10 Essential tips for employment Benefits in Malaysia
August 7, 2023
Hire in Malaysia
Malaysia PEO &
Employer of Record
Hire & manage teams remotely in Malaysia without a local entity. We handle HR compliance, payroll & taxes so you can focus on your business.
Business Language
Malay
Salary Currency
Ringgit (MYR)
Payroll tax
13.22%
Payroll Cycle
Monthly
Time zone
UTC +8
Capital city
Kuala Lumpur
Hire Employees in Malaysia
NNRoad provides employer of record (EOR) & professional employment organization (PEO) services to ensure that your business in Malaysia complies with local labor laws and regulations. We process monthly payroll and act as the Employer of Record, taking on all local employer liabilities.
The NNRoad Advantage ☺
Pay as you go
No set-up or overhead costs to global expansion.
Global account manager
One point of contact for all of our 50+ serviced countries and regions.
Compliance
Ensured compliant contracts and operations.
Fast Onboarding
Start working with your remote employees/contractors within a week.
Foreigner Visas
NNRoad assists with overseas foreign hires visa needs.
Platform
Access your payroll reports and employee pay stubs on our portal.
Employer of Record in Malaysia
Employer of Record (EOR) services are for companies who do not have a legal entity in Malaysia, but who want to hire localy. Employment and full liability are outsourced to NNRoad.
01.
Candidate Selection
You interviews & select the candidates you want to hire in Malaysia.
02.
Employee Onboarding
We sign a local labor contract with your employees based in Malaysia.
03.
Compliance & Payroll
We manage monthly payroll, mandatory benefits & all HR compliance in Malaysia.
04.
Payroll Reporting
See all payroll reports on our platform & focus on your business in Malaysia.
Recruiting process outsourcing – including but not limited to resume screening, shortlisting candidates, coordination for interviews, and assistance for salary negotiation.
Hiring and termination of employees/local labor contracts (contract administration – engagement, extension termination and conversion to permanent hire).
On-boarding and off-boarding employees following labor law practice.
Complete payroll solution and benefit administration
Employee management – employee record retaining, time keeping, bonus and allowance management, expense and claims, and leave employee database management accordingly to the local law.
Mandatory insurance compliance (i.e. pension, labor and health insurance) according to the local labor laws.
Payment management (Invoicing customers/clients and vendor payments).
Work VISA application assistance, if needed.
Local individual income tax reporting.
Payroll & PEO in Malaysia
Professional Employment Organization (PEO) services are for companies who have a legal entity in Malaysia, and want to outsource their payroll. Employment liabilities are shared between your organization and NNRoad.
01.
Compliance & Payroll
We manage monthly payroll, mandatory benefits & all HR compliance in Malaysia.
02.
Payroll Reporting
See all payroll reports on our platform & focus on your business in Malaysia.
Registering the necessary company and personnel information for payroll calculation in the payroll software and system
Monthly Payroll Processing
Year-End Adjustment and Annual Declaration
Taxes & Payroll in Malaysia
Employee Income Taxes:
Individual income tax rates in Malaysia are based on progressive tax brackets.
Incomes at or bellow 5000 MYR per year are not taxed. Individual income taxes are levied on a person’s tax base, which includes their worldwide income. This means that any income earned overseas is also subject to individual income taxes. There are a few exceptions to this rule, such as if the individual is working in a country with a double taxation agreement with Malaysia. However, for the most part, individuals will need to pay taxes on their overseas income in addition to any taxes due on their income.
