If you’re hiring employees in Malaysia, you need to know exactly what the law requires you to provide. Malaysia’s Employment Act 1955 sets out minimum entitlements for leave and benefits, and separate legislation governs mandatory contributions to the country’s social protection schemes. Get these wrong and you’re exposed to compliance risk. Get them right and you’ll build a solid foundation for your Malaysian workforce.
Annual leave
Annual leave entitlement scales with an employee’s length of service. The minimums under the Employment Act 1955 are:
- Less than 2 years of service: 8 days per year
- 2 to 5 years of service: 12 days per year
- More than 5 years of service: 16 days per year
These are statutory minimums. You can offer more, and many employers do to stay competitive, but you can’t offer less.
Sick leave and hospitalisation leave
Sick leave entitlements also scale with service length. For non-hospitalisation sick leave, the minimums are:
- Less than 2 years of service: 14 days per year
- 2 to 5 years of service: 18 days per year
- More than 5 years of service: 22 days per year
On top of those amounts, employees are entitled to an additional 60 days of hospitalisation leave per year. This applies when the employee requires certified medical treatment in a hospital, and it’s separate from standard sick leave. So an employee with more than 5 years of service could take up to 82 days of sick and hospitalisation leave in a given year.
Maternity leave
Malaysia amended its Employment Act in 2023, and one of the biggest changes was to maternity leave. Eligible employees are now entitled to 98 consecutive days of maternity leave at full pay. This applies for the first five surviving children.
As the employer, you’re responsible for paying the employee’s full salary throughout that period. Factor this into your workforce planning when you hire female employees of childbearing age.
Paternity leave
The 2023 amendments also extended paternity leave. Male employees whose wives give birth are entitled to 7 consecutive days of paternity leave at full pay. This is up from 3 days under the previous rules.
Note that paternity leave applies to married male employees only, and it covers each confinement regardless of the number of children born.
Public holidays
Employees in Malaysia are entitled to 11 national public holidays per year, plus 1 to 2 additional state public holidays depending on which state they’re based in. In practice, most employees in Malaysia get 12 to 13 paid public holidays per year.
If you need an employee to work on a public holiday, you’re required to pay at a premium rate. Make sure your employment contracts and payroll processes account for the state your employees are located in, since entitlements vary slightly across states.
Epf: mandatory pension savings
The Employees Provident Fund (EPF) is Malaysia’s mandatory pension scheme. Both employers and employees contribute a percentage of the employee’s monthly salary.
For Malaysian employees, the employer contribution rate is 12% to 13% of the employee’s wages (the exact rate depends on the employee’s salary level), and the employee contributes 11%.
For non-Malaysian employees, separate rates apply. From October 2025, both the employer and employee each contribute 2% of monthly wages to EPF.
EPF contributions are calculated on total wages, and you need to register your employees with the EPF and submit contributions on time each month.
Socso and eis
Two additional mandatory contributions apply to most employees in Malaysia: SOCSO and EIS. Here’s how each works.
SOCSO stands for the Social Security Organisation. It provides coverage for workplace injuries and invalidity. The employer contributes 1.75% of the employee’s monthly wages, and the employee contributes 0.5%. Contributions are calculated on wages up to a ceiling of RM 6,000 per month.
EIS stands for the Employment Insurance System. It provides short-term financial support to employees who lose their jobs. Both the employer and the employee each contribute 0.2% of monthly wages, again up to a ceiling of RM 6,000 per month.
You’ll need to register with SOCSO and make both SOCSO and EIS contributions on the same schedule, typically through a combined submission via the Perkeso platform.
Managing malaysian benefits through an Employer of Record
If you don’t have a legal entity in Malaysia, you can’t employ workers there directly. One way to solve this is through an Employer of Record (EOR), which employs workers on your behalf and takes on the legal responsibility for compliance with Malaysian employment law.
Understanding what an EOR is matters before you commit to one. The EOR becomes the legal employer of record, handles payroll, administers leave entitlements, makes EPF, SOCSO, and EIS contributions, and keeps you compliant with the Employment Act. You retain day-to-day management of the employee’s work.
If you’re evaluating your options, comparing EOR services can help you find a provider that matches your scale and budget.
Book a demo to see how RemotePass manages Malaysian leave and benefits on your behalf.
Frequently asked questions
Do the employment act entitlements apply to all employees in malaysia?
The Employment Act 1955 covers employees earning up to RM 4,000 per month, as well as all manual workers regardless of salary. Employees earning above that threshold aren’t automatically covered by every provision of the Act, but many employers apply the same minimum standards across their workforce for consistency and to remain competitive.
Are employers required to pay epf for foreign employees?
Yes. From October 2025, non-Malaysian employees and their employers each contribute 2% of monthly wages to EPF. This is a change from the previous position where foreign employees could opt out entirely.
What happens if a public holiday falls on a rest day?
If a public holiday falls on an employee’s rest day, the employee is entitled to a substitute holiday on the following working day. You’ll need to pay for that substitute day as a paid public holiday.
Can employers offer more than the statutory minimum leave entitlements?
Yes, and many do. The figures set out in the Employment Act are minimums. You’re free to offer more annual leave, sick leave, or any other benefit. If you want to attract skilled talent in Malaysia, offering above-minimum leave is a common way to do it.
