Updated on: 2025/08/04 14:03 (UTC)
Overview
The Employment Act of 1955 is the main source for employment law in Malaysia and covers most employees in the private sector. When first enacted, the act applied only to Peninsular Malaysia, but it was extended in 2000 to cover the Federal Territory of Labuan, an island off Sabah in East Malaysia. The remaining states, Sabah and Sarawak in East Malaysia, have separate ordinances that on most issues are very similar to the laws covering Peninsular Malaysia.
The Industrial Relations Act, originally enacted in 1967, covers relations among employers, employees, and trade unions throughout Malaysia, including Sabah and Sarawak. The act applies to any “workman,” defined as “any person, including an apprentice, employed by an employer under a contract of employment to work for hire or reward.”
Another important law is the Employees Provident Fund Act of 1991, which established a mandatory savings program for retirement throughout Malaysia, including Sabah and Sarawak. The act applies to most workers, except domestic workers and some others, who may participate voluntarily.
The statutes set out minimum requirements that employers and employees may expand on through collective bargaining agreements.
The Ministry of Human Resources is the general government agency overseeing employment issues for all of Malaysia. The agency includes the departments of Labor in Peninsular Malaysia and in Sabah and Sarawak in East Malaysia; the Industrial Relations Department, which deals with trade union issues and includes the Industrial Court; and the Occupational Safety and Health Department.
Hiring
Employment Contracts
Fixed-term contracts for more than one month must be in writing and include the manner by which either party may terminate the contract. The Employment Act does not specify provisions that must be included in a contract for an indefinite term, although the Employment Act states that a contract may not restrict the rights of employees to join, participate in or organize trade unions.
Effective Jan. 1, 2023, employees may apply for a flexible working arrangement to vary their work hours, work days, or place of work. Employers must communicate their decision on the flexible work request to the employee in writing within 60 days of receipt of the application. If the request is not granted the employer must provide grounds for the refusal.
Apprenticeship contracts between an employer and an apprentice bind the employer to employ and train the apprentice for a period of at least two years. Effective Jan. 1, 2023, apprenticeship programs will be limited to a minimum duration of six months and a maximum duration of 24 months.
Effective Jan. 1, 2023, in the absence of a written contract, individuals will be presumed to be employees if:
their manner or hours of work are subject to control by another person;
they are provided with tools, materials or equipment by another person to execute their work;
their work constitutes an integral part of another person’s business;
their work is performed solely for the benefit of another person; and
payment is made to them for work done at regular intervals and it constitutes the majority of their income.
Restrictions on Hiring
Under the Employment Act, women are not permitted to work in the industrial and agricultural sectors from 10 p.m. to 5 a.m. and in those sectors must be given an 11-hour break between the end of one day’s work and the start of another’s. Women also may not be employed in any underground work. The government may issue a waiver on either the time restrictions or the ban on underground work in a particular case. Effective Jan. 1, 2023, employers may employ women in night or underground work.
The Children and Young Persons (Employment) Act 1966 applies to Peninsular Malaysia and the Federal Territory of Labuan. It states that a youth under the age of 16 may be employed only in light work in a family business, in public entertainment, as an approved apprentice or in work sponsored by the government. A youth 14 or 15 years old may in addition be employed as a domestic servant, in any office or shop, or in an industrial undertaking appropriate to his or her capacity. No girl under 16 years of age may work in a hotel, bar or restaurant unless the establishment is under the management of a parent or guardian or approval is given by the director general of labor.
Children may not work more than six days in any seven-day period. Those under 14 may not work more than six hours per day; those 14 or 15 may not work more than seven hours per day. Children under 14 may not work at night unless employed in public entertainment; those 14 or 15 may not work at night unless employed in agriculture, in public entertainment or on a vessel under the charge of a parent or guardian.
The director general of labor must issue a permit for any youth to be employed in public entertainment. Other conditions for the employment of children or young people may be set by the director or by the minister of human resources.
Rules on hiring foreign employees. An employer may not terminate a Malaysian employee in order to hire a foreign employee, and a local applicant who has been turned down for a job that was given to a foreign employee may file a complaint with the director general of the Ministry of Human Resources.
In the case of mass dismissals, an employer may not terminate Malaysians unless all foreign employees have first been terminated.
