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How to hire and pay employees in Malaysia
Slasify
Jun 18, 2025
| Key Takeaways |
|---|
| 1. Malaysia offers cost-effective operations and a multilingual workforce, making it attractive for international businesses. |
| 2. Payroll is processed monthly and employers must complete payments within 7 days after the end of the wage period. |
| 3. Minimum wage is MYR 1,700 per month, effective from February 1, 2025. |
| 4. Personal income tax is progressive up to 30% for residents, while non-residents are taxed at a flat 30%. |
| 5. Statutory contributions include EPF, SOCSO, and EIS, with rates varying by employee type and age. |
| 6. Standard working hours are 8 hours per day or 45 hours per week, with overtime paid at 150% and capped at 104 hours per month. |
| 7. Employees receive 8–16 days of annual leave depending on years of service, plus paid public holidays. |
| 8. Termination requires just cause and procedural fairness, with notice periods ranging from 4 to 8 weeks and severance pay based on length of service. |
| 9. Maternity and paternity leave is provided, with 98 days for maternity and 7 days for paternity, subject to eligibility and notification requirements. |
Discover the global hiring and employment landscape in Malaysia – leveraging a diverse and multilingual workforce, Malaysia offers industry-focused ecosystems and incentives, positioning itself as an appealing destination for cost-effective operations and acquiring top-tier talent.
Personal Income Tax
Non-residents are taxed at a flat rate of 30% on their gross employment income, whereas tax residents are subject to the following progressive tax rates:
| Taxable Income (MYR) | Progressive Tax Rate (%) |
|---|---|
| Up to 5,000 | - |
| 5,001–20,000 | 1 |
| 20,001–35,000 | 3 |
| 35,001–50,000 | 6 |
| 50,001–70,000 | 11 |
| 70,001–100,000 | 19 |
| 100,001–400,000 | 25 |
| 400,001–600,000 | 26 |
| 600,001–2,000,000 | 28 |
| Over 2,000,000 | 30 |
Local Taxes
There are no local taxes on employment income in Malaysia.
Statutory Contributions
Employers and employees in Malaysia are required to contribute to the Social Security Organization (SOCSO) and a variety of social schemes, including the Employees Provident Fund (EPF) and Employment Insurance (EIS).
The contribution schedule in Malaysia varies according to a range of factors, including the employee's age, income and residency status in the country. It is important to note that contributions to SOCSO and EIS are calculated based on the employee's monthly wage of up to MYR 6,000.
Official contribution schedules: Employees Provident Fund (EPF) | Social Security Organization (SOCSO) | Employment Insurance (EIS)
Employer Contributions
| Contribution Rates for Malaysians | Contribution Rates for PRs | Contribution Rates for Expats | |
|---|---|---|---|
| EPF | 13% (or 12% if monthly income is above MYR 5,000) | 13% (or 12% if monthly income is above MYR 5,000) | 2% |
| SOCSO | 1.75% | 1.75% | 1.75% |
| EIS | 0.2% | 0.2% | - |
In addition to the above, businesses with 10 or more employees shall contribute to the Human Resource Development Fund (HRDF) at 1% of their employees' wages. Those with less than 10 employees can voluntarily contribute at 0.5%.
For employees who are 60 years old and above, the contribution rates to EPF and SOCSO shall be adjusted to the following:
| Contribution Rates for Malaysians | Contribution Rates for PRs | Contribution Rates for Expats | |
|---|---|---|---|
| EPF | 4% | 6.5% (or 6% if monthly income is above MYR 5,000) | 2% |
| SOCSO | 1.25% | 1.25% | 1.25% |
Employee Contributions
| Contribution Rate for Malaysians | Contribution Rate for PRs | Contribution Rate for Expats | |
|---|---|---|---|
| EPF | 11% | 11% | 2% |
| SOCSO | 0.5% | 0.5% | 0.5% |
| EIS | 0.2% | 0.2% | - |
For employees who are 60 years old and above, the contribution rates to EPF and SOCSO shall be adjusted to the following:
| Contribution Rate for Malaysians | Contribution Rate for PRs | Contribution Rate for Expats | |
|---|---|---|---|
| EPF | - | 5.5% | 2% |
| SOCSO | - | - | - |
Payment of Wages
Payroll cycle shall be determined by the employment agreement as long as they do not exceed a month. The absence of any provision regarding payroll cycles in the employment contract will set the payroll cycle as monthly by default.
