Key Takeaways for Hiring in Malaysia
- Wages must be paid no later than the seventh day after the last day of any wage period
- From October 2025, expatriates must contribute to the Employees Provident Fund (EPF)
- Employees get 14-22 days of paid sick leave annually (non-hospitalization), plus up to 60 days if hospitalization is needed
- Severance pay applies when employment ends due to business closure or redundancy, not resignation
Continent
Asia
Capital
Kuala Lumpur
Currency
Malaysian Ringgit (MYR)
Language
Malaysian
Payroll Cycle
Monthly
VAT
10%
Quick Facts For Hiring In Malaysia
Malaysia Employment Contract Overview
What Do You Need To Include In A Malaysian Employment Contract?
Make sure your contracts include all of these to comply with Malaysian labor law:
Employee Information
- Full name
- ID number
- Role / Job title
- Start date
- Contract duration
- Working hours
- Probation and notice conditions
- Termination provisions
- Address details
- Compensation details
- Leave entitlements
- End date (if applicable)
Payroll
Average employer cost
Up to 15.95%
| Category | Details |
|---|---|
| 13th Salary | Not mandatory; commonly offered as a bonus |
| Avg employer tax | Up to 15.95% |
Tax Breakdown
Employer Contributions
| Category | Rate / Details |
|---|---|
| Employees Provident Fund (EPF) | 12%–13% of monthly salary |
| Social Security Organization (SOCSO) | 1.75% |
| Employment Insurance System (EIS) | 0.2% |
| Human Resources Development Fund (HRDF) | 1% (for companies with ≥10 employees) |
| Total Estimated Employer Contributions | Approximately 18.95%–22.45% of gross salary |
Employee Contributions
| Category | Rate / Details |
|---|---|
| EPF | 11% of monthly salary |
| SOCSO | 0.5% |
| EIS | 0.2% |
| Total Estimated Employee Contributions | Approximately 11.7%–17.2% of gross salary |
Personal Income Tax (PIT)
Progressive Rates
| Category | Rate / Details |
|---|---|
| 0% | on income up to RM5,000 |
| 1%–30% | for higher income brackets |
Tax Reliefs
| Category | Rate / Details |
|---|---|
| Available for | EPF contributions, life insurance, medical expenses, and more |
VAT
| Category | Rate / Details |
|---|---|
| VAT | 10% for sales tax and 6% for service tax |
Employee Benefits and Mobility in Malaysia
Employment of expats is supported in Malaysia.
| Benefits | Provider | Funded Through | Notes |
|---|---|---|---|
| Health Insurance | Government |
Payroll Contributions |
Social security benefits in Malaysia cover medical coverage. |
| Pension / Social Security | Government |
Payroll Contributions |
Social security benefits in Malaysia, which include retirement, disability, survivor benefits, and medical coverage, are offered through the Employees Provident Fund (EPF) and the Social Security Organization (SOCSO). Both you and the majority of employees—including part-time, temporary, and probationary workers—are required to participate in these programs. |
Leave And Holiday Entitlement In Malaysia
Annual Leave
Employees receive paid annual leave based on their length of continuous service with their current employer as follows:
-
Less than two years: eight days of leave
-
Between two and five years: 12 days of leave
-
Five years or more: 16 days of leave per year
Employees who have worked for less than 12 months with you are entitled to a pro-rated amount of the full annual leave, calculated based on the months they’ve served. Leave can be accumulated but only carried forward into the following 12-month period after it has been earned. Additionally, employees may choose to receive payment instead of taking their leave.
Public Holidays
Malaysian law mandates 12 or 13 paid public holidays annually, with the exact number depending on the state. These include:
-
Chinese New Year
-
Birthday of the Prophet Muhammad
-
Wesak Day
-
Hari Raya Puasa (two days)
-
Hari Raya Haji (two days in Kedah, Kelantan, Perlis, and Terengganu; one day in other states)
-
Deepavali
-
National Day (August 31)
-
Birthday of Yang di-Pertuan Agong (June 1)
-
Labor Day (May 1)
-
Malaysia Day (September 16)
-
Christmas Day (December 25)
In addition to these, individual states may declare additional paid holidays.
Sick Leave
When hospitalization isn’t required, employees are entitled to paid sick leave per calendar year as follows:
-
14 days for those employed less than two years
-
18 days for employees with two to five years of service
-
40 days per year with 15 to 30 years of contributions
-
22 days for those with five or more years of employment
If hospitalization is needed, employees can receive up to 60 days of paid sick leave annually. This 60-day hospitalized sick leave is granted in addition to the regular non-hospitalization sick leave entitlement.
A medical certificate from a licensed practitioner is required to validate the illness.
