If a lack of speed or local knowledge is one of your primary worries when expanding to or hiring employees in Malaysia, an employer of record may be your best option for meeting your global expansion goals.
An employer of record, often known as an international PEO, enables you to quickly engage and onboard employees in Malaysia, frequently within two weeks, without incurring the expense and risk of forming a local business.
Hiring in Malaysia with a Global PEO
The Employment Act of 1955 is the primary source of employment legislation in Malaysia’s private sector. It includes Peninsular Malaysia and Labuan Federal Territory. East Malaysia’s remaining states, Sabah and Sarawak, have distinct employment legislation.
The Industrial Relations Act and the Employees Provident Fund Act of 1991 are both significant statutes. These statutes provide minimal requirements that businesses and employees may supplement via collective bargaining agreements.
The Ministry of Human Resources is the Malaysian government agency in charge of employment issues, including labor relations, trade unions, and occupational safety.
Since employment is extensively regulated in Malaysia, proper employment contracts are a need for businesses. As your employer of record and PEO in Malaysia, we can ensure that each employee’s contract satisfies all applicable regulations. In addition to advising you on cultural norms and hiring best practices, we can also keep you abreast of evolving employment laws.
Contracts for work in Malaysia
As you seek to hire employees in Malaysia, here are some basic regulations you’ll need to be aware of in order to draft a compliant contract, as well as how an employer of record and PEO may support your unique HR requirements.
Regular work hours are limited to eight per day or forty-eight per week. A contract of employment may permit an employee to work more than eight hours on certain days and less on others, up to a maximum of 12 hours per day and 48 hours per week.
After six hours of continuous work, employees are entitled to a 45-minute break. If a job needs the employee’s constant presence, the workday may consist of eight consecutive hours with a 45-minute meal break.
Part-time employees, defined as those who work between 30% and 70% of full-time hours, must get the same benefits as full-time employees, including overtime compensation, annual and medical leave, and paid public holidays.
Every worker is entitled to one day of relaxation per week. Any continuous work period of at least 30 hours, if the employee is given shift work, requires a rest day, which varies from month to month.
Under certain scenarios, an employee may be obliged to work overtime or on a rest day:
The work is crucial for the community, national defense, or national security.
A workplace accident has occurred or a possible accident is feared.
Work must be performed immediately on the office structure or its equipment.
There was an unanticipated interruption to the job.
Compensation
Consider the following when determining the suitable wage to give new employees:
The monthly minimum wage is 1,200 ringgit, or 5.77 ringgit per hour.
Monthly overtime is limited to 72 hours and is rewarded at 150 percent of the standard rate.
Employees paid by the hour or day who work on a rest day are compensated as follows:
A full day’s compensation for all work up to a half day’s duration.
Two days’ salary for any work performed between a half-day and a full day
double time for any additional hours worked
Employees paid on a monthly basis who labor on a rest day are compensated as follows:
A half day’s remuneration for all work up to a half day’s duration.
A full day’s remuneration for any work performed between a half day and a full day.
Double time for any hours worked in excess of that Collective agreements may govern the lawful salary range.
As your legal employer in Malaysia, we can supply you with resources and information regarding employee compensation, allowing you to make a more competitive job offer.
Bonuses Unless required by an employment contract, bonuses are granted at the discretion of the employer.
Initial trial period
In Malaysia, probationary periods typically last between three and six months.
Dismissal and severance
Employment contracts must specify how either the employer or the employee may terminate the relationship.
Whether mentioned in the employment contract or not, the same notification periods apply to both employers and employees. Unless otherwise indicated, notification is determined as follows:
Four weeks for employees with two years or less of service
Six weeks for service between two and five years
Eight weeks for service of at least five years
Employers may pay the employee’s full compensation for the notice period in place of providing notice.
Employers may terminate an employee without notice, demote the employee, suspend the employee for up to two weeks without pay, or impose a lower consequence in the event of misconduct. The employer must first conduct “due diligence” During the investigation, the employer may suspend the employee with at least half pay for up to two weeks. If the investigation determines that no misbehavior occurred, the employer must return the employee’s withheld wages.
The Employment (Termination and Layoff Benefits) Regulations of 1980 stipulate the following about severance pay:
Employees having at least one year of service but fewer than two years: 10 days’ salary annually
Two to five years’ experience: 15 days’ salary annually
Five or more years of service: twenty days’ pay annually
For half years of employment, severance pay is calculated using a prorated formula.
No severance pay is required for terminations due to misconduct, retirement, or the employee’s own decision.
As your official employer in Malaysia, we can work with you to swiftly handle the unanticipated termination of an employee, giving legal counsel and a customized strategy to guarantee you avoid labor court.
