Guide to hiring employees in Malaysia

Everything you need to know when expanding your Malaysian workforce

malaysia skyline featuring the petronas twin towers (1)
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Malaysia is a prime location for hiring skilled talent, boasting a pipeline of highly literate, tertiary educated, multilingual talent. This is further supported by information in the Global Competitiveness Report 2019 by the World Economic Forum, where Malaysia ranked 6th out of 141 countries in terms of its pay-to-productivity ratio.

There are more than 330,000 students enrolled in tertiary programs at over 240 higher-learning institutions and more than 40% of Malaysians are below the age of 25.

It is easy to immigrate to and settle in Malaysia for work, as the Malaysian government provides expatriates with the Employment Pass (EP).

Capital Kuala Lumpur
Languages spoken Bahasa Malaysia is the official language, but English is widely spoken with a 50 to 60% proficiency rate
Population size 33.8 million
Payroll frequency Monthly
Currency Malaysian Ringgit (MYR)
VAT 10% for sales tax, 6% for service tax

Taxes in Malaysia

Employer contributions in Malaysia

EPF, SOCSO, and EIS are three of the most commonly provided contributions to an employee’s salary in Malaysia.

Employee Provident Fund (EPF). Manages the compulsory savings plan and retirement planning for Malaysia’s private sector employees.

  • 12 to 13% is provided to employees up until the age of 60 years old.
  • 4 to 6.5% is provided to employees over the age of 60 years old.

Social Security Organisation (SOCSO). Also known as PERKESO, it provides social security protection to Malaysia’s private sector employees in case of workplace emergencies such as injuries, illness, or death.

  • 1.75% is contributed by the employer

Employment Insurance Scheme (EIS). Is a financial scheme that collects funds from employers to provide retrenched with re-employment services, career counselling, training allowance, etc.

  • 0.2%

Human Resource Development Fund (HRDF). A mandatory levy payment put in place to ensure that all Malaysian employees have access to training and upskilling resources. All employers are required to register under the Pembangunan Sumber Manusia Berhad Act 2001 (PSMB).

  • 1% of each Malaysian employees’ monthly wages for companies with 10 or more Malaysian employees
  • 0.5% of each Malaysian employees’ monthly wages for companies with five to 9 Malaysian employees.

Employee taxes in Malaysia

Personal income tax falls between 1 to 30%, depending on the employee’s income bracket.

All employees in Malaysia are required to file their income tax for each calendar year by the 30th of April.

Minimum wage in Malaysia

As of May 1, 2022, Malaysia has increased the national monthly minimum wage by 25% from MYR 1200 to MYR 1500. Under the National Wage Consultative Council Act 2011, the Malaysian government is obligated to review its minimum wage every two years.

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.

Business Meeting

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.

Business sharing idea

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.

What are my options for hiring in Malaysia?

For businesses that want to hire team members in Malaysia, Airswift provides a variety of employment solutions that make it easy for you to hire employees efficiently and within full compliance with the local laws.

Our expertise allows us to minimise risk while bearing the administrative responsibilities of hiring and onboarding high-quality candidates while you focus on growing your business.

Hiring options businesses can explore include:

Talent acquisition


Work with an in-country talent acquisition specialist to source high-quality candidates in a competitive landscape.

 Our contract hire services can help you fill temporary roles and provide your business with the agility to respond to shifts in needs and market demand.

For long-term hiring needs, Airswift’s professional search can help you discover talented Malaysian candidates for permanent roles within your business.

Employer of record


For businesses that want to hire remote employees without setting up a physical entity, an Employer of Record in Malaysia simplifies the process of hiring Malaysian employees with minimal compromise on time and expense.

An experienced Employer of Record lets you bypass the complications of physical entity setup and focus on growing your business. Tasks an EOR can help you manage include overseeing locally compliant payroll and managing statutory benefits.

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*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.

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