Southeast Asia opens the door to new talent and growth opportunities. Malaysia stands out with its growing economy, English-speaking workforce, and relatively low cost of living. But every country has its own rulebook.

Navigate local labor laws with a Malaysia employer of record (EOR). As a global EOR, G-P manages all aspects of payroll, contracts, and everything in between. We offer comprehensive support, from hiring to offboarding, ensuring your hiring experience in Malaysia is stress-free. 

Simplify hiring in Malaysia with an employer of record

Malaysia's employment is mainly governed by two laws: 

  • The amended Employment Act applies to Peninsular Malaysia (West Malaysia) and Labuan (one of three federal territories). The amended employment law covers all workers, but some protections only apply to specific workers, such as employees earning less than a certain amount.

  • The Industrial Relations Act of 1967 applies nationwide and governs industrial relations, the private sector, and trade unions.  

Employees in Sabah and Sarawak are covered by their respective state labor ordinances, which aren’t covered in this article. 

Using a Malaysia EOR simplifies international hiring. An EOR, like G-P, acts as the legal employer on your behalf. That means you don’t need to set up a local entity or worry about complying with the Employment Act (Amendment) of 2022. 

An EOR ensures your team members enjoy employment protections, and you comply with the most up-to-date laws. 

The EOR hiring process in Malaysia:

  1. Partner with a global employment expert. Choose an EOR with deep expertise in Malaysia as they’ll guide you through the local legal landscape.

  2. Source your ideal candidate. You find the best talent, and the EOR handles the rest.

  3. Generate a compliant employment contract. Your EOR drafts a locally compliant contract in line with Malaysia’s labor laws, including salary, working hours, and notice periods.

  4. Onboard and manage your team. The EOR manages the entire employment lifecycle. This includes managing your team members’ payroll and administering benefits. 

Employment contracts in Malaysia

Employment longer than one month must be documented in a written contract. Contracts can be in any language, as long as the employee understands the contract. Best practice is to write contracts in English or Bahasa Malaysia. 

Contracts must outline the terms of employment, including compensation, benefits, and termination requirements. Specify compensation in Malaysian ringgit (MYR). 

As your EOR in Malaysia, G-P drafts legally compliant contracts for you, ensuring everything aligns with the country’s labor laws.

Leave entitlements in Malaysia

Working hours in Malaysia

Employees in Malaysia can work up to 45 hours per week. A standard workday is eight working hours. The total time from when someone starts work to when they finish — including any breaks or unpaid time in between —  can’t be more than 10 hours in a day. Employees get at least one rest day per week. 

Employees who earn MYR 4,000 or less, manual laborers, and other types of workers get overtime pay if they work more than 45 hours a week (or more than eight hours a day). Overtime calculations are complex, and vary based on when the work is done and how many hours are worked. 

Public holidays in Malaysia

Employees covered by the amended Employment Act get 11 paid public holidays. Five of these are compulsory days off:

  • National Day

  • Birthday of the Yang di-Pertuan Agong (the King)

  • Birthday of the State Ruler or Federal Territory Day

  • Labor Day

  • Malaysia Day

The employer chooses the remaining six from an official list, which can vary by state. When a public holiday falls on a rest day, the next working day is a paid holiday.

Vacation days in Malaysia

The minimum number of paid annual leave days increases based on how long an employee has worked for the same employer:

  • Less than two years’ service: Eight days per year

  • 2–5 years: 12 days per year

  • More than five years: 16 days per year

Sick leave in Malaysia

Malaysia law distinguishes between non-hospitalized and hospitalized sick leave. 

Non-hospitalized sick leave depends on length of service: 

  • Less than two years’ service: 14 days per year

  • 2–5 years of service: 18 days per year

  • More than five years of service: 22 days per year

Employees can take up to 60 days of paid sick leave if they need to be hospitalized. The total number of non-hospitalized and hospitalized sick leave days can’t exceed 60 days in a year. 

Employees must notify their employer and provide a medical certificate, even if they’re not hospitalized.

Maternity and paternity leave in Malaysia

Pregnant employees get 98 days of paid maternity leave. Fathers who’ve been employed for at least 12 months with the same employer get seven days of paid paternity leave. 

Maternity and paternity leave days must be taken consecutively and can’t be split up.

How an employer of record in Malaysia helps manage leave entitlements

A Malaysia EOR manages employee entitlements on your behalf. They handle the admin and ensure you tick all the legal boxes.

