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Employers must comply with laws related to employment and labour and should refrain from any unfair labour practices. We have listed some of the important provisions that employers must know when hiring, managing and terminating employees.
Let’s start.
Hiring foreign employees
Companies that are hiring foreigners must obtain foreign quota approval from the Local Centre of Approval from the Ministry of Home Affairs.
Foreign employees are allowed to work with Malaysian companies operating in the agriculture, construction, manufacturing, plantation and services industries.
Employers should know that only certain positions are available for foreigners and are usually positions that are highly skilled or technical positions that cannot be filled by locals.
Some of the positions include:
- Top managerial positions for foreign companies in Malaysia
- Professional or mid-managerial positions
- Highly skilled, technical positions that require experience
Once the requirements are met, employers must submit all the documents to the Immigration Department.
Upon quota approval, the employer must submit the employment pass application and a letter explaining why the position must be filled by a foreigner to the Immigration Department. Once approved, a letter of approval for the employment pass will be issued.
Leave entitlement
Public holidays
Annual leave
Employees in Malaysia are entitled to paid annual leave depending on the number of years of service.
Years of service | Leave per year |
One to two years | Eight days |
Two to five years | 12 days |
More than five years | 16 days |
Sick leave
Full-time employees are entitled to paid sick leave in accordance with the length of service with the company.
Years of service | Leave per year |
Less than two years | 14 days |
Two to five years | 18 days |
More than five years | 22 days |
In the case of hospitalisation, employees are eligible for 60 days of hospitalisation leave a year in addition to the number of days for sick leave.
Maternity leave
Female employees in the private sector are entitled to 60 days of maternity leave, while employees in the public sector are entitled to 90 days of maternity leave.
The Malaysian 2020 Budget extended the maternity leave for private employees to 90 days starting on 1 January 2021.
Working hours in Malaysia
The regular working hours in Malaysia are eight hours a day and 48 hours a week.
If an employee is required to work overtime on a normal working day, he/she must be paid 1.5 times the hourly wage rate.
Other rates for overtime work are as follows:
Overtime work hours | Overtime pay calculation |
Rest day but is required to work normal working hours | Overtime work does not exceed half the normal work hours: 1/2 of the normal rate of pay Overtime work is more than half but does not exceed the regular work hours: one full day wage at the normal rate of pay |
Rest day but is required to work in excess of normal working hours | Two times the hourly wage |
Public holiday but is required to work normal working hours | Two days wage |
Public holiday but is required to work in excess of the normal working hours | Three times the hourly wage |
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Employees provident fund
The employees provident fund (EPF) is a retirement savings scheme for employees in Malaysia comprising of the employer’s and employee’s monthly contributions.
Employers must register with the EPF within seven days of hiring their first employee and also register the employee as an EPF member.
The contribution rate for employees and employers are as follows:
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% | 9% | 12% | 9% |
Residents ages 60 and above | 4% | 0% | 4% | 0% |
Permanent residents ages below 60 | 13% | 9% | 12% | 9% |
Permanent residents ages 60 and above | 6.5% | 5.5% | 6% | 5.5% |
Non-residents ages below 60 | RM 5.00 | 9% | RM 5.00 | 9% |
Non-residents ages 60 and above | RM 5.00 | 5.5% | RM 5.00 | 5.5% |
Types of employment and contracts
Employment contracts
Employment contracts are required for employments that are longer than one month and must include the following information:
- Job title
- Wage rate
- Wage period
- Working hours
- Employment benefits
- Work location
- Leave and holiday entitlement
- Probationary period
- Confidentiality requirements
- Termination notice
Termination of employment
Termination notice
According to section 12 of the Employment Act 1955, the employer or employee must give notice within the following lengths:
Length of notice | Years of service |
Four weeks | Employed for less than two years |
Six weeks | Employed between two to five years |
Eight weeks | Employed for longer than five years |
Reasons of termination
Employers can terminate an employee’s contract under the condition that the termination is justified, done in good faith and fair.
The court may be involved if the dismissal is considered unfair, and to avoid an unfair dismissal claim, the termination must be with just cause and excuse.
Just cause and excuse means that the employer has a justified reason to terminate the employee. The reasons may include:
- Major misconduct, such as theft, sexual harassment and failure to follow safety protocols
- Negligence in performing duties
- Poor performance
- Redundancy and closing the business
- Retirement
- Death of employees
- Breach of the contract
- Termination at the end of the probation period
- Expiration of fixed-term contract
Severance payment
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.
Employers must ensure that they fully comply with the employment and labour laws in Malaysia to avoid any penalties and treat employees fairly. Feel free to contact Acclime if you have any additional questions about employment.
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