Payroll and Benefits Guide - Malaysia

Malaysia
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Currency

Malaysian Ringgit (MYR)
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Capital

Kuala Lumpur
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Employer Taxes

18.95% – 22.45%
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Date Format

dd/mm/yyyy
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Fiscal Year

1 Jan – 31 Dec

Fun Facts

Malaysia is known for its diverse cultural heritage, with a blend of Malay, Chinese, Indian, and indigenous influences.

Malaysia is home to the tallest twin towers in the world, the Petronas Towers, which are located in Kuala Lumpur.

Malaysia’s national sport is sepak takraw, a unique game that combines elements of football and volleyball, played with a rattan ball.

Malaysia is home to one of the oldest rainforests in the world, Taman Negara.

Malaysia is one of the world’s top producers of palm oil, rubber, and tropical fruits.

Malaysia has a strong passion for badminton.

Malaysia

Contributions

Employee Payroll Tax

Contribution TypeRate
Provident Fund11.00%
Provident Fund0.00% – 5.50%
Social Security0.50%
Employment Insurance0.20%

Employer Payroll Tax

Contribution TypeRate
Provident Fund12.00% – 13.00%
Provident Fund4.00% – 6.50%
Social Security1.75%
Employment Insurance0.20%
Human Resource Development Fund1.00%

Payroll

Payroll Cycle

In Malaysia, payments are typically made on the last working day of each month throughout the payroll cycle.

13th Salary

A 13th-month payment is often made at the end of the year in Malaysia. The employment contract will include a clause stating this.

Work Hours and Week

The typical workweek consists of 40 hours, although the standard workweek is eight hours every day, up to a maximum of 45 hours.

Overtime

The Employment Act, the employment contract, and collective agreements govern any labor that is performed in excess of the normal number of hours per week and must be compensated as overtime. Although it is only legally applicable to manual and non-manual employees with a wage of less than 2,000 MYR, the Employment Act is typically utilized as guideline.

According to the law, extra hours spent on working days throughout the week are compensated at 150.00% of the normal pay rate, while those worked on rest days and weekends are compensated at 200.00% of the regular salary rate.

Public holiday overtime is compensated at a rate of 300.00% of the usual compensation rate.

Malaysia

Leave

Paid Time Off

In Malaysia, paid leave is specified in the employment contract and is based on the number of years of service. In addition to any holidays, this paid leave is also available.

An employee has a right to eight days of paid leave per year during the first two years of work. The employee is entitled to 12 days each year from the second to the fifth year of employment, rising to 16 days for those with more than five years of service. Starting with 12–15 days annually and increasing with seniority is typical. From January through December, vacation time is accumulated.

Public Holidays

There are 11 paid public holidays that employees are eligible to each year, depending on their situation.

Sick Days

In Malaysia, paid sick leave is stipulated in the employment contract and is based on the number of years of service as well as the submission of a professional medical certificate.

Based on the number of years of service, an employee is entitled to a certain amount of paid sick time.

  • An employee who hasn’t worked for two years or more is entitled to 14 days of sick time annually.
  • 18 days of sick time per year are granted to workers with two to five years of service.
  • Employees who have worked for the company for more than five years are eligible to up to 22 days of sick time annually.

In addition to the standard sick leave, employees who are admitted to the hospital are entitled to 60 days of annual hospitalization leave.

Maternity Leave

In Malaysia, private sector employees are entitled to 98 consecutive days of paid maternity leave, paid in full.

Beginning the maternity leave term sooner than 30 days before the due date is prohibited. Only the first five surviving children of a female employee are eligible for any maternity leave in Malaysia. If approved by her employer and given a doctor’s clearance, the female employee may return to work at any point within the 98-day period.

Paternity Leave

In Malaysia, married dads who have worked for 12 months are entitled to seven consecutive days of paid leave for each child. The projected due date must be disclosed to the employer 30 days in advance.

Parental Leave

In Malaysia, parental leave is not mandated by law.

Termination

Termination Process

Unless an employer can demonstrate adequate grounds for termination without notice, Malaysia’s typical termination procedure is based on labor law standards.

Written notice of termination must be delivered to the appropriate governmental authorities.

There are limitations on firing pregnant employees, with the exception of instances of employment contract violation, misbehavior, or firm closure.

Notice Period

The following minimal notice periods are due to employees:

  • If the employee has been working for less than two years on the day the notice is given, they will get four weeks’ notice.
  • If the person has been working for the company for more than two years, but less than five years, they must provide 6 weeks’ notice.
  • 8 weeks’ notice if the employee has been working for the company for at least 5 years as of the date in question.

Alternatively, any party may provide notification in lieu of payment.

Severance Pay

Severance compensation is required in Malaysia if appropriate, however the amount varies depending on the duration of employment.

  • For employees hired during the first two years, ten days of severance compensation at the standard salary pay rate for each year of service completed.
  • The reward is determined at 15 days per year of service for workers who have completed between two and five years of service.
  • The entitlement is 20 days for each year of service for employees with five or more years of service.

Probation Period

Probation Period

For Malaysian permanent workers, the probationary period typically lasts between one and three months. Despite this, the Employment Act affirms that there is no distinction in the rights of workers, regardless of whether they are in their probationary term or not.

Immigration

The employer must sponsor the visa and be a recognized business that is authorized to employ foreign nationals. The employee must be a recognized foreign authority in the industry in which they will work. Additionally, Malaysia maintains a reported key occupations list (COL), which highlights occupational categories where there is a skills gap in the nation and helps applications for work permits and visas.

An employment pass, a professional visit pass, and a temporary employment pass are the three different types of work permits/visas available in Malaysia. Each sort of pass has specific requirements that must be met by the employee in order to be accepted, among other requirements.

Before hiring foreign staff, the director-general must first provide his or her consent.

If/when a foreign employee is fired, the employer is required to provide the director general notice within 30 days.

VAT

Malaysia’s normal VAT rates are 6.00% for service tax and 10.00% for sales tax.