Labor Code Provisions in Malaysia
Under the Employment Act 1955, employees are entitled to a range of benefits such as annual paid leave, sick leave, maternity leave, and paid public holidays. As an employer, it’s essential to ensure these entitlements are clearly stated in your employment contracts and fully comply with the Act’s standards.
Minimum Age
To be eligible for employment in Malaysia, a person must be at least 15 years old. However, this restriction varies depending on the type of work performed by the employee. For light work in family businesses or certain approved trades, individuals as young as 13 may be employed, with limitations.
Minimum Wage Payment
In Malaysia, the government has implemented a mandatory minimum wage under the Minimum Wages Order 2022. The minimum wage is set at RM 1,500 per month, though some rural or small enterprises may follow a different schedule. Employers must pay wages at least once a month, and wages must be paid no later than 7 days after the end of the wage period. Any overtime worked must be settled within 14 days after the end of the wage period.
Working hours and overtime law in Malaysia
The following are the legal requirements for working hours and overtime under the Employment Act:- Employees are only allowed to work a total of 48 hours per week, or 8 hours a day
- Employees may not work more than 5 continuous hours without a break of at least 30 minutes
- Employees cannot work more than 12 hours a day, including overtime, except in particular circumstances such as emergencies or unforeseen interruptions
- Employees are entitled to a rest day every week, which is a non-working day. They should receive at least one rest day per week
- If employees are required to work on a rest day, they are entitled to two times their daily wage for any work performed
For higher earners and managerial employees who earn more than RM 2,000 per month, the rules around working hours and overtime may not apply, and are typically agreed upon between the employer and employee. In practice, office hours in Malaysia are typically from 9 a.m. to 6 p.m., with most employees working five days a week. Paid Annual Leave
In Malaysia, employees are entitled to paid annual leave if they have worked for at least 12 months. The number of days of leave increases with the employee’s length of service:
Malaysia's Sick Leave Rules
The statutory requirement and common practice for sick leave and hospitalization leave in Malaysia are as follows:
Minimum number of months in service
Paid hospitalization leave (including sick leave)
Employees are entitled to 14 days of paid sick leave per year if they have worked for fewer than two years. If they have worked for more than 5 years, they are entitled to 22 days of paid sick leave annually.
Upon return to work, the employee is also required to present a medical certificate from an approved medical practitioner or hospital.
Minimum number of months in service
Minimum number of months in service
Paid hospitalization leave (including sick leave)
Public Holidays
Under the Employment Act 1955, employees in Malaysia are entitled to 11 paid public holidays. Of these, 5 public holidays are mandatory:- National Day (Hari Merdeka)
- The Birthday of the Yang di-Pertuan Agong
- The Birthday of the Ruler or Governor of the State
- Labour Day
- Malaysia Day
If an employee is required to work on a public holiday, they must be compensated with an extra day’s pay or a day off in lieu. If a public holiday falls on a rest day, the next day is treated as a paid public holiday. Health Insurance
Private health insurance is not a requirement under the Employment Act in Malaysia. However, employers must contribute to the Social Security Organization (SOCSO), which covers occupational injuries and diseases. Additionally, employers must contribute to the Employees Provident Fund (EPF), which provides some health benefits under its disability retirement scheme.
Many larger companies in Malaysia offer additional private health insurance as part of their employee benefits. This is especially common in industries with highly skilled workers, but smaller businesses may not always provide this benefit.
For companies hiring foreign workers, employers are required to provide Foreign Worker Hospitalization and Surgical Insurance Scheme (FWHS) coverage.
Malaysia's Parental Leave
Under the Employment Act 1955, female employees who have been employed for more than 90 days are entitled to paid maternity leave. The benefits include:- 60 consecutive days of paid maternity leave
- Employers are not allowed to terminate female employees who are on maternity leave
- Employers must pay maternity leave in full if the employee is dismissed without cause within 3 months of taking maternity leave
- Paternity leave: As of 2022, male employees in the private sector are entitled to 7 days of paid paternity leave
Malaysia Law on Probation Period
There are no specific clauses under the Employment Act regarding a probation period in Malaysia. However, it is common practice for employers to specify a probation period of 3 to 6 months for new employees. During this period, either party may terminate the employment with shorter notice compared to a confirmed employee.
