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Hiring local & foreign employees in Malaysia.

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Hiring local & foreign employees in Malaysia

We have put together a guide on hiring local and foreign employees in Malaysia.

To hire foreign and local employees, Malaysian companies must follow certain recruitment and employment requirements to ensure employees are legally hired.

Let’s find out more.

Hiring local employees

Minimum wage for locals in Malaysia

Malaysia has increased the minimum monthly wage to RM 1,200 in 56 cities and municipal areas. The minimum hourly and daily wages are as follows:

  • Minimum hourly rate – RM 5.77
  • Daily minimum wage:
    • Four working days – RM 69.23
    • Five working days – RM 55.38
    • Six working days – RM 46.15

The minimum monthly wage for cities and municipal council areas other than the 56 areas is RM 1,100.

The minimum daily and hourly wage rates are:

  • Minimum hourly rate – RM 5.29
  • Daily minimum wage:
    • Four working days – RM 63.46
    • Five working days – RM 50.77
    • Six working days – RM 42.31

Employee provident funds

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:

Employee’s status

Employer’s contribution

Employee’s contribution

Monthly salary of RM 5,000 or below

Residents ages below 60

13%

9%

Residents aged 60 and above

4%

0%

Permanent residents ages below 60

13%

9%

Permanent residents aged 60 and above

6.5%

5.5%

Monthly salary of more than RM 5,000

Residents ages below 60

12%

9%

Residents aged 60 and above

4%

0%

Permanent residents ages below 60

12%

9%

Permanent residents aged 60 and above

6%

5.5%

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Hiring foreign employees

How can foreigners legally work in Malaysia?

Malaysia offers three types of work permits for foreigners who intend to work in Malaysia, these are the employment pass, temporary employment pass and the professional visit pass.

Employment pass

The employment pass allows foreign employees to legally work in Malaysia under a contract and is issued to employees who have specific skills for technical or managerial jobs.

The employment pass consists of three categories, which are category I, category II, and category III.

Employment pass type

Salary

Employment contract

Renewable

Bring dependents and/or foreign domestic helpers

Category I

RM 10,000 and above

Up to five years

Yes

Yes

Category II

RM 5,000 to RM 9,999

Up to two years

Yes

Yes

Category III

RM 3,000 to RM 4,999

Up to 12 months

Yes

No

Companies must receive approval from the Local Centre of Approval of the Ministry of Home Affairs (MOHA) or other relevant authorities before hiring foreign employees as Malaysia restricts the number of foreign employees allowed to work in a Malaysian company.

Other authorities include:

  • Malaysia Investment Development Authority (MIDA)
  • Multimedia Development Corporation (MDEC)
  • Central Bank of Malaysia (BNM)
  • Securities Commission (SC)
  • Malaysian Biotechnology Corporation
  • Expatriate Committee (EC)

The employment pass is only eligible for certain positions, usually for highly-skilled managerial technical positions which cannot be filled by locals. These positions include:

  • Top managerial posts for foreign companies in Malaysia
  • Professional or mid-managerial positions
  • Highly-skilled, technical positions

Employers are responsible for applying for an employment pass on the foreign employee’s behalf, and once the quota is approved, the employer must submit the following documents to the Immigration Department of Malaysia:

  • Employment pass application form
  • Approval letter from the relevant authority
  • Passport copy
  • CV and education certificate
  • Company profile
  • Employment contract

Once the foreign employee has obtained the employment pass, the foreign employee can only work for the company that is in the employment pass. In the case that the foreigner moves companies, an application for a new employment pass must be submitted.

Temporary employment pass

The temporary employment pass is issued to semi-skilled foreign workers in specifically approved sectors.

