Employer of Record in Malaysia

Guide to Hiring Employees in Malaysia

Your guide to hiring employees in Malaysia, covering the employment landscape, working customs, and local labor laws.

Capital City

Kuala Lumpur

Currency

Ringgit

 (

RM

)

Timezone

GMT +8

Payroll Frequency

monthly

Tax Year

1 January - 31 December

Employer Tax

18.95% - 22.45%

Languages

Malay

Leave The hiring to a local expert

Hire in Malaysia with ease—our experts handle employment and compliance for you.

Enquire Now

How to Hire In Malaysia

Hiring in Malaysia for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in Malaysia in the following three ways:

  • Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in Malaysia.
  • Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with Malaysia’s labor laws and tax regulations.
  • Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Good To Know

Since gaining independence in 1957, Malaysia has aimed to diversify its economy, focusing on manufacturing and services, particularly in electrical appliances and components.

Malaysia boasts one of the most open economies globally, with trade and investment playing a crucial role in driving employment and income growth.

Its strategic location and business-friendly reputation make Malaysia an attractive destination, with a skilled workforce and strong manufacturing and export capabilities.

Malaysia attracts significant foreign investment due to factors like its educated workforce, robust infrastructure, and supportive government policies promoting business development.

How to Employ In Malaysia

Businesses can only operate smoothly in Malaysia if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Malaysia below, to avoid any compliance issues.

Employment Contract Requirements

The regulation of employment in Malaysia falls under the 1955 Employment Act, applicable to both fixed-term and permanent employment. According to this law, any arrangement exceeding one month requires a written employment contract. Such contracts are mandated to incorporate specific terms of employment, which include:

  • Identification of both parties
  • Starting date (and duration for temporary contracts)
  • Workplace and working hours
  • Job description, duties, and responsibilities
  • Basic salary (including compensation and benefits)
  • Payment conditions
  • Probation period
  • Total number of holidays
  • Notice periods and guidelines for termination
  • Clauses concerning workplace health and safety

Onboarding Process

We can help you get a new employee started in Malaysia quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Malaysia

The usual working hours in Malaysia consist of 8 hours per day, not exceeding 45 hours per week. However, it is common for employees to work 40 hours per week.

Overtime in Malaysia

Overtime in Malaysia refers to work performed beyond the regular business hours. The maximum monthly limit for overtime hours is 104. Employees are restricted from working more than 12 hours in a day, inclusive of overtime, and must receive compensation at a rate not less than 150% of their standard hourly wage. Employers should pay overtime at 200% of standard hourly wage rate when working on a public holiday (less than 8 hours) or 300% (more than 8 hours).

Probation Period in Malaysia

In Malaysia, probationary periods generally span from 3 to 6 months, however there is no legal requirement to put an employee on probation before they are hired. According to the Employment Act, there is no distinction in entitlements whether an employee is within or outside the probationary period.

A collage of people in various careers

Payroll Management in Malaysia

Fiscal Year in Malaysia

1 January - 31 December is the 12-month accounting period that businesses in Malaysia use for financial and tax reporting purposes.

Payroll Cycle in Malaysia

The payroll cycle in Malaysia is usually monthly, with employees being paid on the last working day (no later than 7th day of the following month).

Minimum Wage in Malaysia

The minimum wage for employees in Malaysia is typically 9.375 MYR per hour, amounting to ~1,500 MYR per month for a typical 40 hour work week.

Bonus Payments in Malaysia

Although not mandatory, it is common practice in Malaysia to provide a 13-month payment at the end of the year, as specified in the employment agreement.

Overview of Employment Taxes in Malaysia

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 18.95% - 22.45% on top of the employee salary in Malaysia.

Tax TypeTax Rate
Provident Fund (for employees under the age of 60)12.00% " 13.00%
Provident Fund (for employees over the age of 60)4.00% - 6.50%
Social Security [SOCSO] (for employees below the age of 60 capped at MYR 86.65 monthly contribution)1.75%
Employment Insurance [EIS] (monthly salary capped at 5,000 MYR) 0.20%
Human Resource Development Fund (for companies with over 10 employees)1.00%

Employee Payroll Tax Contributions

In Malaysia , the typical estimation for employee payroll contributions cost is around 11.70% - 17.20%%.