Employers shall complete all wage payments to their employees within 7 days after the last day of their established wage period.
Minimum Wage
Effective February 1, 2025, the minimum wage in Malaysia is set at MYR 1,700 per month.
Statutory Bonus
There is no statutory bonus in Malaysia, though it is customary to give an employee their 13th month pay.
Termination
There is no at-will termination in Malaysia. Any termination must be justified, done in good faith and procedurally fair. Employers dismissing their employees must have a just cause, which in itself is broadly defined and may vary between establishments.
That being said, employers who seek to dismiss their employees on the grounds of their misconduct or poor performance must only do so after undergoing a domestic inquiry. During the course of the inquiry, the employee can request for an explanation for their planned dismissal and shall be given time to respond to the allegations.
Employers can suspend the employee at half pay for up to 2 weeks during the duration of the inquiry. Once the inquiry has concluded, employers can choose from one of the following outcomes:
| Result of inquiry | Employer action |
|---|---|
| No misconduct found | The employee shall resume their employment, with their full sum of wages withheld during suspension being restored. |
| Misconduct was found | Employers can either dismiss the employee without notice, downgrade the employee or impose any other lesser punishment as they deem fit. In any case, suspension without wages shall not exceed 2 weeks. |
Notice Period
Both employers and employees shall observe the following notice period or payment in lieu of notice upon termination:
| Length of service | Notice period |
|---|---|
| Less than 2 years | 4 weeks |
| 2 years or more, but less than 5 years | 6 weeks |
| 5 years and above | 8 weeks |
No notice period is required if the termination is caused by the willful breach of contract terms by either the employee or employer, and the party who committed the breach shall be liable to compensate the other party a sum in lieu of the notice period not served.
Severance Pay
An employee covered under the Employment Act who has at least 12 months of service shall generally be entitled to receive the following severance pay upon termination:
| Length of service | Severance pay |
|---|---|
| Less than 2 years | 10 days of salary per year of employment |
| 2 years or more, but less than 5 years | 15 days of salary per year of employment |
| 5 years and above | 20 days of salary per year of employment |
Employees who are rightfully dismissed due to misconduct or those who voluntarily resigned from their post are not entitled to receive severance. The same goes for employees who are retiring, provided that their non-entitlement to severance upon retirement is stipulated in their employment contract.
Probationary Period
There are no statutory provisions for probationary periods in Malaysia. However, it is common for probationary periods to be between 1–6 months.
Work Time Rules
Standard Working Hours
Standard working hours in Malaysia is subject to a maximum of 8 hours per day or 45 hours per week.
Break Period
Employees working for 5 consecutive hours must be granted a break period of at least 30 minutes. Any break of less than 30 minutes during the 5 consecutive hours of work shall not break the continuity of that 5 consecutive hours of work. Furthermore, employees working for 8 consecutive hours must be granted a break period of at least 45 minutes.
On Fridays, the break period is usually granted between 12:15 p.m. and 2:45 p.m. to allow Muslim employees to perform their Friday prayers.
Overtime
Any work performed over the standard working hours are considered overtime, which shall be paid at 150% of the employee's ordinary rate of pay.
No employee shall work more than 104 hours of overtime per month, not including any work performed on a rest day, public holidays or any paid holidays substituted. In any case, no employee should work for more than a total of 12 hours per day, inclusive of overtime.