Maternity Leave
Female employees are entitled to 98 consecutive days of paid maternity leave. Leave may begin up to 30 days before the expected date of confinement or, if not taken earlier, will start on the day following childbirth. If a doctor certifies that the employee can’t continue working, maternity leave may commence earlier than the 30-day window.
These rights also apply in cases of stillbirth after 22 weeks of pregnancy. To qualify for paid leave, the employee must have worked at least 90 days in the nine months before confinement and been employed at some time in the four months immediately before confinement.
Employees must give you 60 days’ notice of the expected confinement and intended start date of leave. Notice may be oral or written, given to a supervisor or authorized person. If leave starts without notice, payment of the maternity allowance may be suspended until proper notice is provided.
Paternity Leave
Male employees are entitled to seven days of paid paternity leave upon the birth of a child, provided they meet the following conditions:
-
They’re legally married to the mother of the child
-
They’ve been continuously employed by the same employer for at least 12 months prior to the start of the leave
-
They inform you of the pregnancy at least 30 days before the expected delivery date, or as soon as reasonably possible after the child is born
Other Types of Leave
No other statutory leave. You may grant leave at your own discretion.
Termination and Offboarding in Malaysia
| Type | Possible? |
|---|---|
| Termination for Cause (poor performance, misconduct, etc.) | Yes |
| Termination without Cause | Yes |
| Mutual Termination Agreement (MTA) | Yes |
| Redundancy | Not possible under the EOR setup |
Malaysia Employee Resignation
Notice period
The standard notice periods for resignation are based on length of service:
-
Four weeks of notice for less than two years of service
-
Six weeks of notice for between two and five years of service
-
Eight weeks of notice for five or more years of service
Employees have the right to end their employment without prior notice if they or their dependents face an immediate threat from violence or illness—provided they were unaware such risks were part of their job when they accepted the position.
Payment in lieu of notice or notice waiver
Employees may choose to resign immediately by compensating you with an amount equal to the wages that would have been earned during the applicable notice period.
End-of-Service Benefits
Severance/Gratuity
Under the Employment (Termination and Lay-Off Benefits) Regulations 1980, employees are entitled to severance (termination) payments only if their employment ends due to reasons like business closure—not due to resignation.
Other Benefits
-
Unused Annual Leave Encashment
-
Unpaid Salary, Allowances, Overtime
-
Unused Public Holiday Entitlement
Employer Termination With Cause in Malaysia
Acceptable grounds
The Employment Act doesn’t provide a specific definition of misconduct beyond describing it as “misconduct inconsistent with the fulfillment of the express or implied conditions” of the employee’s service.
Notice
In cases involving misconduct, you have the right to dismiss an employee without notice, impose a demotion, suspend the employee without pay for a period of up to two weeks, or apply a lesser disciplinary measure. However, such actions may only be taken after conducting a proper “due inquiry” to ensure fairness.
While investigating the alleged misconduct, you may suspend the employee for up to two weeks with at least half of their regular pay. If the inquiry concludes that the employee didn’t commit any misconduct, you’re required to compensate the employee for any withheld wages.
End-of-Service Benefits
Severance
Severance pay isn’t applicable in dismissals due to employee misconduct.
Employer Termination Without Cause in Malaysia
Notice period
In the absence of a specified notice period in the employment contract, the default notice requirements are determined by the employee’s length of service:
-
Four weeks for those employed for less than two years
-
Six weeks for those with two to five years of service
-
Eight weeks for employees who have worked five years or more
Payment in lieu of notice or notice waiver
Instead of giving the required notice, you may choose to compensate the employee with an amount equal to the wages that would have been earned during the notice period.
End-of-Service Benefits
Severance
As per the Employment (Termination and Lay-Off Benefits) Regulations 1980, severance pay is as follows:
-
At least one year but less than two years of service: 10 days’ wages per year of service
-
From two to five years of service: 15 days’ wages per year of service
-
Five or more years of service: 20 days’ wages per year of service
For partial years of service, severance pay is calculated on a pro-rata basis.
Other Benefits
-
Unpaid salary up to the termination date
-
Encashment of unused annual leave
-
Outstanding overtime, bonuses, commissions (if contractually owed)
-
Payment for any public holidays not taken if applicable
Mutual Termination Agreements in Malaysia
MTAs are voluntary agreements signed by both parties to terminate an employment contract by mutual consent.
Notice
Notice period
Four weeks for those employed for less than two years
-
Six weeks for those with two to five years of service
-
Eight weeks for employees who have worked five years or more
Waiver of notice
Instead of giving the required notice, you may choose to compensate the employee with an amount equal to the wages that would have been earned during the notice period.
