Malaysia

Contract Types

In Malaysia contracts can be permanent or fixed term.

Probation

There is no legal regulation of probation terms, but it should be specified in the contract. Usually, probation is between 3 and 6 months, however, employees have full rights during the probation period.

Working Hours

Normal hours in Malaysia are 8 hours per day with a maximum of 45 hours per week.

Overtime

Employers must pay a minimum of 150% of base salary for overtime during the week and 200% for overtime worked during holidays and at the weekend. Overtime performed on a public holiday is paid at 300%.

Other

Whilst not mandatory, a 13th month salary is normal in Malaysia, paid at the end of the year. Performance bonuses are also commonly given. Employees must receive a written contract which must include a job description.

Tax rates valid for: 2024

Corporation Tax: 24%

Consumption Tax: Sales tax 10%; Service tax 6%

Employers’ Social Security Contributions: 4% – 13%

Employees’ Contributions: 11% Provident Fund if under 60 (0 – 5.5% for the over 60s) plus other taxes of 0.75%

Income Tax Rates

• Up to 5,000 MYR – 0%
• 5,000 to 20,000 MYR – 1%
• 20,000 to 35,000 MYR – 3%
• 35,000 to 50,000 MYR – 8%
• 50,000 to 70,000 MYR – 13 %
• 70,000 to 100,000 MYR – 21%
• 100,000 to 250,000 MYR,000 – 24%
• 250,000 to 400,000 MYR – 24.5%
• 400,000 to 600,000 MYR – 25%
• 600,000 to 1,000,000 MYR – 26%
• 1,000,000 to 2,000,000 MYR – 28%
• Over 2,000,000 MYR – 30%

Non-resident employees are taxed at a flat rate of 30%.

Notice

Unless specified otherwise in the contract, the notice period varies with service. Up to 2 years’ service, 4 weeks’ notice must be given, rising to 6 weeks with up to 5 years’ service, and 8 weeks thereafter.

A termination agreement with a severance payment in lieu of notice is possible. This requires the agreement of both parties.

Dismissal

Employees can be dismissed for just cause, which includes redundancy and poor performance, with no severance. Correct notice should be given and any outstanding accrued leave (including sick leave) should be paid. In all cases of termination it must be in writing and sent to the relevant government department.

Severance Pay

Severance is payable when the termination is not for just cause and rises with service. 10 days’ salary is payable for each year of employment for the first 2 years, rising to 15 days per year for the next 3 years, and 20 days per year thereafter. Employees should also receive pay in lieu of unused holiday and sick leave.

National Public Holidays:

Minimum 11 days but many employees are entitled to 21 to 25 days depending on the state and the employer.

Lunar New Year* – 10th -12th February

Day Given in Lieu: Yes

Hari Raya Puasa* – 10th – 11th April

Day Given in Lieu: Yes

Labour Day – 1st May

Day Given in Lieu: Yes

Wesak Day – 22nd May

Day Given in Lieu: Yes

The Yang di-Pertuan Agong’s Birthday* – 3rd June

Day Given in Lieu: NA

Hari Raya Haji* – 17th – 18th June

Day Given in Lieu: Yes

Muharram * – 7th – 8th July

Day Given in Lieu: Yes

National Day – 31st August

Day Given in Lieu: Yes

Prophet’s Birthday * – 16th September

Day Given in Lieu: Yes

Malaysia Day – 17th September

Day Given in Lieu: Yes

Diwali – 31st October

Day Given in Lieu: Yes

Christmas Day – 25th December       

Day Given in Lieu: Yes

*Tentative date: Only Federal holidays are listed above and in some states these may not be celebrated. Employers may choose which public holidays to give in addition to the five mandated holidays (in italics above plus the birthday of the ruler of the state where the employee works). The individual states also celebrate other holidays throughout the year, but it is not mandatory for employers to give these days off, though it is normal.

A day in lieu is given only when the holiday falls on a Sunday.

Election days are also public holidays.

Paid legal entitlement (working days)

Leave entitlement increases with service. For the first two years, employees are entitled to 8 days per year. For the following 3 years they receive 12 days’ leave and thereafter they are entitled to 16 days off per year.

Carry over permitted

Employees may carry over their leave for 12 months after which time it is lost. With the employee’s agreement, this carried over leave can be paid out at the normal salary rate.

Payment in lieu allowed

Residual leave must be compensated in cash after termination of employment if it cannot be taken in kind.

Sick

Employees are entitled to 14 days per year of paid sick leave during their first two years. This rises to 18 days for the next 3 years, after which they are entitled to 22 days per year. Should an employee be hospitalised they are entitled to a total of 60 paid days of hospitalisation leave. Any unused sick leave should be paid out on termination.

Maternity

After 4 months’ employment, and a total of 90 days’ employment in the previous 9 months, new mothers are entitled to 98 days of paid maternity leave. This only applies to the first 5 children. Notification must be given at least 60 days before the due date and can commence within 30 days of the due date.

Female employees have protection of employment whilst on maternity leave.

Paternity

New fathers are entitled to 7 days’ paid paternity leave, but some employers will give up to 30 days. To qualify, the new father must have been employed for the previous 12 months and be legally married to the mother. Notice of the intended leave must be given within 30 days.

Parental

There is no legal provision for parental leave in Malaysia.

Adoption Leave

15 days’ leave from the day the couple receive the child.

Bereavement Leave

Most employers give between 1 and 3 days’ paid leave in the event of the death of an immediate family member.

Marriage Leave

Some employers will offer 3 days’ leave on the occasion of an employee’s wedding.

Medical

The Malaysian public healthcare system operates alongside a flourishing private system. Many professional companies will offer private medical insurance to their employees and many plans are available ranging from preventative only packages to comprehensive plans. These may be offered via a group policy, or an allowance, giving the employee the choice of provider. All non residents and expats must have private medical insurance.

Life

This is sometimes offered to employees and includes accident insurance.

Other

Employees are commonly provided with transport allowances.