Malaysia Fact Sheet
Malaysia offers a strategic gateway to Southeast Asia, boasting a cost-efficient business environment and a skilled, multilingual workforce. However, navigating its employment landscape requires careful attention to statutory obligations, from EPF and SOCSO contributions to work pass regulations and culturally respectful practices. This guide highlights the key HR considerations for companies planning to hire or operate in Malaysia, ensuring you stay compliant while focusing on growth.
Country: Malaysia
Capital: Federal Territory of Kuala Lumpur
Population (July 2025): 34.2 million
Citizens: 30.9 million (90.1%)
Non-citizens: 3.4 million (9.9%)
Official Language(s): Malay language (Bahasa Melayu), while English is widely used in business and education; Chinese dialects and Tamil are also commonly spoken, reflecting the country’s multicultural society.
Currency: Malaysian Ringgit (MYR)
Time Zone: GMT +8
Main Employment Law: Employment Act 1955 (applicable in Peninsular Malaysia and Labuan; Sabah and Sarawak have separate labour ordinances)
Social Security System: Employees’ Provident Fund (EPF / KWSP), Social Security Organisation (SOCSO / PERKESO), Employment Insurance System (EIS)
Corporate Tax Rate: 24% flat rate for most companies. Resident SMEs (paid-up capital ≤ RM2.5 million and gross income ≤ RM50 million) enjoy reduced rates of 15% on the first RM150,000 of chargeable income and 17% on the next RM450,000.
Malaysia Employment Fact Sheet
Key Compliance & Employer Obligations
1. Employees’ Provident Fund (EPF / KWSP)
Mandatory for Malaysian citizens & residents in private and non-pensionable public sectors.
Voluntary for non-Malaysians until October 2025.
Contributions (below 60): Employee 11%, Employer 13% if wages ≤ RM 5,000; 12% if above RM 5,000.
Age 60+: Employer 4%, Employee 0%.
From 1 October 2025, non-Malaysians with valid employment passes (excluding domestic workers) must contribute.
2. Social Security (SOCSO / PERKESO)
Covers Employment Injury Scheme, Invalidity Scheme, and Employment Insurance System (EIS).
Contribution rates: Employer – 1.75%, Employee – 0.5%.
For EIS, both contribute 0.2%, subject to caps.
Since July 2024, foreign employees must contribute to SOCSO.
EIS not applicable to foreigners.
3. Working Hours & Overtime
Standard: 45 hours/week (commonly 40 hours, 5 days).
Overtime applies to employees earning below RM 4,000/month.
Rates:
Normal day: 1.5× hourly rate
Rest day (normal hours): 0.5–1× daily wage
Rest day (overtime): 2× hourly rate
Public holiday: 2× daily wage; OT 3× hourly rate
4. Employment Contracts & Probation
Contract types: Permanent, Fixed-Term (1–3 years), Part-Time.
Repeated renewals of fixed-term contracts may be treated as permanent.
Probation: Commonly 3–6 months. Termination during probation must still be fair and justified.
5. Termination & Severance
- With notice: Allowed for redundancy, closure, transfer refusal, or performance issues.
- Without notice: Allowed for serious breach by either party.
- Notice periods:
- <2 years: 4 weeks
- 2–5 years: 6 weeks
- >5 years: 8 weeks
- Severance pay (≥12 months service):
- <2 years: 10 days/year
- 2–5 years: 15 days/year
- >5 years: 20 days/year
6. Minimum Wage & Salary Payment
Minimum wage: RM 1,700/month (from Feb 2025).
Wages must be paid within 7 days after end of pay cycle.
7. Leave Entitlements
Maternity Leave: 98 days (up to 5 confinements). Employee must have worked ≥90 days in the 9 months before confinement and with same employer in last 4 months.
Paternity Leave: 7 days (up to 5 confinements). Married male employees must have ≥12 months service and notify employer in advance.
8. Public Holidays
Federal holidays plus state-specific holidays.
Employers must follow holidays observed in their business location.
9. Cultural & Religious Considerations
Employers should accommodate Muslim prayer times (5 daily prayers).
Friday congregational prayer may require up to 1.5 hours during lunch.
10. Important Notes & Updates
Non-Malaysian EPF: Mandatory from 1 October 2025.
Foreigners & SOCSO: Required since July 2024.
HRDF: Mandatory for employers with more than 5 employees.
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Employer of Record (EOR) Advantage: An EOR in Malaysia ensures full compliance with the Employment Act, EPF, SOCSO, and EIS contributions while managing payroll and tax obligations. It also sponsors work visas for foreign employees, allowing companies to hire talent quickly without navigating separate labour ordinances or setting up a local entity.
👉 Email us at info@linkcompliance.com to get personalised guidance on employment documentation and HR compliance in Malaysia and beyond. More information, www.linkcompliance.com
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