The two categories of the temporary employment pass that are issued:

  1. To foreign workers in the agriculture, construction, manufacturing, plantation and services sector
  2. Foreign domestic helpers

The temporary pass is only issued to citizens of the following countries:

  • Bangladesh
  • Cambodia
  • India
  • Indonesia
  • Kazakhstan
  • Laos
  • Myanmar
  • Nepal
  • Pakistan
  • Philippines
  • Sri Lanka
  • Thailand
  • Turkmenistan
  • Vietnam

Requirements for the temporary employment pass

Before applying for the temporary employment pass, employers must obtain approval and pay the levy at the Local Centre of Approval, Ministry of Home Affairs.

The following documents are required when applying for a visa approval letter from the Immigration Department of Malaysia:

  • Visa with reference (VDR) application form
  • Letter of approval from the Ministry of Home Affairs
  • Receipt of levy payment
  • Form IMM.12
  • Deposit/insurance guarantee/bank guarantee
  • Copy of worker’s passport
  • Passport-sized photo of the worker
  • Medical report from the worker’s country of origin

Once the visa approval letter is issued, the employee will need to apply for a VDR at the Malaysia Embassy. The employee must also need to obtain an Immigration Security Clearance (ISC) from an ISC Centre in the country of origin.

After receiving the VDR, the employee can travel to Malaysia. To obtain the temporary employment pass, the employee must undergo a FOMEMA medical examination within 30 days.

Professional visit pass

The professional visit pass is issued to foreign employees with professional qualifications or skills to work in Malaysia.

They are only allowed to provide services or undergo training with a Malaysian company on behalf of an overseas company for a period of 12 months.

The following individuals are eligible to apply for a professional visit pass:

  • Experts or volunteers
  • Filming and performance artists
  • Government officials
  • International students attending religious courses in Malaysia
  • Religious workers (priests, gurukkal, granthi, guru dharma)

The sponsoring company must submit an application and the following documents to the Immigration Department in Malaysia:

  • 12 and 38 form
  • Passport copies of the foreign employee
  • Passport sized photo
  • Letter of offer from the Malaysian company
  • Academic certificates (for students)
  • CV or resume
  • Bank guarantee (for Chinese applicants)

Once the pass is approved, the employee will need to obtain a VDR before entering Malaysia. Upon receiving the VDR and entering Malaysia, the employee must get a professional visit pass sticker on their passport at the Immigration Department.

Restricted occupations for foreign employees

Foreign employees are restricted from working in certain sectors which are reserved for locals. The following are restricted occupations for foreigners:

  • Bistros
  • Convenience shops
  • Fuel stations
  • Jewellery shop
  • Medical hall
  • Mini markets and supermarkets
  • National strategic interest
  • Non-exclusive restaurants
  • Pavement stores
  • Textile industries
  • Wet market stalls

Are foreign employees entitled to the employee provident fund?

EPF is mandatory for Malaysian residents and permanent residents. However, EPF is not compulsory for foreign employees, but they can choose to contribute to the EPF.

Employee’s status

Employer’s contribution

Employee’s contribution

Monthly salary of RM 5,000 or below

Non-residents ages below 60 (registered as a member before 1 August 1998)

13%

9%

Non-residents aged 60 and above (registered as a member before 1 August 1998)

6.5%

5.5%

Non-residents ages below 60 (registered as a member on or after 1 August 1998)

RM 5.00

9%

Non-residents aged 60 and above (registered as a member on or after 1 August 1998)

RM 5.00

5.5%

Monthly salary of more than RM 5,000

Non-residents ages below 60 (registered as a member before 1 August 1998)

12%

9%

Non-residents aged 60 and above (registered as a member before 1 August 1998)

6%

5.5%

Non-residents ages below 60 (registered as a member on or after 1 August 1998)

RM 5.00

9%

Non-residents aged 60 and above (registered as a member on or after 1 August 1998)

RM 5.00

5.5%

Hiring employees is an essential process for a company, and should ensure that all employees should be hired according to the guidelines and requirements. Hiring foreign employees first requires permission from the Local Centre of Approval of the MOHA or other authorities. If you need help hiring employees, feel free to contact Acclime.

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