Tax Brackets
0%: 0 – 5,000 MYR
1%: 5,000 – 20,000 MYR
3%: 20,000 – 35,000 MYR
8%: 35,000 – 50,000 MYR
14%: 50,000 – 70,000 MYR
21%: 70,000 – 100,000 MYR
24%: 100,000 – 250,000 MYR
24.5%: 250,000 – 400,000 MYR
25%: 400,000 – 600,000 MYR
26%: 600,000 – 1,000,000 MYR
28%: 1,000,000 – 2,000,000 MYR
30%: >2,000,000 MYR
1%: 5,000 – 20,000 MYR
3%: 20,000 – 35,000 MYR
8%: 35,000 – 50,000 MYR
14%: 50,000 – 70,000 MYR
21%: 70,000 – 100,000 MYR
24%: 100,000 – 250,000 MYR
24.5%: 250,000 – 400,000 MYR
25%: 400,000 – 600,000 MYR
26%: 600,000 – 1,000,000 MYR
28%: 1,000,000 – 2,000,000 MYR
30%: >2,000,000 MYR
Sample Calculation
Yearly income = 70,000 MYR
14% * 20,000 = 2800
8% * 15,000 = 1200
3% * 15,000 = 450
1% * 15,000 = 150
2800+1200+450+50 = 4500
Yearly income tax = 4500 MYR
14% * 20,000 = 2800
8% * 15,000 = 1200
3% * 15,000 = 450
1% * 15,000 = 150
2800+1200+450+50 = 4500
Yearly income tax = 4500 MYR
Employer Costs in Malaysia
In Malaysia, contributions to the Social Security Organization (SOCSO) are mandatory for all employers. The employer cost for each employee is RM21 per month. In addition, the employer must also contribute RM5 per month to the Employees’ Provident Fund (EPF).
As an employer, you are also required to contribute to the Employees’ Provident Fund (EPF). The EPF is a retirement savings fund for citizens. The employer’s monthly contribution is based on a percentage of the employee’s salary, and is currently set at 12%. For example, if your employee earns a salary of RM1,000 per month, you would be required to contribute RM120 to their EPF account.
Employer Contribution
Employers must pay contributions based on the salary of their employees:
12% – 13% – Provident Fund for employees under 60 years old
4% – 6.5% – Provident Fund for employees over 60 years old
1.25% – 1.75% – Social Security
0.2% – Employment Insurance
1% – HR Development Fund for companies with over 10 employees
Employee Contribution
9% – Provident Fund for employees under 60 years old
0% – 5.5% – Provident Fund for employees over 60 years old
Benefits & Insurance in Malaysia
Pension Fund
Employees in Malaysia benefit from a pension fund where both the employer and employee deposit a monthly percentage of the employee’s salary.
The provident fund is a retirement savings scheme that is mandatory for all employees. The employer contributes a percentage of the employee’s salary to the fund, and the employee can also make voluntary contributions. The fund can be used to purchase a property, pay for medical expenses, or provide an income in retirement.
Both the employee and employer are required to contribute to the Employees Provident Fund (EPF). Employers are required to contribute 13% of their employees’ salaries into their EPF account, while employees can choose to contribute between 11% and 18%. This contribution is compulsory for all employees earning a monthly salary of RM5,000 or less.
Healthcare Insurance
Employees benefit from a social security where the employer contributes 1.25% to 1.75% of the employee’s salary.
The social security system is administered by the Social Security Organization (Socso). Employers are required to contribute a percentage of their employees’ salaries to Socso, which provides financial assistance to workers in case of illness, injury, or unemployment. Employees are also required to contribute a small portion of their salaries to the system. Socso benefits are available to all citizens and permanent residents who are employed in the formal sector.
There are two main types of social security benefits:
Employment Insurance
Employees in Malaysia benefit from an employment insurance where the employer contributes 0.2% of the employee’s salary.
Malaysia’s employment insurance system is designed to provide financial assistance to workers who have lost their jobs due to no fault of their own. The system is funded by contributions from employers and employees, and provides benefits for a maximum of 60 days. Job seekers are also able to receive assistance in terms of job placement and training.
Working Hours in Malaysia
Working Hours Per Week
The work week in Malaysia does cannot exceed 45 hours per week. Work should not exceed an average of 8 hours per day or 48 hours per week. A maximum of 12 hours per day can be worked. Employees must get a 30-minute rest period after 5 hours of consecutive work or 45 minutes after 8 hours.
Employees in organizations with less than 10 employees and who are not under the Employment Act (EA) may freely negotiate hours.
