Stay Informed, Stay Compliant: Navigating Malaysia’s Employment Law Landscape

Petronas Twin Tower, Kuala Lumpur Malaysia

By See Wooi, Assistant Manager, Payroll, GoGlobal (Malaysia) 

Malaysia’s employment law serves as the cornerstone of employer-employee relationships, fostering an environment of fairness and equity in the workplace. These legal provisions not only safeguard the rights of employees but also offer employers a roadmap to ensure compliance.  

By understanding Malaysia’s employment law, both employers and employees can make informed decisions, fostering a harmonious and productive workplace.  

In this blog post, we delve into the key aspects of Malaysia’s employment law, including types of employment contracts, employee rights, statutory benefits, wages, overtime, termination, severance and regulations related to foreign workers. 

Employment contracts and types of employment 

Malaysia recognizes various types of employment contracts, each with distinct features. Employers must provide written contracts within the first two months of employment, outlining essential terms and conditions to ensure transparency and avoid disputes.  

  • Permanent Employment: Offers long-term stability. 
  • Fixed-term Contracts: Cater to specific projects or periods. 
  • Casual Employment: Temporary and irregular engagements. 

Employee rights and protections 

Malaysia’s employment law grants fundamental rights to employees to safeguard their interests and well-being. Employees have the right to reasonable working hours, rest days, paid annual leave and protection against unfair dismissal and discrimination, ensuring they are treated with respect and dignity. 

Statutory benefits 

Statutory benefits are mandatory and enhance employee welfare and financial security. Key statutory benefits in Malaysia include: 

  • Employees’ Provident Fund (EPF): A retirement savings scheme, providing financial security for employees during retirement. 
  • Social Security Organization (SOCSO): Offers financial protection in case of work-related accidents, injuries, or illnesses. 
  • Employment Insurance System (EIS): Provides financial aid to employees who have lost their jobs, assisting them during periods of unemployment. 
  • Annual Leave: Employees are entitled to a minimum number of paid leave days each year based on their length of service. This benefit allows employees to take breaks and recharge, promoting overall well-being and productivity.  
  • Sick Leave and Medical Benefits: Employers are required to grant employees sick leave for medical reasons, ensuring they can focus on their recovery without financial worries. Medical benefits cover the cost of medical treatment, promoting employees’ health and welfare.  
  • Maternity Leave: Female employees are entitled to a certain period of paid maternity leave, providing them with time to recuperate after childbirth and bond with their newborns.  
  • Paternity Leave: Male employees are granted a specific number of paid paternity leave days, allowing them to support their partners during the birth of their child and participate in early childcare responsibilities. 

Wages, overtime and benefits 

Malaysia’s employment law mandates a minimum wage requirement to protect workers from exploitation and ensure a decent standard of living. As of the most recent information available, the minimum wage rate in Malaysia is RM1,500 per month.

Employers must comply with the prescribed minimum wage, which may vary based on location and sector of employment. Ensuring employees receive fair wages and benefits is crucial for maintaining a motivated and productive workforce. 

Termination and severance 

Employers must have valid reasons for termination and follow proper procedures, ensuring employees’ rights are protected. In cases of retrenchment, employers may offer severance pay to employees to ease the transition during a job loss. 

Foreign workers and immigration requirements 

As businesses expand globally, hiring foreign workers may become necessary to meet specific skill demands.  

For foreign workers intending to work in Malaysia, there are various types of work visas and employment passes available, depending on the individual’s skill set and the duration of the intended employment:  

  • Employment Pass (EP): The Employment Pass is for foreign professionals, managers, executives and technical personnel who hold specific skills or expertise. It is typically issued for skilled positions and requires a minimum salary threshold. The application process for the Employment Pass involves several stages, including obtaining approval from the relevant authorities and obtaining an endorsement from the Immigration Department.  
  • Professional Visit Pass (PVP): The Professional Visit Pass is for foreign professionals who enter Malaysia for specific short-term professional assignments or consultations. The application process for the Professional Visit Pass involves submitting relevant documents to the Immigration Department for approval.  
  • Temporary Employment Pass (PLKS): The Temporary Employment Pass is for foreign workers engaged in non-professional and semi-skilled positions in specific sectors such as manufacturing, construction, agriculture, and services. Employers must apply for the Temporary Employment Pass through the Foreign Worker Application System (Sistem Pengambilan Pekerja Asing – SPPA) online portal.  
  • Visit Pass (Temporary Employment) (VPTE): The Visit Pass (Temporary Employment) is for foreign workers employed on a short-term basis for specific projects or assignments. The application process involves submitting relevant documents to the Immigration Department for approval.  
  • Residence Pass-Talent (RP-T): The Residence Pass-Talent is for expatriates holding key positions in companies operating in Malaysia. It allows eligible individuals to work and live in Malaysia for an extended duration. The application process for the Residence Pass-Talent involves several stages, including obtaining approval from relevant authorities and obtaining an endorsement from the Immigration Department. 

Compliance and enforcement 

The Malaysian government is responsible for enforcing employment laws and ensuring compliance. Employers who fail to adhere to these laws may face penalties and legal consequences, negatively impacting their reputation and business operations. 

Looking ahead: stay informed, stay compliant 

Malaysia’s employment law encompasses a wide array of rights, regulations and statutory benefits aimed at creating a conducive and fair work environment for employees. Understanding and adhering to these laws is essential for employers to uphold ethical practices, treat employees with respect, and create a productive and harmonious workplace. 

In this complex regulatory landscape, partnering with experts such as GoGlobal can be a game-changer for businesses. GoGlobal specializes in helping companies navigate the intricacies of Malaysia’s employment laws, ensuring they stay informed and operate compliantly. 

Whether through internal resources or external support, ensuring compliance and ethical practices will play a pivotal role in your journey to success in Malaysia. 

Contact us to talk with an international HR expert about the intricacies of Malaysia’s employment laws and how they can impact your business when expanding, recruiting and hiring locally.