Health insurance and supplementary benefits in Malaysia

Malaysia has a public healthcare system, which is funded by the government through general taxation. Many companies offer supplemental private health insurance as a competitive benefit. 

Bonuses in Malaysia

It’s common to give employees a 13th-month bonus, but this isn’t mandatory. Performance-based bonuses are also standard.

How an employer of record helps with benefits in Malaysia

Partner with a Malaysia EOR, like G-P, to design a benefits package that’s compliant and competitive. We also manage and administer supplementary benefits so you don’t have to.

Termination and severance in Malaysia

Employment termination is highly regulated. Employers must have a just cause and excuse to avoid claims of unfair dismissal under the Industrial Relations Act. 

There’s no legal minimum or maximum for probation. Probationary periods are typically 3–6 months. 

The legal minimum notice period for termination depends on the employee's length of service:

  • Less than two years’ service: Four weeks' notice

  • 2–5 years of service: Six weeks' notice

  • More than five years of service: Eight weeks' notice

Under the amended Employment Act, employees who are made redundant or retrenched get severance pay after 12 months of service. The payment is based on years of service.

Termination and employee offboarding are complex and expose you to compliance risk. An EOR Malaysia partner offers expert guidance and minimizes this risk. 

Payroll and taxes in Malaysia

Malaysia has a progressive tax system ranging from 0–30%. Employers withhold taxes and make social security contributions on behalf of employees. Taxes include:

  • Monthly income tax deduction (called PCB, potongan cukai bulanan): Employers pay this to the Inland Revenue Board of Malaysia (LHDN, Lembaga Hasil Dalam Negeri). The deducted amount depends on total monthly income, marital status, number of children, and eligible tax relief.

  • Employee provident fund (EPF/KWSP, kumpulan wang simpanan pekerja): This is a retirement savings fund. The employer contributes 12% or 13% of an employee's monthly wages, depending on the salary amount. The standard employee contribution is 11%.

  • Social security organization (SOCSO/PERKESO, pertubuhan keselamatan sosial): Provides disability, survivor, and medical benefits through two schemes, the Employment Injury Scheme and the Invalidity Scheme. Both the employer and employee make contributions. Rates depend on the employee’s wages and age.

  • Employment insurance system (EIS): Managed by SOCSO, this gives financial assistance to employees who’ve lost their jobs. Employers and employees contribute 0.2% of the employee's wages.

An EOR Malaysia manages all aspects of payroll, ensuring all contributions and deductions are calculated and paid correctly.

Choosing the right EOR in Malaysia

When selecting an employer of record in Malaysia, consider the following factors:

  • Compliance expertise: The EOR should have in-depth knowledge of Malaysia labor laws, including the amended Employment Act and Industrial Relations Act. This ensures all employment practices, from contracts to termination, are fully compliant.

  • Comprehensive service offering: A best-in-class EOR partner should manage all aspects of employment, including payroll processing, tax remittances, benefits administration, leave management, and offboarding procedures.

  • Local market understanding: Look for an EOR with a strong local presence or proven experience in Malaysia, as this often indicates a better understanding of market norms and cultural nuances that can impact employee experiences.

  • Scalability and flexibility: The EOR should be able to accommodate your hiring needs, whether you're hiring a single employee or a global team, and scale with your global expansion strategy.

  • Technology and integration: An AI-powered platform simplifies onboarding, benefits management, and payroll. Confirm that the EOR integrates with existing HCM, PEO, or payroll systems to avoid operational delays.

  • Transparency and communication: Choose an EOR that offers clear communication channels, transparent pricing, and regular updates on compliance changes.

  • Reputation and references: Research the EOR's reputation, customer testimonials, and industry recognition to ensure they have a track record of reliability and success.

  • Data security and compliance. Ensure your EOR follows strict data security protocols like GDPR. This is critical for protecting sensitive employee information and maintaining compliance.

Use G-P EOR for global hiring in Malaysia

G-P EOR is the award-winning, AI-enabled global hiring solution that empowers startups, SMB, and enterprise businesses to build global teams with ease. Onboard, manage, and pay top talent in over 180 countries in minutes, without the complexity of entity setup. 

G-P EOR is the preferred partner for leading HCM, PEO, and payroll platforms. Bring your workforce data together in one place to maintain existing workflows while keeping consistent and accurate data across your integrated systems.


Request a proposal to start hiring in Malaysia today.