Country Information

Malaysia is a southeastern Asian country. It is a federal constitutional monarchy that is made up of 13 states with three separate federal territories. The official language is Malaysian although there are a multitude of local languages. Malaysia’s top exports include rubber and palm oil.

Employment Contracts

Employment contracts in Malaysia are commonly in written form. It must specify the terms and conditions of the employment such as the location of work, job description, wages, overtime, working hours, leaves and entitlements, health and safety matters, probation and termination. Written contracts must include language specifying conditions for termination of the contract.

Labor contracts can be for a fixed term or an indefinite period. A fixed-term contract for more than one month must be in writing. However, if an employee’s fixed-term contract is renewed multiple times, then that employee will be considered as a permanent employee in the case of dismissal. Probation periods are capped at three months and an employer has the right to terminate the contract during the probation period if the employee is incompetent. Pre-employment background checks are not prohibited but may be subject to data privacy rules.

Working Hours

The standard work period in Malaysia cannot exceed 48 hours in a week, over six days with eight-hour workdays. However, if less than eight hours is worked on one or more days during the week, the number of hours worked on the remaining days can exceed eight hours, up to a maximum of nine hours in one day and 48 hours per week.

Overtime, defined as hours above and beyond normal work time, are paid at least one and a half times of the employee’s normal wages. The maximum amount of overtime hours an employee may work is 104 hours per month. Special restrictions for women include protections for female employees working in agriculture. Women are not allowed to work between the hours of 10 p.m. to 5 a.m.

Sick Leave

Employees receive 14 days of paid sick leave a year if they have less than two years of service, 18 days if they have between two to five years of service and 22 days if they have five or more years of service. Employees are required (at the employer’s expense) to submit to a medical examination to independently verify an illness or medical condition.If an employee needs to be hospitalized for their illness or medical condition, the employer provides 60 days of leave, which includes whatever paid sick leave days the employee has already used. The employer pays the employee that is on sick leave at 100% of their normal wages.

Maternity/Paternity Leave

Eligible female employees receive 60 consecutive days of paid maternity leave, which can start up to 30 days before the expected birth. This is set to increase in 2021 to 90 days.

Employees are eligible for maternity benefits if they have worked:

  • At least 90 days in the nine months prior to giving birth
  • Any time within the four months immediately before the birth

An employee must provide her employer 60 days of notice before she expects to take maternity leave. Failure to do so may result in the suspension of maternity pay. Notice can be written or verbal and can be given to the employee’s supervisor, foreman or any other designated individual. Due to the eligibility requirements, employers may be required to pay maternity benefits to an employee who leaves employment before giving birth. However, an employee who expects to give birth within four months of the last day of work must notify the employer of the pregnancy. Otherwise, the employer will not be obligated to pay maternity benefits. An employee can claim maternity benefits from more than one employer if she qualifies but she is not entitled to double benefits.

An employee can request that maternity benefits be paid to a nominee. If the employee begins leave but dies of any cause during leave, the employer is still liable to pay maternity benefits. The benefits are paid to the nominee designated by the employer or legal representative. Employees at banks and some government employees currently receive 90 days of maternity leave. Additionally, employees in the civil services are given an additional five months of unpaid leave. Male employees in Malaysia are not entitled to paternity leave.

Compensation

Employers are not required to pay their employees bonuses. It is common for employers to pay a performance-related bonus that is the equivalent of a 13th month of pay.

Vacation Leave

In addition to public holidays, employees are entitled to between eight and 16 days of annual leave depending on the employee’s length of service.

Specifically, employees receive:

  • Eight days of paid leave if the employee has less than two years of service
  • 12 days of paid leave for employees with two to five years of service
  • 16 days of paid leave for employees with five or more years of service

Employees must work for at least 12 months to be eligible for paid annual leave. Leave is pro-rated for employees who have less than 12 months of service and for employees who separate from service in less than 12 months. Days accrued are calculated using the base of eight days. This means that the accrual of vacation leave happens at roughly 0.66 days per month. Employees can agree to payment in lieu of annual leave. If terminated, employees are entitled to either take the accrued time or the equivalent compensation.

Public Holidays

Malaysia observes the following public holidays:

  • Thaipusam
  • Chinese New Year
  • Hari Raya Puasa (Eid al Fitr)
  • Vesak Day
  • Birthday of Seri Paduka Baginda Yang di-Pertuan Agong
  • Hari Raya Haji (Eid al Adha)
  • Awal Muharram
  • Independence Day (Hari Merdeka)
  • Malaysia Day (Hari Malaysia)
  • Prophet Muhammad’s Birthday
  • Deepavali
  • Christmas Day
Health Insurance Benefits

Malaysia has universal healthcare, some employers choose to provide private health insurance.

Employment / Termination / Severance

Either the employee or the employer may terminate an employment contract at the end of its term.An employer may terminate an employee for misconduct, incompetence, or a criminal or civil offence without providing notice. No notice is required by either party if there is a willful breach of the employment contract.Both the employer and employee can waive their right to notice or provide payment in lieu of notice in the amount of wages the employee would have accrued during the notice period.

Local Laws & Regulations

We understand that local laws and regulations change and sourcing an accurate reference guide is not easy. Our data is researched and verified by our team of local international Employment Attorneys, HR and Benefit Professionals and Tax Accountants through our Atlas team and consultants, to ensure information up-to-date and accurate.

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