Recordkeeping
Employers must keep employee records for at least six years and provide such records to the director general of the Ministry of Human Resources upon request.
Background Checks
Background checks are not addressed in the labor code.
Noncompetition Agreements
The labor code generally prohibits post-termination agreements that restrict employees from being involved in a business or profession. However, employees can be asked to sign agreements that prohibit them from:
- using confidential information gained from employment and
- interfering with the business of the ex-employer.
Reference Citations
Employment Contracts: Employment Act, 1955 (as amended), §§ 6-10
Restrictions on Hiring: Children and Young Persons (Employment) Act, 1966 (as amended)
Recordkeeping: Employment Act, 1955 (as amended), § 61
Immigration and Work Permits
In General
The express policy of the Malaysian government is to favor the employment of Malaysian citizens over foreign nationals and to encourage employers operating in Malaysia to train Malaysians to fill skilled positions rather than import skilled labor from abroad. To this end, the government restricts both the industries and the positions into which expatriates may be hired.
Visas and Work Permits
The express policy of the Malaysian government is to favor the employment of Malaysian citizens over foreign nationals and to encourage employers operating in Malaysia to train Malaysians to fill skilled positions rather than import skilled labor from abroad. To this end, the government restricts both the industries and the positions into which expatriates may be hired.
The Expatriate Services Division of the Immigration Department was established in 2012 to provide a single channel for expatriates or employers to address all immigration-related matters online. Employers and employees must use the ESD portal for most transactions.
An expatriate who qualifies for a work permit will be issued a multiple-entry visa valid for the duration of the work permit. The Immigration Department’s Expatriate Committee or another relevant authority must give approval for the foreign employee to fill a position before a work permit will be issued.
Expatriate employees are allowed to enter Malaysia only for work in manufacturing, agriculture, construction and services, for example, and only certain categories of expatriate employees will be approved for entry into the country:
- Key Post: high-level managers responsible for setting company policy (a permanent posting)
- Time Post (executive): intermediate-level managers responsible for implementing company policy and supervising subordinate personnel (temporary posting)
- Time Post (non-executive): highly skilled employees (temporary posting)
How many expatriate employees an employer is allowed to bring into the country in each of these categories and how long these expatriates are allowed to remain depends on the amount of paid-up capital the company maintains in Malaysia (essentially, the amount of liquid funds deposited in an in-country bank).
A posting must be for a minimum of two years.
Otherwise qualified employees will be automatically approved for immigration if the employer submits—together with Form DP 10 (expatriate post application form) and a copy of the employment contract—a letter of undertaking guaranteeing the required minimum monthly salary and payment of associated employment taxes.
An employer must apply to the Ministry of Home Affairs for approval to bring a foreign worker into Malaysia and for the appropriate visa. Effective Jan. 1, 2023, employers must apply to the Director General of Labor for approval to bring a foreign employee into Malaysia. Failure to do so could lead to a fine of up to M$100,000 and/or imprisonment of up to five years.
Employers seeking to hire foreign workers must first advertise the job vacancy for at least 30 days in the MYFutureJobs portal. Exemptions apply for highly skilled or executive-level roles, or positions that pay more than a specified salary threshold.
An application fee is required. The employer is responsible for all payments of fees.
Employees will not be allowed to enter Malaysia until the application process has been completed. If an expatriate employee is transferred to another post within the same company, the employer is required to obtain a new employment pass.
An expatriate who qualifies for an employment pass will be issued a multiple-entry visa valid for the duration of the employment pass. The employment pass is a work permit allowing an expatriate to work for an organization in Malaysia. The pass is subject to the contract of employment (up to 60 months). The Immigration Department’s Expatriate Committee or another relevant authority must give approval for the foreign employee to fill a position before an expatriate employment pass will be issued.
Digital Nomad Visa. Effective Oct. 1, 2022, foreigners seeking to work remotely in Malaysia for a company that does not have operations in the country can apply for the DE Rantau programme pass. The visa is valid for up to one year, and can be renewed for an additional 12-month period. Pass holders may bring their spouse and children.
