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As with any country, it is important for businesses to understand the costs involved in hiring and retaining employees. Businesses must consider a range of costs, from minimum wages to termination compensation, in order to efficiently manage their budget. This guide aims to provide a comprehensive overview of the expenses involved with employing staff in Malaysia for both new business owners seeking to understand the costs or an existing business planning to hire new talent.
Key takeaways
- The minimum monthly wage is RM 1,500. Employers must also pay overtime wages for any work exceeding regular work hours.
- Employees are entitled to paid annual leave, sick leave and hospitalisation depending on their length of employment.
- Employers must register their employees with the Employee Provident Fund and make contributions by the 15th of the following month.
- Employees earning are entitled to termination compensation if they have completed a certain number of years of service, but those who are dismissed for misconduct, voluntarily terminate their contract or retire are not entitled to severance pay.
Employee wages
Minimum wage
Malaysia has increased the minimum monthly wage from RM 1,200 to RM 1,500 in May 2022. The minimum hourly and daily wages are as follows:
- Minimum hourly rate – RM 7.21
- Daily minimum wage:
- Four working days – RM 86.34
- Five working days – RM 69.23
- Six working days – RM 57.69
Overtime wages
In Malaysia, employees are only permitted to work 104 hours of overtime each month, equalling up to an average of less than four hours per day of overtime every month.
Overtime calculations
There are three different rates for overtime pay, which are normal day, rest day and public holiday rates.
- Normal workdays
For overtime performed in normal workdays, employers must pay a rate of at least 1.5 times of the hourly rate.
- Rest days
If employees paid on a monthly basis is required to work on a rest day, they are entitled to:
- Half the ordinary rate of pay for work done if it does not exceed half of the normal work hours.
- One days’ wage at the ordinary rate of pay for if the employee works for more than half of their normal work hours but not exceeding the normal work hours per day.
If employees are paid daily, hourly or other similar pay rates, they are entitled to:
- One day’s wage at the ordinary pay if it does not exceed half of the normal work hours.
- Two day’s wage at the ordinary rate of pay if the employee works for more than half of the normal working but not exceeding the normal work hours per day.
Regardless of whether they are paid on a monthly or daily/hourly basis, the employee is entitled to overtime pay of twice their hourly rate of pay for any work done on a rest day in excess of the regular working hours.
Paid leave entitlement
Employees are entitled to paid annual leave depending on the period of employment as follows:
Number of leave days | Years of employment |
Eight days | One to two years |
12 days | Two to five years |
16 days | More than five years |
The number of paid sick leaves is also determined by the length of employment. Employees who are not required to be hospitalised are entitled to:
Number of leave days | Years of employment |
14 days | One to two years |
18 days | Two to five years |
22 days | More than five years |
If the employee requires hospitalisation, the employee will be entitled to 60 days of paid sick leave.
In addition to mandatory leave entitlements, there are other types of leave in Malaysia that are generally unpaid and subject to employer approval. For learn more about leave entitlement in Malaysia, read here.
Employee provident fund
Employers are required to register the employee with the Employee Provident Fund (EPF) within seven days. EPF contributions must be made by the 15th of the following month.
The EPF contribution rates for local employees are the following:
Monthly salary | RM 5,000 and below | More than RM 5,000 | ||
Employee’s status | Employer’s contribution rate | Employee’s contribution rate | Employer’s contribution rate | Employee’s contribution rate |
Residents ages below 60 | 13% | 11% | 12% | 11% |
Residents aged 60 and above | 4% | 0% | 4% | 0% |
Permanent residents ages below 60 | 13% | 11% | 12% | 11% |
Permanent residents ages 60 and above | 6.5% | 5.5% | 6% | 5.5% |
Non-residents ages below 60 (registered as a member before 1 August 1998) | 13% | 11% | 12% | 11% |
Non-residents aged 60 and above (registered as a member before 1 August 1998) | 6.5% | 5.5% | 6% | 5.5% |
Non-residents ages below 60 (registered as a member on or after 1 August 1998) | RM 5.00 | 11% | RM 5.00 | 11% |
Non-residents aged 60 and above (registered as a member on or after 1 August 1998) | RM 5.00 | 5.5% | RM 5.00 | 5.5% |
Social security contribution
Companies must register new employees with the Social Security Organisation (SOCSO) within 30 days from the day of starting work. While most employees are eligble for the SOCSO scheme, there are certain employee categories who are not covered:
- Public sector employees, including civil servants and employees of statutory bodies and local authorities.
- Self-employed individuals
- Independent contractors and freelancers
- Domestic workers
- Members of the armed force and police force
Social security contribution rates
The social security rates in Malaysia are as follows:
Employee’s status | Employer’s contribution rate | Employee’s contribution rate |
Age below 60 | 1.75% | 0.5% |
Age above 60 | 1.25% | 0% |
Foreign workers | 1.25% | 0% |
The maximum monthly contribution is RM 4,000. The employer and employee portions of the monthly SOCSO contribution are both due by the 15th of the following month. Every day that a contribution is not paid will result in a 6% annual late payment interest charge being added.
Termination compensation
Employees employed for less than two years are entitled to 10 day’s wage for every service year completed.
Employees who have been employed for two to five years are entitled to 15 days’ wage for every year completed, and employees of five or more years are entitled to 20 days’ wage for every year completed.
Employees who are dismissed for misconduct, voluntarily terminate their contract or retire are not entitled to severance pay.
How Acclime can help with your HR needs
A thorough understanding of the total costs associated with employees is critical for business owners in order to accurately forecast and allocate budgets for their business operations. Employee costs include payments such as provident and social security contributions, paid time off and severance pay in addition to their salary.
Acclime provides professional human resource services such as PEO, payroll and HR administration. Our in-country experts can handle all of your staff-related tasks, allowing you to focus on core business functions rather than time-consuming administrative tasks. Do not hesitate to contact us if you need support with employment or HR issues.
Related guides
- How to convert contractors to employees in Malaysia
- How to hire employees in Malaysia
- How to terminate employees in Malaysia
- Incorporation vs EoR in Malaysia
- Understanding employment law in Malaysia
- Understanding employees provident fund (EPF) in Malaysia


About Acclime.
Acclime is Asia’s premier tech-enabled professional services firm. We provide formation, accounting, tax, HR and advisory services, focusing on delivering high-quality outsourcing and consulting services to our local and international clients in Malaysia and beyond.