Global HR Compliance in Malaysia

The war for global talent has never been tougher. Attracting and keeping sought-after international employees requires knowledge. Whether your company is already engaging or planning to engage a global workforce in Malaysia, you need to trust that your operations are executed without flaw and without any unnecessary risks. Businesses of all sizes face a devastating lack of information and support on global employment, taxation, and immigration in Malaysia. There’s a common and significant gap between what’s required to be 100% compliant and what most organizations actually have at their disposal.

Acumen International can fill the gap in fragmented Global HR Compliance knowledge

We are experts in global workforce employment in Malaysia, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources. We act as an information service for corporate clients, agencies, and independent contractors and freelancers. Our Global HR Compliance service in Malaysia will help you:

1. Navigate legislation and local nuances of Malaysia. You need to know what is acceptable and what can expose you to employment litigation as well as employee / independent contractor misclassification risk in Malaysia.
2. Avoid areas of possible risk. Certain areas and activities can create unnecessary risk, such as employer-employee relations. We can help you with worker classification, payroll and tax calculations, and social cost contributions.
3. Handle currency exchanges and local invoicing in Malaysia. We save you time and effort, freeing you from having to understand complicated regulations and tax calculations written in the local language and subject to frequent changes.
4. Create employment contracts and handle compliant engagements. Our objective is to assist you with international HR compliance issues and offer you the best payment and taxation options in Malaysia.
5. Manage expatriate immigration and visa support nuances in Malaysia. Acumen International provides information about the best scenarios of expat immigration and employment.
6. Handle global recruitment issues. We can help you select the person and then employ him with our help. We advise you on local employment laws and implied compliance risks to determine the most cost-effective, compliant, and risk-free solution for you.
7. Withdraw from the region in the least risky and most cost-effective way. If you choose to do so, we can help you withdraw from the region as simply as possible.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need it, regardless of time zones. Our goal is to create tailored labour solutions for you that are managed legally and in full compliance with local employment laws. With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Malaysia.

Employment Contracts in Malaysia

A written contract of employment is mandatory for all employees whose contracts have more than one-month duration. Employment that is intended to last for less than one month can be concluded orally. Under the law, a written contract must specify the parties’ names, employment intended start date, address and place of work, job title and description, hours of work, remuneration package, other entitlements, including probation, overtime and leave, retirement age and terms of notice. An employment contract must be given to the new employee before he commences work.

Statutory Employment Requirements in Malaysia

Hours of work

The statutory time limit for work in Malaysia is 8 hours per day and 48 hours per week.

Probation period in Malaysia

The probationary period in Malaysia can take between 1 month and 6 months. Employees may be placed on probation at the start of the employment to evaluate their suitability for the job. An employee’s contract may be terminated during probation on a justifiable cause without the obligation to provide prior notice.

Annual leave in Malaysia

Employers are required to grant their employees an annual paid leave as follows: 8 days’ leave for every complete year of service for employees who have worked less than 2 years in the company, 12 days’ leave for every complete year of service for employees who have worked for 2 to 5 years in the company and 16 days’ leave for every complete year of service for employees who have worked more than 5 years in the company.

Parental leave in Malaysia

Female employees are entitled to 60 continuous days of maternity leave during pregnancy, miscarriage, and therapeutic abortion (if it is done after 28 weeks of pregnancy). Maternity leave is available to employees from their first childbirth up to their fifth childbirth. An employee may start to take her maternity leave as early as 14 days before her due date if authorized by the doctor. An employee is required to notify her employer 60 days before the start of her maternity leave, otherwise she may not be paid her benefit. Male employees are eligible for 2 days of paternity leave for every new baby they have up to the birth of their fifth child.

Sick leave in Malaysia

Sick employees are eligible for sick leave, of which duration depends on the employee’s years of service and whether a hospitalization is needed or not. Employees with up to 2 years of service are entitled to receive 14 days of sick a year, employees with 3 to 4 years of experience in the company has the right to 18 days leave while those with 5 years and above years of service are entitled to 22 days leave per year. In case of hospitalization, an employee must be given up to 60 days of sick leave.

Overtime in Malaysia

Employers are obliged to compensate their employees for every extra hour they work on any given day/week, for working on any non-working hours (rest time) or non-working days (weekly rest day and holiday). Employers must compensate for overtime with a premium pay of 1.5 when worked during a working day, at a double rate of the employee’s normal pay when worked during a rest day and at a triple rate of the employee’s normal pay when worked on a holiday. The total amount of hours of overtime per month must not exceed 104.

Minimum salary in Malaysia

As of 2024, the minimum wage in Malaysia is set at RM1,500 per month. This rate applies nationwide to all sectors and employers with five or more employees. The minimum hourly wage, based on the Minimum Wages Order 2022, is RM7.21 per hour. The minimum wage increase was deferred until January 1, 2023, for micro-enterprises (businesses with fewer than five employees) and businesses located outside major towns, but since then, the RM1,500 minimum wage has applied universally. The Malaysian government reviews the minimum wage every two years, and there is an ongoing discussion about a potential revision in 2024.

Employment Termination in Malaysia

In Malaysia, both employers and employees have the right to terminate an employment relationship, provided that prior notice is given. The specifics of the notice period are governed by the Employment Act 1955 and depend on the length of the employee’s service. Here are the key points:

Notice Periods

The required notice periods for termination are as follows:

• Less than 2 years of service: 4 weeks’ notice
• 2 to 5 years of service: 6 weeks’ notice
• More than 5 years of service: 8 weeks’ notice

Payment in Lieu of Notice

Instead of serving the notice period, either party (employer or employee) may opt to make a payment in lieu of notice. This payment should be equivalent to the amount of wages the employee would have earned during the notice period.

Just Cause and Excuse

Employers must have “just cause and excuse” to terminate an employee. This means that termination should be based on valid reasons such as:

• Misconduct
• Poor performance
• Redundancy
• Breach of contract

Exceptions

• Summary Dismissal: In cases of serious misconduct, an employer may terminate the employee without notice or payment in lieu of notice.
• Probationary Employees: While probationary employees are also entitled to notice, the notice period may be shorter and is usually specified in the employment contract.

Coverage

The Employment Act 1955 applies to employees in Peninsular Malaysia and Labuan. As of January 1, 2023, the Act covers all employees, with certain provisions specifically applying to those earning up to RM4,000 per month or in specific job categories.

Additional Considerations

• Contractual Terms: Employers and employees should also refer to the terms specified in the employment contract, as they may provide additional rights or obligations regarding termination.
• Industrial Relations Act: Employees who feel they have been unjustly terminated can seek redress under the Industrial Relations Act 1967.

Acumen International can help you fast-track your possibilities of entering and expanding your business in Malaysia by providing you with our Employer of Record services. Our Global EOR solutions will enable you to start your global operations immediately, cost-effectively and compliantly without any need to set up a legal entity.