Post-Entry Requirements
An employer who employs a foreign employee must, within 14 days of the employment, furnish the Director General of Labor with the particulars of the foreign employee. If an employment contract is terminated by either the employee or the employer or reaches its expiration date, the employer must notify the Director General of Labor within 30 days of the termination of service.
Effective Jan. 1, 2023, employers who terminate a foreign worker must notify the Director General of Labor within 30 days of the date of the termination, or within 14 days if a foreign worker resigns or absconds.
On expiration of the work visa, the employee must be repatriated to his or her country of origin. If an extension of the stay is necessary, the employer should submit a request to the Foreign Workers Division of the Ministry of Immigration Affairs at least three months prior to the expiration of the current visit pass. The employee may be required to undergo another medical examination.
Reference Citations
Post-Entry Requirements: Employment Act, 1955 (as amended), § 60k
Nondiscrimination
In General
Employment discrimination on the basis of religion, race, descent, place of birth, gender, pregnancy, or union membership is illegal and the government encourages (but does not require) employers not to discriminate based on physical or mental disabilities.
Apart from the constitution, discrimination in employment is not explicitly prohibited in Malaysia’s employment statutes except for prohibitions of discrimination against pregnant women and union members.
Employers are required to investigate and act upon any complaint of sexual harassment in the workplace.
Disability Discrimination
Discrimination based on physical or mental disabilities is not included among the types of discrimination barred in the constitution, although the government has issued the Code of Practice for the Employment of Persons with Disabilities in the Private Sector to encourage and guide employers in the hiring of suitable persons with disabilities in private sector jobs. The guidelines do not have the force of law.
Gender Discrimination
The Federal Constitution bars discrimination in employment on the basis of gender.
Under the Employment Act, a sexual harassment complaint may be made by an employee against another employee, by an employee against an employer, or by an employer against an employee. Whenever an employer receives a complaint of sexual harassment, it is required to inquire into the complaint and take disciplinary action against the person concerned if he or she is found guilty. This provision is also applicable to all employees, irrespective of their salary.
Effective Jan. 1, 2023, employers must conspicuously exhibit a notice to raise awareness of sexual harassment in the workplace.
Reference Citations
Constitution of Malaysia, 1958 (as amended), art. 8
Employee Privacy
Employee Data
When processing personal information, employers must ensure that the data are:
- processed lawfully and fairly;
- collected and recorded for specific, explicit, and legitimate purposes;
- accurate and kept up to date;
- relevant, complete, and not excessive in relation to the purposes for which the data are collected or subsequently processed; and
- kept in a form that permits identification of the employee for no longer than is necessary.
Employers must take steps to protect the personal data during its processing from any loss, misuse, modification, unauthorized or accidental access or disclosure, alteration, or destruction.
Employees whose data are being processed have the right to:
- access their data,
- correct their data,
- withdraw their consent to process personal data,
- prevent processing likely to cause damage or distress, and
- prevent processing for direct marketing.
Employers cannot transfer employees’ personal data outside Malaysia except to countries that have been approved by the Malaysian government.
Employee Monitoring and Surveillance
Under guidelines issued by the Malaysian Personal Data Protection Department, the primary purpose of video monitoring at the workplace is for crime detection and prevention, and hence it “cannot be misused for other purposes such as staff monitoring.”
Reference Citations
Employee Data: Personal Data Protection Law, No. 709 of 2010, § 6
Employee Monitoring and Surveillance: Personal Data Protection Law, No. 709 of 2010, § 6
Compensation
Hours of Work
Regular work hours may not exceed eight in a day or 48 in a week. An employment contract may provide for a work schedule in which an employee works more than eight hours some days and less other days, subject to a maximum of 12 hours in a day and 48 hours in a week. After six consecutive hours of work, workers must be granted a 45-minute rest period.
Effective Jan. 1, 2023, the maximum number of work hours will be 45 hours per week.
If a job requires the employee’s continual attendance, work hours may run for eight consecutive hours if a meal break of at least 45 minutes is given.
Work Regulation (Part-Time Workers) 2010 requires employers to grant part-time workers benefits similar to those enjoyed by full-time employees, including overtime pay, annual and medical leave and observance of public holidays. The rule classifies part-time employees as those who work between 30 and 70 percent of full-time hours. Workers who fall below 30 percent are categorized as casual workers and are exempt from the regulation, while those who work more than 70 percent of full-time hours are considered full-time employees.