End-of-Service Benefits
Severance
As per the Employment (Termination and Lay-Off Benefits) Regulations 1980, severance pay is as follows:
-
At least one year but less than two years of service: 10 days’ wages per year of service
-
From two to five years of service: 15 days’ wages per year of service
-
Five or more years of service: 20 days’ wages per year of service
For partial years of service, severance pay is calculated on a pro-rata basis.
Other Benefits
-
Unpaid salary up to the termination date
-
Encashment of unused annual leave
-
Outstanding overtime, bonuses, commissions (if contractually owed)
-
Payment for any public holidays not taken if applicable
Offboarding Process for the End of Fixed-term Contracts in Malaysia
If the Fixed-Term Contract Ends Normally
Notice
The contract expires on the agreed end date without renewal.
End-of-Service Benefits
Severance/Gratuity
No statutory requirement for severance pay unless contract or company policy states otherwise.
Other Benefits
You must provide:
- Final salary payment including unpaid wages, pro-rated bonuses, overtime, and allowances
- Payment for unused annual leave accrued during the contract period
- Notice (if required by contract): Some contracts specify notice before non-renewal; otherwise, contract expiry is automatic
- Return of company property and completion of exit formalities
- Settlement of statutory contributions (EPF, SOCSO) up to the last working day
- Certificate of Service or Employment Reference Letter if requested
If the Employer Terminates Early
Early termination before the contract expiry date is generally only lawful with cause or if the contract includes a termination clause.
Notice
You must provide written notice as per contract or Employment Act minimum.
End-of-Service Benefits
If you terminate early without cause or without lawful grounds, the employee is generally entitled to:
- Notice pay or payment in lieu of notice, based on the contract or Employment Act
- Severance/termination benefits under the Employment (Termination and Lay-Off Benefits) Regulations 1980, calculated based on length of service
- Final salary, including unpaid wages, allowances, overtime, bonuses
- Unused annual leave encashment
- Settlement of statutory contributions (EPF, SOCSO) up to termination date
Final Payment Timing & Immigration and Visa Compliance in Vietnam
Final Payment Deadline
You’re usually required to settle all final payments immediately or within a short time after termination or contract expiration. Common timelines include:
- By the end of the next working day or
- Within seven to 14 days after termination
Penalty
You may face fines, legal action, or be required to pay interest on delayed payments.
Visa and Immigration Compliance
You must notify the Malaysian Immigration Department immediately upon termination of a foreign employee. Notification must usually be done within seven days of termination.
You’re responsible for canceling the Employment Pass (EP) or any related visa once the employment ends.
You’re generally required to bear the cost of repatriating the foreign employee to their home country if stipulated by local labor laws or the employment contract.
For Employment Pass holders, you must update the MYXpats Centre about the employment status change.
You must file the CP21 form with the Inland Revenue Board of Malaysia (LHDN) at least 30 days before the employee leaves the company or the country. This allows for tax clearance before departure.
Non-compliance may lead to fines, blacklisting, or revocation of your privileges for hiring foreign workers in the future.
Supporting Guides
Frequently Asked Questions
When must wages be paid?
Legally, wages must be paid no later than the seventh day after the last day of any wage period. This ensures employees receive timely payment.
What changes in October 2025 for expatriates?
Starting from October 2025, expatriates are required to contribute to the Employees Provident Fund (EPF). Currently, expatriate contributions are voluntary, but this becomes mandatory from October 2025.
Is the 13th-month salary mandatory in Vietnam?
No, it’s not legally required. However, it’s widely practiced and commonly paid before Lunar New Year. If you offer it, document it clearly in employment contracts or company policies.
How much sick leave do employees get?
For non-hospitalization: 14 days (less than two years service), 18 days (two to five years), or 22 days (five+ years) annually. If hospitalization is needed, employees get an additional 60 days of paid sick leave per year. A medical certificate from a licensed practitioner is required.
When is severance pay required?
Severance pay applies when employment ends due to business closure or redundancy, not resignation. The amount depends on length of service: 10 days’ wages per year (one to less than two years), 15 days’ wages per year (two to five years), or 20 days’ wages per year (five+ years). It’s calculated pro-rata for partial years.
How much maternity leave do female employees get?
Female employees get 98 consecutive days of paid maternity leave. Leave may begin up to 30 days before the expected date of confinement. To qualify, the employee must have worked at least 90 days in the nine months before confinement and been employed at some time in the four months immediately before confinement.
What’s the notice period for resignation?
Four weeks for less than two years service, six weeks for two to five years, or eight weeks for five+ years. Employees may resign immediately by compensating you with an amount equal to the wages that would have been earned during the notice period.
What immigration notifications are required when terminating a foreign employee?
You must notify the Malaysian Immigration Department within seven days of termination, cancel the Employment Pass, update the MYXpats Centre, and file the CP21 form with LHDN at least 30 days before the employee leaves the company or country. Non-compliance can result in fines or blacklisting.