Termination Laws in Malaysia
Severance
As long as the dismissal is justified, no additional compensation or severance pay needs to be offered. Severance laws are governed by the Employment Act 1955. Under the Act, an employee can be terminated for a number of reasons, including:
When an employee is terminated, they are entitled to receive certain payments, including:
Malaysia also has a number of additional laws that protect employees from unfair dismissal, such as the Industrial Relations Act 1967 and the Trade Unions Act 1959. These laws provide employees with certain rights, including the right to file a complaint with the Industrial Court if they believe they have been unfairly dismissed.
Notice Period
To end an employee contract, a one month’s notice must be given (although more can be specified in the contract). There must also be a just cause for the dismissal.
Employment Contract in Malaysia
Employment Contract
Employment in Malaysia is governed by the Employment Act 1955. The Employment Act sets out minimum standards for employment contracts – the legal minimum conditions and rights that should apply. It is common practice to still base contracts of employees that don’t qualify on the Employment Act. But employers have the discretion to alter employment terms.
Probation Period
There is no requirement under employment law to offer a separately defined probation period.
Types of Leaves in Malaysia
Annual Leave
Employees under the Employment Act (EA) are entitled to a number of paid annual leave days per year based on how long they have worked with the employer.
Employed for less than 2 years: 8 days per year
Employed for 2 to 5 years: 12 days per year
Employed for more than 5 years: 16 days per year
Employees not under the Employment Act (EA) can negotiate paid leave with their employer.
Sick Leave
Employees in Malaysia are entitled to:
14 days sick leave for employees with less than 2 years service
18 days sick leave for employees with 2 to 5 years of service
22 days for employees with over 5 years service
60 days in case of a medical emergency.
Employees not under the Employment Act (EA) can negotiate paid leave with their employer.
Maternity Leave
Employee are entitled to 90 days maternity leave where 60 days are paid and 30 days are unpaid.
Public Holidays in Malaysia
Employees are entitled to 11 paid public holiday days off per year. 5 of these are mandatory for all employers, and the other 6 can be chosen by the company (but must be consistent for all company employees).
Malaysia is home to a wide variety of cultural celebrations, including festivals and holidays. Holidays are celebrated with enthusiasm throughout the country and many people take time off work or school to celebrate them. The most popular holidays include Hari Raya Aidilfitri, Chinese New Year, Deepavali, Christmas Day, and Wesak Day.
Hari Raya Aidilfitri marks the end of Ramadan and is one of the most widely celebrated religious holidays in Malaysia. It is traditionally celebrated for three days by Muslims. During this holiday, family members come together to give thanks for Allah’s blessings and exchange well-wishes for the future.
Chinese New Year is also a very popular holiday in. This is a time for families to come together, share meals, and exchange gifts. People also celebrate the New Year with visits to temples for prayers and blessings.
Deepavali is one of the most important holidays celebrated by Hindus. On this day, people visit their family members and friends, light small oil lamps as a symbol of inner light overcoming darkness, chant mantras from ancient scriptures at temples, and offer prayers to gods asking for health, happiness, peace and prosperity.
Christmas Day is another significant holiday observed in Malaysia. On this day Christians gather at churches for special services and sing Christmas carols throughout the streets of the country. It is also traditional to give presents and sing songs about the birth of Jesus.
Finally, Wesak Day is celebrated in Malaysia as a day of enlightenment and liberation from suffering. It marks the birth, enlightenment, and death (Parinirvana) of Gautama Buddha. On this day Buddhists visit temples for prayers and meditation, exchange gifts with family members and friends, light candles or lamps in remembrance of the teachings of Lord Buddha, and celebrate with processions throughout Malaysia’s cities.
These are some of the most popular holidays celebrated in Malaysia. Holidays offer an opportunity to come together to celebrate different cultures and beliefs while strengthening relationships within families and communities. Celebrating these holidays is an important part of Malaysian culture that has been passed down through generations
Public Holidays
Resources
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Complete Guide: Payroll in Malaysia 2022
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Why You Should Start a Business in Malaysia
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NNRoad’s Malaysia Market Entry Guide
April 24, 2020