Every employee is entitled to one rest day per week.
If the employee is assigned to shift work, defined as work that must be carried on continuously for more than one shift, any continuous period of at least 30 hours constitutes a rest day.
If the rest day varies from month to month, the employer must prepare an advance schedule to be communicated to the employees before the start of each month. If all employees have the same rest day each week, however, the employer can simply post a notice in a conspicuous place informing the employees of the rest days.
An employee may be required to work on a rest day if:
- the employer needs work done that is essential to the community or to national defense or security,
- there has been a workplace-related accident or a potential accident is feared,
- urgent work needs to be done on the workplace building or the equipment or
- there was an unforeseeable interruption of work.
Minimum Wage
From May 1, 2022, the minimum wage for all employees in Malaysia is M$1,500 per month. Employers with less than five employees are exempted until Jan. 1, 2023. Until then, the minimum wage for these employers is maintained at M$1,200 a month. From Feb. 1, 2020 to April 30, 2022, the minimum wage requirement for all employers was M$1,200 per month.
Overtime
An employee may be required to work overtime if:
- the employer needs work done that is essential to the community or to national defense or security,
- there has been a workplace-related accident or a potential accident is feared,
- urgent work needs to be done on the workplace building or the equipment or
- there was an unforeseeable interruption of work.
An employer may also apply for permission from the director general of labor to enter into a contract with one or more employees to work overtime.
Overtime work, which means work carried out in excess of the normal work hours, is paid at 150 percent of the employee’s usual hourly rate. The maximum number of overtime hours that an employee can be required to work is 72 per month.
If an employee works on a holiday, he or she is entitled to three days’ wages. For work on a rest day, employees who are paid by the hour or day get a full day’s pay for everything up to a half day’s work, two days’ pay for everything between a half day’s and a full day’s work and double time for any hours above that. Those who are paid by the month get a half day’s pay for everything up to a half day’s work, a full day’s pay for between a half day’s and a full day’s work and double time for any hours above that.
Wage Payment
Wages must be paid at least monthly and not later than the seventh day after the end of the wage period. The government’s director general of labor can extend the seven-day limit for an employer that shows that payment within that time is not practicable.
An employer may not pay an advance of wages greater than the amount earned in the previous month, except under certain circumstances. These circumstances include:
- the employee’s purchase, construction or renovation of a house;
- the employee’s purchase of land, livestock, car, motorcycle, bicycle or shares in the employer’s business or
- any other purpose approved by the government’s director general of labor.
Deductions from earned wages to recover an advance may not exceed 50 percent of a month’s wages.
Mandatory Bonuses
Employers are required to pay employees an annual bonus if provided for in the employment contract. Otherwise, there are no laws governing payment of bonuses and doing so is entirely at the discretion of the employer.
Reference Citations
Hours of Work: Employment Act, 1955 (as amended), § 60A
Overtime: Employment Act, 1955 (as amended), § 60A; Employment (Limitation of Overtime Work) Regulations, 1980
Wage Payment: Employment Act, 1955 (as amended), §§ 19, 25A, 28
Benefits
Vacation
Employees are entitled to paid annual leave as follows:
- with present employer less than two years: eight days’ leave for every 12 months of continuous service;
- with present employer two years to five years: 12 days’ leave for every 12 months of continuous service; and
- with present employer five years or more: 16 days’ leave for every 12 months of continuous service.
If the employment contract is terminated by either party, the employee is entitled to full pay for any accrued leave, provided the employee was not dismissed for misconduct. Employees who do not complete 12 months with the employer get a proportion of the full annual leave based on the number of months of service. Employees who are absent without permission of the employer or without excuse for 10 percent or more of working days during a 12-month period are not entitled to annual leave for that period.
Leave may be accumulated and carried over only to the next 12 months after it is earned. An employee may voluntarily accept payment in lieu of leave.
Holidays
Malaysian law specifies the following 12 or 13 (depending on state) paid public holidays:
- Chinese New Year
- Birthday of the Prophet Muhammad
- Wesak Day
- Hari Raya Puasa Day (two days)
- Hari Raya Haji (two days in Kedah, Kelantan, Perlis and Terengganu states, one day in all other states)
- Deepavali
- Aug. 31: National Day
- June 1: Birthday of Yang di-pertuan Agong
- May 1: Labor Day
- Sept. 16: Malaysia Day
- Dec. 25: Christmas Day
Additional paid holidays are mandated by individual states.