Tax TypeTax Rate
Provident Fund (for employees under the age of 60)11.00%
Provident Fund (for employees over the age of 60)0.00% - 5.50%
Social Security [SOCSO] (for employees below the age of 60, capped at 24.75 MYR monthly contribution)0.50%
Employment Insurance [EIS] (monthly salary capped at 5,000 MYR)0.20%

Individual Income Tax Contributions

The computation of individual income tax in Malaysia follows a progressive rate structure. Other variables, such as household status and the number of dependents, can influence the overall tax rates.

Income BracketTax Rate
0 - 5,000 MYR0%
5,001 MYR - 20,000 MYR1%
20,001 MYR - 35,000 MYR3%
35,001 MYR - 50,000 MYR6%
50,001 MYR - 70,000 MYR11%
70,001 MYR - 100,000 MYR19%
100,001 MYR - 400,000 MYR25%
400,001 MYR - 600,000 MYR26%
600,001 MYR - 2,000,000 MYR28%
2,000,001 MYR - And above30%

Pension in Malaysia

Employees in Malaysia are eligible for the state's old-age retirement pension, provided they meet criteria such as being at least 60 years old (flexible withdrawls allowed after age 55). The pension amount is determined by considering both the employee's and employer's contributions. Payment options include lump-sum payments, monthly payments, or a combination of both.

Info Icon

The tax-related information provided in this guide is intended for general guidance and informational purposes only. Reach out to our dedicated team for insights on remote hiring in Malaysia tailored to your needs.

CTA Image showing employees in various countries across the globe
Employee Cost Calculator

Get an instant breakdown of the true costs of hiring in Malaysia.

Calculate Now Default Icon Hover Icon

Leave Entitlements And Company Policies In Malaysia

Mandatory Leave Entitlement in Malaysia

The annual leave entitlement in Malaysia is 8 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Malaysia

In Malaysia, there are 11 recognised public holidays in a calendar year, which are separate from annual leave. The initial five holidays are national holidays observed throughout Malaysia, and employers have the flexibility to select 6 out of the following 8 holidays to complete the total of 11 public holidays per year (many of these public holidays vary by state):

HolidayDate
Workers Day1 May
Birthday of Yang di-Pertuan AgongFirst Monday of June
Birthday of Ruler of the Yang di-Pertua Negeri24 August but varies by state
National Day31 August
Malaysia Day16 September
Chinese New YearFebruary, day changes yearly
Nuzul Al-QuranMarch, day changes yearly
Hari Raya PuasaApril, day changes yearly
Wesak DayMay, day changes yearly
Hari Raya HajiJune, day changes yearly
Birthday of the Prophet MuhammadSeptember, day changes yearly
DeepavaliOctober/November, day changes yearly
Christmas Day25 December

Paid Time Off in Malaysia

Paid leave is specified in the employment contract, typically starting at 12-15 days per year and expanding with increased seniority. Accrual occurs from January to December and is contingent on the employee's length of service:

  • First 2 years of service: 8 days paid leave per year
  • 2-5 years of service: 12 days paid leave per year
  • More than 5 years of service: 16 days paid leave per year

Maternity Leave In Malaysia

In the private sector in Malaysia, pregnant employees are entitled to 98 days of fully paid maternity leave, commencing no earlier than 30 days before the due date. They can resume work at any point during this period with the employer's and a medical practitioner's consent. This benefit is applicable for the employee's first five surviving children and if the employee has worked for the employer for at least 90 days continuously in the four months before they give birth.

Paternity Leave In Malaysia

Married fathers with at least a year of service in Malaysia are eligible for 7 consecutive days of fully paid paternity leave per birth if the same employer has employed them for at least 12 months before the commencement of the paternity leave. To avail this leave, employees need to notify their employers 30 days before the expected due date.

