it cost to hire a foreign worker in Malaysia?
The actual cost of hiring a foreign worker in Malaysia will vary depending on nationality, the type of work permit or visa required, and optional services of recruitment agency fees.