If a public holiday falls on a rest day, the next day is deemed a paid holiday. If an employee is on sick leave or annual leave on a holiday, the employer must grant another day as a paid holiday.
Employees required to work on a public holiday must be paid three times their normal wage.
Employees who are absent from work on the working day immediately preceding or immediately succeeding a public holiday are not entitled to any holiday pay for such holiday.
Maternity Leave
Under the Employment Act, women are entitled to 60 consecutive days of paid maternity leave for each child, starting as early as 22 weeks’ gestation and no later than the day after the birth. In cases where a doctor certifies that the employee cannot perform her duties due to advanced pregnancy, the employer can require that she begin maternity leave up to 14 days before the due date. Effective Jan. 1, 2023, women areentitled to to 98 consecutive days of maternity leave for each child.
These leave provisions also apply to a still-birth if the pregnancy lasts at least 28 weeks.
To be eligible for paid leave, the pregnant employee must have worked for the employer at some time during the four months preceding her due date and for at least 90 days out of the nine months before her due date. She is not eligible if she already has five or more surviving children of any age.
The employee must notify her employer within 60 days of the date she intends to begin leave.
Notice may be oral or written and may be given to her supervisor or any employee designated by the employer to collect such notices. If she starts the leave period without giving notice, the maternity allowance is suspended until she does give notice.
An employer is prohibited from dismissing an employee during maternity leave. If the employee cannot return to work immediately after the end of maternity leave due to certified medical reasons connected with the pregnancy, the employer is also prohibited from dismissing her unless she remains unfit to work for more than 90 days. Effective Jan. 1, 2023, employers may not terminate an employee who is pregnant or suffering from an illness arising from her pregnancy, except on grounds due to willful breach of the employment contract, misconduct, or closure of the business.
If the employee was entitled to maternity leave but not paid leave, she may return to work early, provided that she obtains medical certification that she is fit to do so.
Paternity Leave
Male employees are eligible for two days’ paid leave for the birth of a child.
Effective Jan. 1, 2023, paternity leave increases to seven days (restricted to five confinements). To be eligible, the employee must:
- be married to the birth mother;
- be employed by the same employer for at least 12 months immediately prior to the start of his paternity leave, and
- notify his employer of the pregnancy at least 30 days from expected confinement or as early as possible after the birth.
Sick Leave
In cases in which no hospitalization is necessary, an employee is entitled to the following number of days of paid sick leave per calendar year:
- 14 days for those employed for less than two years,
- 18 days for those employed from two years to five years, and
- 22 days for those employed for five or more years.
If hospitalization is necessary, an employee is entitled to a total of 60 days of paid sick leave per calendar year. Effective Jan. 1, 2023, employees are entitled to 60 days of hospitalized sick leave in addition to their leave allotment for non-hospitalization sick leave.
A medical practitioner must certify an illness.
Other Leave
Editor’s note: This information is not available at this time.
Pensions and Social Security
Social security benefits—covering such things as retirement, disability, survivors’ benefits and medical payments—are provided under the Employees Provident Fund and the Social Security Organization. Participation is mandatory for employers and most employees throughout Malaysia, including part-time, temporary and probationary employees.
The Social Security program consists of an Employment Injury Scheme and an Invalidity Pension Scheme. The Employment Injury Scheme, which is distinct and separate from the Employment Insurance System, provides social insurance coverage against workplace accidents, occupational diseases, and commuting accidents to and from place of work. The Invalidity Pension Scheme provides coverage to individuals against invalidity arising from any cause and not necessarily one arising from their employment, if their ailment has caused them to be no longer capable of earning at least one-third of the earnings they customarily could have earned based on the physical capabilities they had before their ailment began.
These schemes entitle workers to medical benefits, temporary and permanent disablement benefits, constant attendance allowance, dependent’s benefit or survivors pension, funeral benefits, rehabilitation benefits, educational benefits, and invalidity pension. The EIS provides employees with unemployment benefits and re-employment placement programs in the event of loss of employment.
