COUNTRY

Written Agreements

In Malaysia, the law requires a written contract:

• If the service provided or the determined time of employment is longer than 1 month
• If no time is specified, but the time reasonably required for the specified work to be completed may exceed 1 month.

Every written contract must include a provision for termination of the agreement by either party.

Oral Agreements

The labor law of Malaysia allows for oral contracts as long as the specified period or the time reasonably required for the specific piece of work is less than 1 month.

Implied Agreements

In Malaysia, employment laws state that a service contract may be express or implied, though all labor agreements concluded for longer than 1 month must be in writing.

The Contract Act states that "When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it."

Thus, even if there is no written employment contract and a voidable work agreement between the parties, the obligation to pay or the obligation to work can still be enforced.

Effective January 1, 2023, working hours are 45 hours per week. A full working day is 8 hours but an employer may require an employee to work up to 10 hours depending on business needs. An employer and employee may agree in the employment contract that the employer can require the employee to work in excess of 45 hours per week, but in no case may the average work hours exceed 45 in a 3-week period.

An employee may apply for a flexible working arrangement to vary the hours of work, days of work, or place of work concerning their employment. In cases where there are applicable collective agreements, any application made by the employee must be consistent with the terms and conditions in the collective agreement.

The National Day (August 31), the birthday of the Yang di-Pertuan Agong (date may vary), the birthday of the ruler of the state in which the employee primarily works, or the Federal Territory Day, as the case may be (date may vary), Worker’s Day (May 1), Polling Day (May 9).

The employee is entitled to 6 additional paid holidays, at the choice of the employer.

In Malaysia, an employee is entitled to paid annual leave based on the length of service with their employer:

• After 12 months of continuous service with the same employer, employees are entitled to 8 days of paid annual leave for the first 2 years of their employment
• 12 days of leave for 2 to 5 years of service with the same employer
• 16 days of leave for over 5 years of working for the same employer.

Annual leave days are paid at the employee’s ordinary wage rate and can be carried over to the next year.

Annual leave entitlement may be canceled in cases where an employee misses work without the permission of the employer, and without reasonable excuse, for more than 10% of working days during the 12 months of the continuous service cycle.

To claim paid sick leave, an employee must be examined by a registered medical practitioner (chosen by the employer, and at the employer's expense), who determines whether sick leave may be granted. The duration of paid sick leave depends on the length of employment with the current employer:

• 14 days in total per calendar year for less than 2 years of employment
• 18 days in total per calendar year for 2 to 5 years of employment
• 22 days in total per calendar year for over 5 years of employment
• 60 days per year in case of hospitalization, irrespective of the duration of employment

Sick leave is paid at the employee's ordinary wage rate.

Effective January 1, 2023,10/17/2024 KN: Updated Access Dates, References hospitalization leave will be a separate leave from sick leave to provide additional protection for workers. Further details will be released pending published changes to the Employment Act approved earlier this year.

Beginning January 1, 2023, female employees in Malaysia are entitled to 98 days of maternity leave. Passed in March 2022, Act 265 increases the length of maternity leave. Additional protections are in place for pregnant employees by prohibiting companies from terminating employees who are pregnant or have pregnancy-related illnesses.

An employee is entitled to a maternity allowance if she has been employed at any time in the 4 months leading up to her confinement, and for a total of at least 98 days in the nine months before confinement. An employee is not eligible for a maternity allowance if, at the time of confinement, she has 5 or more living biological children. The maternity allowance is equal to the daily wages of the employee. The employer pays the total cost of the maternity allowance.

Maternity leave can begin no earlier than 30 days before confinement, and no later than one day after confinement.

Effective January 1, 2023, employees who are married are entitled to 7 days of paid paternity leave. The employee must have been employed by the same employer for at least 12 months immediately before paternity leave starts. The employee is responsible for notifying his employer of his spouse's pregnancy at least 30 days from the expected confinement or as early as possible after the birth.

Minimum Wage

The government determines minimum wages based on the National Wages Consultative Council's recommendations.

Effective February 1, 2025, the monthly minimum wage is MYR 1,700 (Malaysian ringgits) per month for all businesses that:

• Employ 5 or more employees or
• Carry out an activity classified under the Malaysian Standard Classification of Occupations (such as doctors, lawyers, engineers, etc.).

