Knowing the labor laws in the Malaysia is the first step to employing local employees in the country. Additionally, the employers must have information about bonuses, leaves, and allowances. Below are some areas that employers must delve into before taking in employees.
Employee Contract
Public and Provincial Holidays
Leave Information
Basic
Contracts in Malaysia must be written in English. The employer must mention all descriptions, job roles, bonuses, allowances, and leaves in the contract.
Probation Period
A 90-day probation period is the most common type of probation period used by employers. However, it's not uncommon to see shorter timeframes, such as 30 or 60-day probation periods as well as longer periods ranging from 6 to 12 months.
13th Month Pay
In Malaysia, a 13th month pay is not mandatory. Although, it is customary to provide a 13th month pay at the end of the year.
Employee Benefits
Employers in Malaysia may provide the following benefits to their employees:
- Medical insurance.
- Life insurance.
- Disability insurance.
- Retirement contributions and pension plans.
Malaysia's payroll cycle is usually monthly, with wages paid within 7 days of the end of the payroll cycle.
Malaysia's minimum wage is RM1,700 per month, effective from 1 February 2025.
Overtime pay in Malaysia: 1.5 times for weekdays, 2 times for rest days, and 3 times for public holidays.
Employer Payroll Cost:
| Contributions |
Malaysian citizens and permanent residents
(mandatory)
|
Expatriates and foreign workers
(without permanent resident status) (voluntary)
|
| |
Rate of contribution of employee’s wages (minimum) |
| |
Employer |
Employee |
Employer |
Employee |
| Below age 60: |
| Income > MYR 5,000 |
12% |
11% |
MYR 5 per person |
11% |
| Income ≤ MYR 5,000 |
13% |
11% |
MYR 5 per person |
11% |
| Above age 60: |
| Income > MYR 5,000 |
Malaysian: 4.0%; Permanent resident: 6.0% |
Malaysian: 0%;
Permanent resident: 5.5%
|
MYR 5 per person |
5.5% |
| Income ≤ MYR 5,000 |
Malaysian: 4.0%; Permanent resident: 6.5% |
Employee Payroll Cost:
| Contribution to |
Employer Rate |
Employee Rate |
| Employment Injury Scheme (EIS) and Invalidity Scheme (IS) |
Maximum MYR 86.65 |
Maximum MYR 24.75 |
| Employment Insurance System (EIS) |
0.2% (Restricted to MYR 9.90) |
0.2% (Restricted to MYR 9.90) |
Employee Income Tax
| Annual Taxable Income |
Tax on first amount |
Tax rate on the excess |
| 5,000 to 20,000 MYR |
0 |
1% |
| 20,000 to 35,000 MYR |
150 MYR |
3% |
| 35,000 to 50,000 MYR |
600 MYR |
8% |
| 50,000 to 70,000 MYR |
1,800 MYR |
13% |
| 70,000 to 100,000 MYR |
4,400 MYR |
21% |
| 100,000 to 250,000 MYR |
10,700 MYR |
24% |
| 250,000 to 400,000 MYR |
46,700 MYR |
24.5% |
| 400,000 to 600,000 MYR |
83,450 MYR |
25% |
| 600,000 to 1,000,000 MYR |
133,450 MYR |
26% |
| 1,000,000 to 2,000,000 MYR |
237,450 MYR |
28% |
| Above 2,000,000 MYR |
517,450 MYR |
30% |
VAT
Malaysia’s sales and services tax is projected to tread around by 10% in 2022.
Malaysia's payroll cycle is usually monthly, with wages paid within 7 days of the end of the payroll cycle.
Malaysia's minimum wage is RM1,700 per month, effective from 1 February 2025.
Severance pay
Severance pay in Malaysia stipulates that when an employee is dismissed, severance pay is paid according to the length of service, and 10 days' wages are paid for each year of service that is less than 2 years of service; 15 days' wages for 2 to 5 years; More than 5 years are paid 20 days' wages.
Getting an employment visa in Malaysia includes acquiring a Malaysia Work Permit. There are 3 types of work permit base on how long the employee intends to stay in the country:
- Employment Pass – issued from 1 to 5 years
- Temporary Employment Pass – issued up to 2 years
- Professional Visit Pass – issued for a year (12 months)