Employers that hire foreign workers must register these employees with the Social Security program and contribute to the Employment Injury Scheme.
Retirement: Mandatory retirement cannot be imposed on employees who are under the age of 60. Employers are free to set mandatory retirement ages that are higher than age 60.
Disability: Workers who receive medical certification that they have lost the capacity to work, due to either a physical or a mental incapacitation, can withdraw up to the full value of their Provident Fund savings.
Survivors’ benefits: A worker can specify one or more people to be beneficiaries in the case of his or her death. If a beneficiary is age 18 or older, the beneficiary can withdraw the full amount to which he or she is entitled. If the beneficiary is under 18, his or her guardians can apply to make a withdrawal for the benefit of the beneficiary, but otherwise the beneficiary must wait until turning 18 to withdraw the funds. In addition, the deceased worker’s next of kin is entitled to a death benefit.
Other withdrawals: Participants may also make withdrawals to pay for medical expenses not covered by insurance, to buy a house or for a child’s college education.
Workers’ Compensation
Benefits for an occupational injury or illness and for non-work-related disability are paid under the Employees’ Social Security Act, which applies to all of Malaysia and to most employees in the private sector except domestic servants, self-employed persons, foreign workers and the owners of sole proprietorships and their spouses.
If an employee is younger than 60 years old, the worker and his or her employer will make contributions for both workers’ compensation and the disability pension scheme.
For workers older than 55 and those who first contributed to the social security system at age 50 or older, contributions are made by the employer only and only for workers’ compensation.
The fund provides compensation for an insured employee’s occupational injury or accident or non-work-related disability that prevents the insured from working. Benefits are paid for both temporary and permanent disabilities, as a survivors’ pension for dependents and as a funeral grant. If an insured person needs constant care, medical treatment and a supplement are also provided.
Reference Citations
Vacation: Employment Act, 1955 (as amended), § 60E
Holidays: Employment Act, 1955 (as amended), § 60D; Holidays Act, 1951 (as amended) §§ 3-7
Maternity Leave: Employment Act, 1955 (as amended), §§ 37-42
Sick Leave: Employment Act, 1955 (as amended), § 60F
Labor Relations
In General
Malaysian law guarantees workers the right to form, join and participate in trade unions and prohibits employers from discriminating against, dismissing or refusing to hire a person because of union membership (or nonmembership) or activities.
A labor dispute may be reported by the employer or the union to the director general for industrial relations for conciliation and, if conciliation fails, to the Industrial Court, whose decision is binding.
Strikes, lockouts, and other work actions, such as picketing, are allowed, but with a number of restrictions. A job action involving an essential service (e.g., banks, utilities and transportation) must be preceded by 42 days’ notice, for example, and no job action may be initiated during a government investigation into a labor dispute. Picketing must be peaceful and cannot block access to the workplace.
Right to Organize
The Industrial Relations Act of 1967 guarantees workers the right to form, assist in forming, join and participate in a trade union. Employers or their representatives are prohibited from discriminating against, dismissing or refusing to hire a person because of the person’s union membership or activities or the person’s refusal to participate in a union. Employment contracts may not restrict the rights of employees to join, participate in or organize trade unions.
An employer may require that a person who is promoted to a managerial position cease to be or not become a member or officer of a trade union. An employer may also require that a person who works in a “confidential capacity in matters relating to staff relations” cease to be or not become a member or officer of a trade union.
Unions, workers and their representatives are prohibited during work hours at the workplace from trying to persuade workers to join or not join a union unless the action does not interfere with normal duties or is done with the employer’s permission. Unions, workers and their representatives are prohibited from trying to intimidate workers into joining or not joining a union or remaining in or leaving a union. They are also prohibited from offering inducements to workers to not join or to leave a union.
A group of workers who seek recognition as a union may submit a written claim for such recognition to the employer. Within 21 days after receiving such a claim, the employer must either recognize the new union or explain in writing to the workers’ parent trade union the grounds for rejecting the claim.
Once the union has been recognized, the employer must notify the director general for industrial relations. If the employer does not issue this notification, the director general may take steps to ascertain the percentage of workers supporting formation of the union, including by requiring a secret ballot of affected workers. During this process, the employer and the employees must provide the director general with any requested information. The director general may also ask the director general of trade unions to ascertain the competence of the workers making the request.