Businesses with fewer than 5 employees are exempt from the minimum wage increase until August 1, 2025.

The daily minimum wage depends on the number of days worked per week.

A wage period may not exceed a month, and payment must be no later than the 7th day after the wage period unless the employer terminates the contract (wage must be paid on the same day) or the employee terminates the contract (wage must be paid no later than 3 days after termination).

Overtime, Holiday & Vacation Pay

The law in Malaysia requires that employees who work overtime (work in excess of otherwise prescribed regular hours of work) be paid at a rate of at least 150% of their hourly rate regardless of how the pay rate is ordinarily fixed. Overtime hours are limited to 2 hours per day.

An employee required to work on a paid holiday is entitled to be paid twice the ordinary rate for any work done on that day. For overtime carried out on a public holiday, employees are paid at least 3 times the standard wage.

Employees are entitled to their ordinary wages during annual leave.

Notice Period

Per Malaysian labor law, the required notice period must be included in any written contract of employment and must be the same for both the employer and the employee. The minimum statutory length of the notice period must be as follows:

• 4 weeks if the employee has been employed for less than 2 years
• 6 weeks if the employee has been employed for 2 years or more, but less than 5
• 8 weeks if the employee has been so employed for 5 years or more.

A notice period is not required for termination of an employment contract in the event of any willful breach of a condition of the contract by the other party or in the event of gross misconduct by the employee.

Severance Benefits

Malaysian labor law states that employees who are covered under the Employment Act (EA) are entitled to severance benefits if they have been employed for at least 12 months before their dismissal. Covered employees dismissed due to gross misconduct, as well as employees who are rehired within 7 days of dismissal by the same employer, are not eligible to receive severance benefits.

Employees are entitled to severance pay on the following scale, according to the duration of their employment:

• Between 1 and 2 years - 10 days’ wages for every year of employment
• Between 2 and 5 years - 15 days’ wages for every year of employment
• Over 5 years - 20 days’ wages for every year of employment

Pension

All employers are required to register with the Employees Provident Fund’s Board. Contributions are made by both employers and employees at rates tied directly to the wages paid per month for any amount over MYR 10 (Malaysian ringgits). The minimum age to retire is 60.

All employees, including those hired on a contractual basis, are eligible for EPF. The government has also increased the scope of the Self-Employment Social Security Scheme. Additionally, persons in the fishing and farming industries are eligible for social security compensation.

Members can withdraw from their pension funds at age 55 as a lump sum or annuity. Employees younger than 55 can apply to make withdrawals for specific purposes, such as higher education for the employee or their child, construction or purchase of a house for personal use, or permanent emigration from Malaysia. Employees who continue to contribute after 55 years can withdraw funds they contributed after 55 years only when they attain the age of 60 years.

Dependents/Survivors Benefits

In Malaysia, a member of the Employees Provident Fund may nominate another person to be the recipient of any outstanding credit in the event of the employee’s death or incapacitation.

Social Security Fund pays survivors pension if the deceased was under 60 years of age and had made monthly insurance contributions for at least 24 out of the 40 months preceding their death or was in receipt of an invalidity pension. Payments are made to the widow or widower for life, and each child until the child either marries or turns 21, whichever occurs earlier. The dependents are entitled to receive a pension at the rate of 50% of their average assumed monthly wage, increased by 1% for every 12 months’ contributions that are paid in excess of the first 24 months, limited to a maximum of 65%.

Contributions to the scheme are paid by both employees and employers.

Invalidity Benefits

Employees under 60 years old who are incapable of engaging in any substantially gainful activity due to a morbid condition of permanent nature are eligible for pension if they have paid at least 24 monthly contributions during the 40 months prior to the onset of disability. The pension is paid as 50% of the average monthly wage of the employee in the last 24 months, increased by 1% for every year of contributions after the first 24 months, limited to a maximum of 65%.

For temporary disability due to work accidents or diseases, benefits are paid after four days as an amount equivalent to 80% of the average daily wage. For permanent disability, 90% of the average salary is paid as a pension.

Contributions to the scheme are paid by both employees and employers.