Weekly Rest Days
Employees are entitled to at least one rest day per week. While the normal working week is Monday to Friday, in states such as Kedah, Kelantan, and Terengganu, the week starts on Sundays and end on Thursdays.
Those required to work on their rest days shall be paid as follows:
| Pay for work on rest days | |
|---|---|
| For work within normal working hours, but does not exceed half day | Half day's wage at the ordinary rate of pay |
| For work within normal working hours and exceeds half day | Full day's wage at the ordinary rate of pay. |
| For hours worked in excess of normal working hours | 200% of the hourly rate of pay for each hour in excess of normal working hours |
Holiday and Leave Entitlements
Public Holidays
Public holidays in Malaysia are paid, and they vary by region. The public holiday calendar that applies to each region can be accessed through the official release for 2025.
As a reference, the public holidays in Kuala Lumpur for 2025 is as follows:
| Holiday | Date |
|---|---|
| New Year's Day | January 1 |
| Chinese New Year | January 29–30 |
| Federal Territory Day | February 1 |
| Thaipusam | February 11 |
| Nuzul Al-Quran | March 18 |
| Hari Raya Puasa | March 31–April 1 |
| Labor Day | May 1 |
| Vesak Day | May 12 |
| Agong's Birthday | June 2 |
| Hari Raya Qurban | June 7 |
| Maal Hijrah | June 27 |
| National Day | August 31 |
| Maulidur Rasul | September 5 |
| Malaysia Day | September 16 |
| Deepavali Day | October 20 |
| Christmas Day | December 25 |
Employees required to work during public holidays shall be paid as follows:
| Pay for work on public holidays | |
|---|---|
| For work within normal working hours | 200% of the ordinary rate of pay |
| For work in excess of normal working hours | 300% of the hourly rate of pay |
Annual Leave
The duration of annual paid leave an employee is entitled to depends on their length of service, as follows:
| Length of service | Annual leave |
|---|---|
| 1 year or more, but less than 2 years | 8 days |
| 2 years or more, but less than 5 years | 12 days |
| 5 years and above | 16 days |
This leave must generally be taken within 12 months of its accrual lest it be forfeited. However, an employee shall be entitled to payment in lieu of any unused leave if, at the request of the employer, they agree in writing not to avail themselves of any or all of their annual leave entitlement.
Sick Leave
Employees may be entitled to paid sick leave if they are required to do so after a medical examination paid for by the employer. In cases where hospitalization is not needed, the sick employee is entitled to the following paid sick leave per year:
| Length of service | Sick leave |
|---|---|
| Less than 2 years | 14 days |
| 2-5 years | 18 days |
| More than 5 years | 22 days |
If hospitalization is needed, the maximum paid sick leave is extended to 60 days per year. In any case, employees must inform, or attempt to inform, the employer of their absence due to sickness at least 48 hours before the leave happens.
Maternity Leave
Female employees shall be entitled to at least 98 days of maternity leave, which shall not commence earlier than 30 days immediately preceding the expected date of confinement or later than the day immediately after confinement.
Maternity leave pay shall be granted to employees who have been employed at any time in the 4 months immediately before their confinement and have been employed for at least 90 days during the 9 months immediately before their confinement.
The employee is also obligated to notify the employer of their intention to take maternity leave at least 60 days before its commencement to be entitled to receive the maternity leave pay. In any case, maternity leave pay is only applicable to the employee's first 5 children.
Paternity Leave
An eligible married male employee shall be entitled to 7 consecutive days of paternity leave with full pay at their ordinary rate of pay for each confinement, provided that they have been employed for at least 12 months immediately before the commencement of the leave.
The employee is obligated to notify the employer of their spouse's pregnancy at least 30 days before the expected date of confinement or as soon as practicable after childbirth. In any case, paternity leave is only available for a total of 5 confinements, i.e. up to 5 children, regardless of the number of spouses.
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