Sick Leave In Malaysia

The employment contract outlines paid sick leave requirements and the necessity of a valid medical certificate. The compensation during this leave is determined by the employee's length of service:

  • Less than 2 years of service: 14 days sick leave per year
  • 2-5 years of service: 18 days sick leave per year
  • More than 5 years of service: 22 days sick leave per year
  • Employees admitted to the hospital: 60 days hospitalisation leave per year (in addition to regular sick leave)

Parental Leave In Malaysia

There is no provision for shared parental leave that allows parents to divide a set amount of leave between them.

Employment Termination and Severance Policies in Malaysia

Termination Process in Malaysia

In Malaysia, terminations must be justified, and at-will termination does not apply. Acceptable reasons for termination include:

  • Voluntary employee resignation
  • Mutual agreement
  • Contract expiration
  • Unilateral decision by the employer (based on probation period, objective reasons, disciplinary dismissal, inadequate job unsuitability)

Notice Period in Malaysia

Workers in Malaysia have the right to minimum notice periods, and either party can offer payment in lieu as an alternative to giving notice. The duration of the notice periods depends on the length of their employment:

  • Less than 2 years of service: 4 weeks notice
  • 2-5 years of service: 6 weeks notice
  • More than 5 years of service: 8 weeks notice

Severance in Malaysia

Severance pay is compulsory in Malaysia when applicable. The amount of payment varies based on the duration of service:

  • First 2 years of service: 10 days severance pay at regular salary pay rate
  • 2-5 years of service: 15 days per year of service
  • More than 5 years of service: 20 days per year of service

Back to Top

Copied to Clipboard

Woman with glasses
Woman with glasses

Take your business to new places

Employer of Record for Malaysia

  • hire icon Hire employees without entity setup.
  • handshake icon Full compliance, we assume 100% liability.
  • gift icon Handle local payroll and benefits seamlessly.
  • headphones icon 24/5 responsive real-human support.
  • money icon Transparent pricing, no hidden fees.

FAQS

FAQs About Hiring In Malaysia

Playroll makes growing your team in Malaysia effortless. Ready to start?

The HR Platform built to scale your global team.

Employer of Record in [State]

Guide to Hiring Employees in [State]

Your guide to hiring employees in [State], covering the employment landscape, working customs, and local labor laws.

Capital City

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Employer Tax

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.

Leave The hiring to a local expert

Hire in Malaysia with ease—our experts handle employment and compliance for you.

Enquire Now

How to Hire In Malaysia

Hiring in Malaysia for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in Malaysia in the following three ways:

  • Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in Malaysia.
  • Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with Malaysia’s labor laws and tax regulations.
  • Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Good To Know

Since gaining independence in 1957, Malaysia has aimed to diversify its economy, focusing on manufacturing and services, particularly in electrical appliances and components.

Malaysia boasts one of the most open economies globally, with trade and investment playing a crucial role in driving employment and income growth.

Its strategic location and business-friendly reputation make Malaysia an attractive destination, with a skilled workforce and strong manufacturing and export capabilities.

Malaysia attracts significant foreign investment due to factors like its educated workforce, robust infrastructure, and supportive government policies promoting business development.

How to Employ In Malaysia

Businesses can only operate smoothly in Malaysia if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Malaysia below, to avoid any compliance issues.

Employment Contract Requirements

The regulation of employment in Malaysia falls under the 1955 Employment Act, applicable to both fixed-term and permanent employment. According to this law, any arrangement exceeding one month requires a written employment contract. Such contracts are mandated to incorporate specific terms of employment, which include:

  • Identification of both parties
  • Starting date (and duration for temporary contracts)
  • Workplace and working hours
  • Job description, duties, and responsibilities
  • Basic salary (including compensation and benefits)
  • Payment conditions
  • Probation period
  • Total number of holidays
  • Notice periods and guidelines for termination
  • Clauses concerning workplace health and safety

Onboarding Process

We can help you get a new employee started in Malaysia quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Malaysia

The usual working hours in Malaysia consist of 8 hours per day, not exceeding 45 hours per week. However, it is common for employees to work 40 hours per week.