At the end of this process, the minister of human resources is charged with the ultimate decision on certification of the union. The minister’s decision is final and may not be appealed to any court.
Once a trade union has been recognized in a workplace, no other trade union may attempt to form a union in that workplace for a period of three years. In a workplace where union certification has been denied, no attempt to unionize the same group of workers may be made for a period of six months.
Works Councils
Malaysia’s labor laws do not address works councils.
Dispute Resolution
An employer or a trade union may report a dispute to the government’s director general for industrial relations for conciliation. If the dispute cannot be settled, the director general notifies the minister of human resources, who may refer the matter to the Industrial Court. The court has the power to make a binding decision. An appeal may be made to the High Court on a question of law.
Strikes and Lockouts
Strikes, lockouts and other work actions, such as picketing, are allowed, but with a number of restrictions, including:
- None of these actions is allowed while a trade union is in the process of applying for recognition or in response to the minister of human resources’ decision on recognition.
- When employers that provide essential services are involved—including banks, utilities, fire departments, post offices and transportation companies, among others—either side planning a job action must give 42 days’ notice.
- Neither side can stage an action during the time a Ministry of Human Resources Board of Inquiry is investigating a trade dispute or for seven days after the proceedings have concluded or after a dispute has been referred to the Industrial Court.
Anyone found to have engaged in an illegal strike or lockout—or to have instigated or provided financial support for one—may be subject to imprisonment and/or fines.
Picketing is allowed but cannot be intimidating in nature, cannot block access to the workplace and must be conducted peacefully. Those violating this provision may also be subject to imprisonment and/or fines.
Successorship Clauses
Malaysia’s labor laws do not address successorship clauses.
Reference Citations
Right to Organize: Constitution of Malaysia, 1958 (as amended), art. 10; Industrial Relations Act, 1967 (as amended), § 4
Dispute Resolution: Industrial Relations Act, 1967 (as amended), §§ 18-21
Strikes and Lockouts: Industrial Relations Act, 1967 (as amended), §§ 38-46
Safety, Health and Security
In General
Employers have the duty to ensure the safety, health and welfare of employees in the workplace; must train and supervise employees to ensure their safety and health; and must formulate a written safety and health policy. An employer with 40 or more employees must establish a safety and health committee to review workplace safety and health measures and investigate any workplace condition that might pose a risk to health or safety.
Workplace Safety and Health
Under the Occupational Safety and Health Act of 1994, an employer has the duty to ensure the safety, health and welfare of employees in the workplace. The act applies throughout Malaysia and to most industries, including construction, mining, agriculture, forestry, fishing, wholesale and retail trades, real estate, utilities, hotels and restaurants, business and financial services, transport and storage, public services and communications.
According to the act, the employer must train and supervise employees to ensure, as far as practicable, their safety and health. An employer also must formulate a written safety and health policy.
Any employer with 40 or more employees must establish a safety and health committee. The committee’s functions include reviewing workplace safety and health measures, investigating any workplace condition that a committee member or employee considers a risk to health or safety, and attempting to resolve any matter that is investigated or, if the attempt fails, requesting that the government’s director general of occupational safety and health conduct an inspection of the workplace.
An employer is prohibited from dismissing, demoting or impairing the work conditions of an employee for making a complaint regarding safety or health or for exercising a task or function as a member of the safety and health committee.
Drug and Alcohol Use
Malaysia’s labor laws do not address drug and alcohol use.
Reference Citations
Workplace Safety and Health: Occupational Safety and Health Act, No. 514 of 1994, arts. 15, 30
Termination
Termination by Employer
Employment contracts must include a provision setting out the manner in which the contract may be terminated by either party. Either party may give notice of intention to terminate at any time.
Notification periods for termination of a contract are the same for employers and employees, whether those periods are specified in the employment contract or not. If there is no such specification in the contract, the required notification period is as follows:
- four weeks for employees with less than two years of service,
- six weeks for employees with two to five years of service, and
- eight weeks for employees with five or more years of service.
In lieu of providing the requisite notice, employers may make a payment equivalent to the amount of wages that would have been paid during the notice period.
