Malaysia is a country in southeast Asia that is separated by the South China Sea into 2 parts: Peninsular Malaysia and Borneo's East Malaysia. It shares land and maritime borders with Thailand, Brunei, and Indonesia, and maritime borders with Singapore, Vietnam, and the Philippines.

Malaysia is a multiethnic and multicultural country, about half the population is ethnically Malay, with minorities of Chinese, Indian, and indigenous peoples. Kuala Lumpur is the capital and has a growing tech sector with highly skilled services professionals.

1.Minimum wage:

New minimum wage is RM1,700/month, effective 1 February 2025 for employers with ≥5 employees (and all professional categories).

2.Working hours:

Standard workweek: 45 hours/week.
Daily limit: 8 hours/day for normal work.
Spread-over period: Total time at work (including breaks) should not exceed 10 hours/day.

3.Overtime regulations:

150% of regular wage for normal working day beyond 8 hours.

200% of regular wage for rest day work (Weekends).

300% of regular wage for working on a Public holiday; Work on public holiday has its own rate.

4.Employer Contributions:

• Employees Provident Fund (EPF): If monthly salary is under RM5,000- employer contributes 13%; above RM5,000, employer ≈12%.
• SOCSO (Social Security / PERKESO): 1.75% of monthly wages; Capped at RM6,000 wage ceiling.
• EIS (Employment Insurance System): 0.20% of monthly wages; Capped at RM6,000 wage ceiling.
• HRDF (Human Resources Development Fund levy): 1% of monthly wages.
• Foreign Worker Levy & Medical Insurance (SPIKPA): Applicable only to foreign hires, Levy: RM 1,850–10,000/year by employer.

5.Probation:

• Probation is not mandated by law. However, it is a common practice in Malaysia across all sectors.
• Duration: Usually 3 to 6 months (extendable if performance is not satisfactory; however the employer must provide valid reasons to extend probation)
• Probationers are still entitled to: Statutory benefits (e.g., EPF, SOCSO, EIS) & Leave entitlements (pro-rated)

6.Employee Taxes and Contributions:

• EPF (Employees Provident Fund / KWSP): 11% of monthly wages.
• SOCSO (Social Security): 0.5% of monthly wages.
• EIS (Employment Insurance System): 0.2% of monthly wages.
• Income Tax (Monthly / PAYE “PCB”): Malaysia's personal income tax rates for resident individuals are progressive, ranging from 0% to 30%, based on chargeable income. Non-resident individuals are subject to a flat rate of 30% on their total taxable income, without eligibility for personal reliefs.

Annual Leave

Employees under the Employment Act 1955, after 12 months continuous service, are entitled to 8, 12, or 16 days’ paid annual leave depending on service length (<2, 2-5, ≥5 years). Leave for employees with less than 12 months service is prorated. Employee must use statutory annual leave within 12 months after the end of each service year; otherwise entitlement is lost. Any additional leave, accrual method per month, or carry-forward beyond legal minimum depends on contract/employer policy.

Parental Leave

Pregnant employees are entitled to paid maternity leave for 98 days, and can start at most 30 days before the due date. The entitlement to maternity allowance (i.e. paid leave) applies only for the first five children; for the sixth and further children, maternity leave may still be taken but without maternity allowance. Married male employees are entitled to 7 consecutive days paid paternity leave per confinement. Employee must have worked with same employer for at least 12 months immediately before the leave; must notify employer at least 30 days before expected confinement (or as soon as possible after birth). Limited to first five births.

Sick Leave

Employees can take paid sick leave, the length of which depends on the years of employment:

• 0-2 years = 14 days of sick leave
• 2-5 years = 18 days of sick leave
• 5+ years = 22 days of sick leave

Process

The termination process in Malaysia for dismissal without notice is only permitted for serious misconduct or wilful breach of contract, and only after a proper domestic inquiry. The standard under the Industrial Relations Act 1967 is “just cause or excuse.” Notice of termination of an employment contract must be given in writing and sent to the relevant government authorities.

Notice Period

Malaysia does have statutory minimum notice periods under Section 12, Employment Act 1955 (if the contract does not specify longer periods).

Statutory Minimum Notice Periods

• < 2 years service → 4 weeks
• 2–5 years service → 6 weeks
• ≥ 5 years service → 8 weeks

Employers and employees may agree to longer notice in the employment contract.

Severance Pay

• In Mayalsia, severance rules are governed by Employment (Termination and Lay-Off Benefits) Regulations 1980.
• Applies to employees earning ≤ RM4,000/month and with ≥12 months continuous service.

Statutory entitlement:

Years of Service  =  Severance Pay (Days’ Wages per Year of Service):

• < 2 years = 10 days
• 2–5 years = 15 days
• ≥ 5 years = 20 days

Exclusions:

• Employees dismissed for serious misconduct
• Voluntarily resigning employees
• Employees earning > RM4,000/month (unless contract specifies)
• Employers may provide additional severance contractually, but above is the legal minimum.

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While not legally required, it is customary to pay a 13th-month salary payment at the end of each the year in Malaysia. As of 2023, employees can now apply for flexible work arrangements, Employees with at least 6 months continuous service may submit a written request for flexible work (e.g., altered hours, compressed week, remote work) and employers have 60 days to respond with either an agreement or a reason for the rejection. Employer rejection must be for legitimate operational reasons; arbitrary refusal may be challenged under the Industrial Relations Act.