Malaysia’s Employment Law on Termination
Termination of employment in Malaysia can occur when either the employee or the employer ends the employment relationship. Termination may occur for the following reasons:- The employee resigns; the employer terminates the employee; or the employee is dismissed
- When a project or contract period ends, the employment terms must be followed as per the contract
- Both parties must adhere to the termination terms and conditions outlined in the contract of service If the contract does not specify, the Employment Act 1955 provisions should be followed
Notice Period
In Malaysia, the notice period required for terminating an employment contract depends on what is outlined in the contract of service. However, under the Employment Act 1955, the following are common notice periods:- 4 weeks’ notice if the employee has been employed for less than 2 years
- 6 weeks’ notice if the employee has been employed for 2-5 years
- 8 weeks’ notice if the employee has been employed for more than 5 years
Either party can terminate the contract by giving the appropriate notice or offering payment in lieu of notice. Serious breaches of contract may justify immediate termination without notice. Employees may also use their accrued annual leave to offset the notice period.
It is common practice for employers to request a 2-week notice period during probation and a 1-month notice once employment is confirmed. Layoffs, Retrenchment or Downsizing
In Malaysia, layoffs or retrenchment must be handled in accordance with the Employment Act 1955. The legal requirements for retrenchment are as follows:- Employees must be given reasonable notice before the retrenchment takes effect
- Employers should provide retrenchment benefits if the employee has worked for the company for more than 12 months. The amount of retrenchment benefits is typically agreed upon in the employment contract or company policies
- Retrenchment benefits typically include severance pay, which is based on the length of service:
- 10 days’ wages for every year of service if the employee has been employed for less than 2 years
- 15 days’ wages for every year of service if the employee has been employed between 2 to 5 years
- 20 days’ wages for every year of service if the employee has been employed for more than 5 years
Employees who have worked for less than 12 months are generally not entitled to retrenchment benefits unless specified in the employment contract. Retrenchment payments are typically based on the company's financial situation. Employees Provident Fund (EPF) Contributions
The Employees Provident Fund (EPF) is a mandatory retirement savings plan for Malaysian employees. The key regulatory requirements and practices are as follows:
- EPF is mandatory for all Malaysian citizens and permanent residents. Employers and employees are both required to contribute to EPF each month
- Employees contribute 11% of their salary, while employers contribute 13% for those earning RM 5,000 or less and 12% for those earning above RM 5,000
- For foreign workers, EPF is not mandatory, but they may voluntarily contribute if they wish
- EPF contributions must be submitted by the 15th of each month by employers, covering both the employer’s and employee’s share
Non Statutory Benefits or Perks:
Employees in Malaysia may also receive additional non-statutory benefits or perks at the discretion of their employers. Some of the most common perks include:
- Private Medical Insurance – Employers may offer additional healthcare coverage beyond SOCSO
- Per Diem for Travel-Related Jobs – Employees required to travel for work may receive daily allowances for meals and expenses
- Relocation Package – Relocation benefits may include coverage for moving expenses, airfare, housing allowances, and education for children of expatriates. These packages are often divided into categories like full expat, semi-expat, and local terms
- Employee Stock Purchase Plans (ESPP) – In some companies, top-performing employees are eligible for stock purchase plans or stock options
- Corporate Memberships – Memberships for organizations like professional associations or social clubs
- Continuing Education – Employers may offer subsidies for educational programs or professional certifications
- Leisure Activity Coupons – Discounts or coupons for leisure activities, such as movie tickets or travel deals
- Gym Memberships – Subsidized or fully-covered memberships for fitness clubs
- Telecom Plans – Corporate-sponsored mobile or internet plans for employees
Penalties
If a company fails to comply with the provisions of the Employment Act 1955, it could face serious consequences. For each violation, the company may be fined up to RM 10,000. Additionally, managers or individuals found guilty of non-compliance may face imprisonment for up to 12 months. For repeated violations, the penalties may include higher fines and longer imprisonment periods.
In terms of employment contracts, it’s common practice in Malaysia to require two weeks’ notice during the probation period and one month’s notice once the employee has been confirmed.
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