In a case of misconduct, employers can dismiss the employee without notice, demote the employee, suspend the employee for up to two weeks without pay or impose a lesser punishment. The employer cannot take this action, however, without first engaging in “due inquiry.”
During the inquiry into the alleged misconduct, the employer may suspend the employee for up to two weeks with at least half pay. If the inquiry finds that no misconduct was involved, however, the employer must pay the employee the amount of wages withheld.
An employee who believes he or she was unfairly dismissed and who is covered by the Industrial Relations Act may make a written complaint to the office of the director general for industrial relations seeking reinstatement. The matter may then be submitted to conciliation. If no settlement is possible, the dispute may go before the Industrial Court, which can award either reinstatement or compensation. Alternatively, an employee can file an action for wrongful dismissal or for breach of contract in the civil courts.
Misconduct is not defined in the statutes beyond the phrase “misconduct inconsistent with the fulfillment of the express or implied conditions” of the employee’s service, as stated in the Employment Act.
Termination by Employee
Employees may terminate a contract of employment without notice if they or their dependents are immediately threatened by violence or disease and the workers did not know that their employment would include such dangers. Otherwise, the notification periods for termination of a contract are:
- four weeks for employees with less than two years of service,
- six weeks for employees with two to five years of service and
- eight weeks for employees with five or more years of service.
In lieu of providing the requisite notice, employees may make a payment equivalent to the amount of wages that would have been paid during the notice period.
Plant Closings and Mass Layoffs
Employees must be given written notice of termination of the contract of employment if the employer intends to close or move the business or phase out certain types of work or if the business is sold or undergoes a change of ownership. The notice period is the same as for the dismissal of an individual employee.
In the case of mass dismissals, an employer may not terminate Malaysians unless all foreign employees have first been terminated.
Payment on Termination
The Employment (Termination and Lay-Off Benefits) Regulations 1980 provide for severance pay as follows:
- 10 days’ wages for each year of service for employees with at least one year but less than two years of service,
- 15 days’ wages for each year of service for employees with from two to five years’ service, and
- 20 days’ wages for each year of service for employees with five or more years of service.
For partial years of service, severance is determined on a pro rata basis.
The severance pay regulations do not apply to dismissal for misconduct, termination due to the employee reaching retirement age or voluntary termination of the contract by the employee.
Unemployment Insurance
Malaysia does not have an unemployment insurance scheme.
Reference Citations
Termination by Employer: Employment Act, 1955 (as amended), §§ 11-15
Termination by Employee: Employment Act, 1955 (as amended), §§ 11-15
Plant Closings and Mass Layoffs: Employment Act, 1955 (as amended), § 60N
Personal Taxes
Residency Requirements
In general, residence status is established if the employee:
- is in Malaysia for 182 days or more in a year of assessment,
- is in Malaysia less than 182 days in the year of assessment but was present in Malaysia for 182 days in the last six months of the previous year or the first six months of the following year,
- is in Malaysia for 90 days or more and for three out of four immediately preceding years of assessment is either resident or is in Malaysia for periods amounting to 90 days or more, or
- is resident in the year following the particular year of assessment and in each of the three years immediately preceding the particular year of assessment.
Taxable Income
Resident and nonresident individuals are taxed on income accruing in or derived from Malaysia. Individuals, however, are exempted from taxes on foreign income between Jan. 1, 2022 and Dec. 31, 2026.
Tax Rates
Nonresident individuals are taxed at a flat rate of 30 percent. Income tax rates for residents range from zero to 30 percent depending on income.
Social taxes in Malaysia include social security, which is administered by the Social Security Organization (SOCSO), and the Employee’s Provident Fund (EPF), which is administered by EPF. Effective Sept. 1, 2022, the maximum salary for making social security contributions is 5,000 ringgits per month.
Reference Citations
Residency Requirements: Income Tax Act, 1967 (as amended), § 7
Web References
Law and Regulation
Constitution of Malaysia
Employment Act
Income Tax Act
Industrial Relations Act
Occupational Safety and Health Act
Personal Data Protection Law
Government Websites and Documents
Department of Foreign Affairs, Embassy of Malaysia, Washington, D.C.
Department of Immigration, Expatriate Services Division
Ministry of Human Resources
Sabah State Government