Overtime in Malaysia

Overtime in Malaysia refers to work performed beyond the regular business hours. The maximum monthly limit for overtime hours is 104. Employees are restricted from working more than 12 hours in a day, inclusive of overtime, and must receive compensation at a rate not less than 150% of their standard hourly wage. Employers should pay overtime at 200% of standard hourly wage rate when working on a public holiday (less than 8 hours) or 300% (more than 8 hours).

Probation Period in Malaysia

In Malaysia, probationary periods generally span from 3 to 6 months, however there is no legal requirement to put an employee on probation before they are hired. According to the Employment Act, there is no distinction in entitlements whether an employee is within or outside the probationary period.

A collage of people in various careers

Payroll Management in Malaysia

Fiscal Year in Malaysia

1 January - 31 December is the 12-month accounting period that businesses in Malaysia use for financial and tax reporting purposes.

Payroll Cycle in Malaysia

The payroll cycle in Malaysia is usually monthly, with employees being paid on the last working day (no later than 7th day of the following month).

Minimum Wage in Malaysia

The minimum wage for employees in Malaysia is typically 9.375 MYR per hour, amounting to ~1,500 MYR per month for a typical 40 hour work week.

Bonus Payments in Malaysia

Although not mandatory, it is common practice in Malaysia to provide a 13-month payment at the end of the year, as specified in the employment agreement.

Overview of Employment Taxes in Malaysia

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 18.95% - 22.45% on top of the employee salary in Malaysia.

Tax TypeTax Rate
Provident Fund (for employees under the age of 60)12.00% " 13.00%
Provident Fund (for employees over the age of 60)4.00% - 6.50%
Social Security [SOCSO] (for employees below the age of 60 capped at MYR 86.65 monthly contribution)1.75%
Employment Insurance [EIS] (monthly salary capped at 5,000 MYR) 0.20%
Human Resource Development Fund (for companies with over 10 employees)1.00%

Employee Payroll Tax Contributions

In Malaysia , the typical estimation for employee payroll contributions cost is around 11.70% - 17.20%%.

Tax TypeTax Rate
Provident Fund (for employees under the age of 60)11.00%
Provident Fund (for employees over the age of 60)0.00% - 5.50%
Social Security [SOCSO] (for employees below the age of 60, capped at 24.75 MYR monthly contribution)0.50%
Employment Insurance [EIS] (monthly salary capped at 5,000 MYR)0.20%

Individual Income Tax Contributions

The computation of individual income tax in Malaysia follows a progressive rate structure. Other variables, such as household status and the number of dependents, can influence the overall tax rates.

Income BracketTax Rate
0 - 5,000 MYR0%
5,001 MYR - 20,000 MYR1%
20,001 MYR - 35,000 MYR3%
35,001 MYR - 50,000 MYR6%
50,001 MYR - 70,000 MYR11%
70,001 MYR - 100,000 MYR19%
100,001 MYR - 400,000 MYR25%
400,001 MYR - 600,000 MYR26%
600,001 MYR - 2,000,000 MYR28%
2,000,001 MYR - And above30%

Pension in Malaysia

Employees in Malaysia are eligible for the state's old-age retirement pension, provided they meet criteria such as being at least 60 years old (flexible withdrawls allowed after age 55). The pension amount is determined by considering both the employee's and employer's contributions. Payment options include lump-sum payments, monthly payments, or a combination of both.

Info Icon

The tax-related information provided in this guide is intended for general guidance and informational purposes only. Reach out to our dedicated team for insights on remote hiring in Malaysia tailored to your needs.

CTA Image showing employees in various countries across the globe
Employee Cost Calculator

Get an instant breakdown of the true costs of hiring in Malaysia.

