How to hire and pay employees in Malaysia

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Malaysia

Before hiring

EMPLOYEES IN
Malaysia

Before hiring employees in Malaysia, there are a few important things you’ll need to know. Firstly, in Malaysia, employees pay between 0% and 30% in taxes depending on their income bracket. They also pay social security contributions up to 11.70%. 

It’s also important for employers to know that employees in Malaysia can be dismissed for causes such as misconduct or poor performance. Employees dismissed for reasons not connected to their conduct are entitled to severance pay that depends on their length of service.

We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform. 

Get an overview of what you need to know when hiring in Malaysia below.

At a glance

CURRENCY

MYR

OFFICIAL LANGUAGE

MALAY

PAYROLL FREQUENCY

MONTHLY

PUBLIC HOLIDAYS

13

(based on region;
see here
)

EMPLOYER TAXES

UP TO 15.95%

of gross salary

13th / 14th SALARY

N/A

Good to know

  • The number of paid holidays and sick leave available to employees depends on their length of service.
  • There is no paternity leave in Malaysia but some employers can choose to offer this. Mothers in Malaysia are entitled to at least 60 days of fully paid maternity leave if they have been employed in the last four months, and have worked for the same employer for at least 90 days in the nine months prior to childbirth. The leave period can begin one month before the expected delivery date.
  • Probation periods are optional, but commonly range from one to three months. There is no legal difference between an employee on probation and a permanent employee.

Labor laws in

Malaysia

Working hours and overtime

Employees in Malaysia work eight hours daily, 40 hours weekly. 

Any overtime work is paid at the rate of 150% of the standard hourly salary. Overtime work cannot exceed:

  • Eight hours per seven consecutive days
  • 12 hours per seven consecutive days if the employee expresses their consent in writing

Minimum wage

Employment contracts

Probationary period

Probation is optional, but commonly ranges from one to three months. There is no legal difference between an employee on probation and a permanent employee. 

Pensions

IP protection and non-compete agreements

Non-compete agreements are legally void in Malaysia. 

Calculate costs to hire internationally

Benefits and leave in

Malaysia

Vacation time

Paid vacation entitlement in Malaysia depends on the length of service. The breakdown is as follows:

  • Up to two years of employment: Eight days per year
  • Between two and five years: 12 days per year
  • Over five years: 16 days per year

Sick leave

In Malaysia, sick leave entitlement depends on the length of service. The breakdown is as follows:

  • Up to two years of employment: 14 days per year
  • Between two and five years: 18 days per year
  • Over five years: 22 days per year

Maternity and paternity leave

Parental leave

Employees in Malaysia are entitled to at least 60 days of fully paid maternity leave if they have been employed in the last four months, and have worked for the same employer for at least 90 days in the nine months prior to childbirth. The leave period can begin one month before the expected delivery date.

Employers are not required to offer paternity leave.

Holidays

View a list of recognized public holidays in Malaysia here.

Employer tax

Employer social contributions in Malaysia are up to 15.95% of an employee’s salary. This includes contributions for: 

  • Provident Fund (Employees under the age of 60): 12-13%
  • Provident Fund (Employees over the age of 60): 4-6.5%
  • Social Security (SOCSO): 1.75%
  • Employment Insurance (EIS): 0.2%
  • Human Resource Development Fund (Companies with over 10 employees): 1%

Individual tax

In Malaysia, employees pay between 0% and 30% in taxes depending on their income bracket. They also pay social security contributions up to 11.70%. 

Termination in

Malaysia

Employees in Malaysia can be dismissed for causes such as misconduct or poor performance. Employees dismissed for reasons not connected to their conduct are entitled to severance pay that depends on their length of service:

  • Up to two years of employment: 10 days’ wages for each year of service
  • Between 2 to 5 years: 15 days' wages for each year of service
  • More than years: 20 days' wages for each year of service
Termination requirements
Notice period

Notice periods in Malaysia depend on the length of service in the case of both dismissals and resignations. The breakdown is as follows:

  • Less than two years of service: Four weeks notice
  • Two to five years of service: Six weeks notice
  • More than five years of service: Eight weeks notice

Employers can also choose to pay a dismissed employee standard wages in lieu of the notice period.

Severance pay

Start hiring employees in

Malaysia

Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast. 

We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities. 

With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.

Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While Oyster strives to provide current and accurate information, Oyster makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.

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