Guide to hiring employees in Malaysia

Employee Benefits in Malaysia

In the Employment Act 1955, employers are legally obligated to provide their employees in Malaysia with certain basic rights and support. However, they are encouraged to develop additional policies that go beyond these fundamental requirements.

Benefits in Malaysia can be broken down into two categories: Mandatory and optional.

Mandatory benefits include leave entitlement, taxes, capped working hours of up to 48 hours per-week, taxes, and wages.

On the other hand, optional benefits typically run the gamut of:

• Medical, optical, dental, and/or life insurance
• Flexible working hours
• Bonuses
• Overtime pay
• Personal and professional training
• Paid or subsidied gym memberships
• Travel and/or parking allowance
• Additional paid leave

When thinking about which optional benefits to implement, consider them from the perspective of your staff. Thinking about what is most meaningful to their needs and how you can help them at every stage of growth helps you understand what they need from you.

This will not only result in more loyal and productive employees, but it will also help you retain them and positively impact your bottom line.

Types of leave available in Malaysia

According to the Employment Act 1955 (EA), all employees in Malaysia are entitled to a certain number of leave requirements.

Annual Leave

Section 60E of the EA outlines the annual leave entitlement for employees in Malaysia as follows:

• For the first two years of service, an employee is entitled to eight days of leave for every 12 months of continued service.
• For two to five years of service, an employee is entitled to 12 days of leave for every 12 months of continued service.
• For five years and more of service, an employee is entitled to 16 days of leave for every 12 months of continued service.

For employees that don’t complete 12 months of continuous service with the same employer, their annual leave will be prorated according to the number of months of completed service prior to their contract being terminated.

Malaysia public holidays

Public holidays in Malaysia occur on both a national and state level. Employees are entitled to 11 gazetted public holidays according to Section 60D of the EA, five of which must be:

• National Day,
• The Birthday of Yang-Di Pertuan Agong,
• The Birthday of the Ruler or the Yang di-Pertua Negeri or Federal Territory Day,
• Worker’s Day
• Malaysia Day

For the remaining six, it is up to the employer to determine and list which gazetted public holidays will be observed by the company.

In addition, any day that is declared as a public holiday by the Prime Minister under section 8 of the Holidays Act 1951 will entitle employees to a paid public holiday on that day. For public holidays that fall on a rest day (I.e. the weekend), it will be carried forward to the next working day.

Sick Leave

Paid sick leave in Malaysia is based on an employee’s number of years of service. Section 60F of the EA declares that an employee is entitled to:

• 14 days of paid sick leave for less than two years of service
• 18 days of paid sick leave for two to five years of service
• 22 days of paid sick leave for more than five years of service

If hospitalisation in needed, the employee is eligible for total of 60 days of paid sick leave per calendar year. However, the must be able to provide a medical certificate and inform the employer within 48 hours or run the risk of being considered as absent without permission.

Maternity and Paternity Leave

In Malaysia, female employees are entitled to up to 98 consecutive days of paid maternity leave. They can also receive a maternity allowance if they have less than five surviving children and have been employed by the employer for at least 60 days in the 3 months preceding their delivery date.

The Employment (Amendment) Act 2022 now also grants working fathers a total of seven days of paid paternity leave.

Attracting Malaysian talent

As competition increases and becomes more globalised, companies must compete for talent by offering more than just a high salary. According to Digital News Asia, eight out of 10 employees in Malaysia want to continue working from home while 89% of employees feel training and development are necessary to helping them stay relevant in an evolving job market. To confront this new wave of employee expectations, hiring managers must find ways to push the boundaries to meet candidates' expectations.

Here are some of the ways businesses can attract top talent in Malaysia:

Implement policies that promote work-life balance

In a recent survey, 88% of Malaysians have expressed that they want work-life balance. Covid-19 brought about a change in perspective in and employees in Malaysia today highly value working for companies that promote employee wellbeing and flexibility.

Upskilling and reskilling

As business pick up pace and digitisation accelerates in Malaysia, 9 out of 10 employees are interested in upskilling and reskilling. Many have even resorted to taking personal initiatives to upskill themselves. Companies that can help workers bridge their skills gap and provide them with various L&D resources will be the ones to stand out from the competition and appeal to a talent pool hungry for the opportunity to develop their skills and thrive in a digitally dominant business climate.

Career growth opportunities

Job seekers who are high performers and talented are always keen on learning new things, so they're always interested in joining organisations where there are opportunities for career growth. Whether these opportunities take the form of mentorships or professional development plans, business should focus on providing candidates with clear information about potential career pathways within the company.

Termination of employment in Malaysia

In Malaysia, any termination of employment must be done with "just cause or excuse." The following are the most widely recognised types of just cause or excuse for terminating an employment contract:

• Misconduct
• Retrenchment
• Poor performance
• Retirement
• The expiry of a legitimate fixed-term contract
• Resignation
• Mutual agreement

The burden of proof in an unfair dismissal case is on the employer. They must show that they terminated the employment contract with just cause or excuse.

An employee who believes they were fired without reason or justification can file a written request with the Director-General of Industrial Relations (DGIR) to be reinstated to their previous position.

If the DGIR believes there is no likelihood of these representations being settled, they may be directed to an industrial court.

Notice Period

EA Employees are entitled to the following minimum notice periods:

• 4 weeks’ notice if the employee has been so employed for less than 2 years on the date on which the notice is given.
• 6 weeks’ notice if the employee has been so employed for 2 years or more, but less than 5 years on such date.
• 8 weeks’ notice if the employee has been so employed for 5 years or more on such date.

For non-EA Employees, the notice period is as stated in the employment contract, and if the contract is silent, a “reasonable” notice period will be implied.

Alternatively, a payment in lieu of notice can be made by either party.

Notice of termination is not required if there is a serious misconduct or a “wilful breach” of the employment contract.

Severance Pay

EA Employees who have been employed for 12 months or more are entitled to the following minimum statutory severance payments pursuant to the Employment (Termination and Lay-Off Benefits) Regulations 1980:

• 10 days’ wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for a period of less than 2 years.
• 15 days’ wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for 2 years or more but less than 5 years.
• 20 days’ wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for 5 years or more.

For non-EA Employees, the entitlement to severance payments depends on the employment contract.

If the contract is silent, there is a general expectation that a financially able employer should pay reasonable severance compensation.

Probation Period

Probationary periods vary between companies. It is common to see probation periods of 1–6 months. Probationers are usually entitled to the same security of tenure as permanent employees, and any non-confirmation of employment during or at the termination of the probationary period must be reasonable.