Calculate Now Default Icon Hover Icon

Leave Entitlements And Company Policies In Malaysia

Mandatory Leave Entitlement in Malaysia

The annual leave entitlement in Malaysia is 8 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Malaysia

In Malaysia, there are 11 recognised public holidays in a calendar year, which are separate from annual leave. The initial five holidays are national holidays observed throughout Malaysia, and employers have the flexibility to select 6 out of the following 8 holidays to complete the total of 11 public holidays per year (many of these public holidays vary by state):

HolidayDate
Workers Day1 May
Birthday of Yang di-Pertuan AgongFirst Monday of June
Birthday of Ruler of the Yang di-Pertua Negeri24 August but varies by state
National Day31 August
Malaysia Day16 September
Chinese New YearFebruary, day changes yearly
Nuzul Al-QuranMarch, day changes yearly
Hari Raya PuasaApril, day changes yearly
Wesak DayMay, day changes yearly
Hari Raya HajiJune, day changes yearly
Birthday of the Prophet MuhammadSeptember, day changes yearly
DeepavaliOctober/November, day changes yearly
Christmas Day25 December

Paid Time Off in Malaysia

Paid leave is specified in the employment contract, typically starting at 12-15 days per year and expanding with increased seniority. Accrual occurs from January to December and is contingent on the employee's length of service:

  • First 2 years of service: 8 days paid leave per year
  • 2-5 years of service: 12 days paid leave per year
  • More than 5 years of service: 16 days paid leave per year

Maternity Leave In Malaysia

In the private sector in Malaysia, pregnant employees are entitled to 98 days of fully paid maternity leave, commencing no earlier than 30 days before the due date. They can resume work at any point during this period with the employer's and a medical practitioner's consent. This benefit is applicable for the employee's first five surviving children and if the employee has worked for the employer for at least 90 days continuously in the four months before they give birth.

Paternity Leave In Malaysia

Married fathers with at least a year of service in Malaysia are eligible for 7 consecutive days of fully paid paternity leave per birth if the same employer has employed them for at least 12 months before the commencement of the paternity leave. To avail this leave, employees need to notify their employers 30 days before the expected due date.

Sick Leave In Malaysia

The employment contract outlines paid sick leave requirements and the necessity of a valid medical certificate. The compensation during this leave is determined by the employee's length of service:

  • Less than 2 years of service: 14 days sick leave per year
  • 2-5 years of service: 18 days sick leave per year
  • More than 5 years of service: 22 days sick leave per year
  • Employees admitted to the hospital: 60 days hospitalisation leave per year (in addition to regular sick leave)

Parental Leave In Malaysia

There is no provision for shared parental leave that allows parents to divide a set amount of leave between them.

Employment Termination and Severance Policies in Malaysia

Termination Process in Malaysia

In Malaysia, terminations must be justified, and at-will termination does not apply. Acceptable reasons for termination include:

  • Voluntary employee resignation
  • Mutual agreement
  • Contract expiration
  • Unilateral decision by the employer (based on probation period, objective reasons, disciplinary dismissal, inadequate job unsuitability)

Notice Period in Malaysia

Workers in Malaysia have the right to minimum notice periods, and either party can offer payment in lieu as an alternative to giving notice. The duration of the notice periods depends on the length of their employment:

  • Less than 2 years of service: 4 weeks notice
  • 2-5 years of service: 6 weeks notice
  • More than 5 years of service: 8 weeks notice

Severance in Malaysia

Severance pay is compulsory in Malaysia when applicable. The amount of payment varies based on the duration of service:

  • First 2 years of service: 10 days severance pay at regular salary pay rate
  • 2-5 years of service: 15 days per year of service
  • More than 5 years of service: 20 days per year of service

Back to Top

Copied to Clipboard

Woman with glasses
Woman with glasses

Take your business to new places

Employer of Record for Malaysia

  • hire icon Hire employees without entity setup.
  • handshake icon Full compliance, we assume 100% liability.
  • gift icon Handle local payroll and benefits seamlessly.
  • headphones icon 24/5 responsive real-human support.
  • money icon Transparent pricing, no hidden fees.

FAQS

FAQs About Hiring In Malaysia

Playroll makes growing your team in Malaysia effortless. Ready to start?

The HR Platform built to scale your global team.