Malaysia Labour Laws

Malaysia’s thriving economy and its business-friendly climate have made it a magnet for global investors. In 2023, the country attracted almost USD28.4 billion of approved investments in services, manufacturing, and primary sectors, according to the Malaysian Investment Development Authority.

But while running a business in the country presents a ton of opportunities, there are important considerations and regulatory aspects that businesses must navigate.

The employment regulations in Malaysia are primarily governed by the Employment Act of 1955. This law oversees various aspects of employment, including working hours, holidays, rest periods, wages, overtime, and other conditions of employment.

This guide will delve into the critical aspects of this legislation and other relevant regulations shaping Malaysia’s employment landscape. Whether you’re an employer looking to run your business in Malaysia confidently or an employee looking to know your rights, you’ve come to the right place.

This article covers:

• What are Malaysia Time Management Laws?
• What are the Hiring, Working & Dismissal Laws in Malaysia?
• Malaysia Payment Laws
• Malaysia Overtime Laws
• Malaysia Time Off/Break Laws
• What are Malaysia Leave, Vacation, and Holiday Laws?
• What are Malaysia’s Child Labour Laws?

What are Malaysia Time Management Laws?

Malaysia has several laws that regulate the time employees spend at their jobs. These laws are in place to protect the rights of workers and ensure they receive fair pay for their work. One of the country’s principal legislations shaping employee time management is the Employment Act of 1955.

As per the Act, an employee’s normal working time should not exceed more than 45 hours per week. It also sets the daily work hour limit to 12 hours on any given day, including overtime hours. All work hours should be accurately recorded to ensure accurate compensation. The decision on how to track employee time is left to the employer.

Employers are also required to create a wage ledger for each workplace. This ledger should include details on how wages are calculated, the total number of wages, and any other information specified by ministry regulations. It’s essential to keep these records for 3-5 years. This helps ensure transparency and compliance with regulations in managing employee-related information.

All employees in Malaysia are now protected by the Employment Act of 1955, thanks to the amendments made in 2022. Before these changes, the Employment Act applied only to those earning less than RM2,000 per month or engaged in specific roles like manual labour, supervision of manual labour, operating vehicles, working on certain vessels, or as domestic servants.

What are the Hiring, Working & Dismissal Laws in Malaysia?

To be lawfully employed in Malaysia, individuals must be either citizens of Malaysia or permanent residents. Foreigners seeking employment in the country must obtain a valid work permit or visa, with specific requirements depending on factors like job category, salary level, and education.

In Malaysia, hiring, working, and dismissal are governed by laws that promote equal opportunities and fair treatment in employment. While there are no specific workplace discrimination laws in the country, Article 8 of the Federal Constitution emphasizes equal opportunities for all Malaysians regardless of religion, race, descent, place of birth, or gender. This encourages a balanced distribution of employment among different ethnic groups to foster social harmony.

Every employment beyond a one-month probationary period must be formalized through a written contract. This contract is required to outline essential details such as:

• Job description
• Nature of work
• Compensation packages
• Benefits and other aspects related to the employee’s health and safety
• Working hours
• Leave entitlements
• Conditions for termination

Having a well-drafted contract is essential to prevent potential disputes in the future, ensuring clarity and fairness for both employers and employees.

Each employee also needs to be classified properly – whether an employee or an independent contractor. The challenge with worker classification in Malaysia though is that it does not follow a fixed formula. Instead, each case is individually considered by the Industrial Court, taking into account various factors such as the nature of work, degree of employer control, work period, contractual terms, and how the company treats the worker in comparison to other employees.

Distinctions between employees and independent contractors have legal and financial implications. Employees enjoy statutory protections and benefits, including minimum wage, overtime pay, and social security, while independent contractors generally do not.

When it comes to the employee termination process, the Industrial Relations Act 1967 protects employees against unfair dismissal, requiring employers to provide just cause and excuse for termination. Discriminatory terminations, especially against protected groups, are prohibited. If an employee is to be terminated, the Employment Act 1955 mandates due notice, with specific notice periods based on the duration of employment. 

What Are the Key Labour Laws in Malaysia?

There are many laws that govern employment in Malaysia and it can be hard to keep track of them all. To help you stay compliant, here’s a breakdown of the main sources of employment law in Malaysia:

• The Employment Act 1955 (EA): The Employment Act 1955 (EA) is a crucial piece of legislation in Malaysia that outlines the basic terms and conditions of employment for workers in the private sector. Enacted to protect the rights of employees, the EA covers various aspects such as working hours, rest days, public holidays, and overtime pay. 
• Industrial Relations Act 1967 (IRA): The Industrial Relations Act 1967 (IRA) plays a significant role in shaping the relationships between employers and employees in Malaysia. Enacted to regulate industrial relations and promote peaceful resolution of disputes, the IRA provides a framework for the organization and conduct of trade unions. 
• Occupational Safety and Health Act 1994 (OSHA): Malaysia’s Occupational Safety and Health Act 1994 (OSHA) places a strong emphasis on preventing workplace accidents and illnesses by establishing guidelines and standards for occupational safety and health. The Act requires employers to provide a safe and healthy working environment, including proper training and equipment for employees. OSHA also outlines the responsibilities of employers, employees, and other parties in promoting and maintaining a safe workplace. It covers aspects such as hazard identification, risk assessment, and the implementation of necessary control measures.
• Employees Provident Fund Act 1991 (EPFA): The Employees Provident Fund Act 1991 (EPFA) is a significant legislation in Malaysia that aims to ensure financial security for employees after their retirement. The EPFA established the Employees Provident Fund (EPF), a savings fund created to assist employees in saving for their future. Under this Act, both employers and employees are required to contribute a certain percentage of the employee’s monthly salary to the EPF.
• Employees’ Social Security Act 1969 (SOCSO): SOCSO provides a social security net by offering protection against unforeseen events such as accidents, occupational diseases, and disabilities. Under this Act, both employees and employers contribute to a social security fund, which is then utilized to provide financial assistance and support to employees facing work-related challenges.
• Minimum Retirement Age Act 2012 (MRAA): The primary purpose of the Minimum Retirement Age Act 2012 (MRAA) is to promote fairness and prevent age-based discrimination in the workplace. According to the MRAA, the minimum retirement age is set at 60 years. This means that employers are not allowed to terminate or force employees to retire before they reach this age unless there are certain circumstances specified in the law. 

Malaysia Payment Laws

What is the Minimum Wage in Malaysia?

In May 2022, Malaysia increased its National Minimum Wage by 25 percent, raising it from 1,200 ringgit (US$265) to 1,500 ringgit (US$331). As for employees paid on an hourly basis, the Minimum Wages Order 2022 set out the minimum wage rate at RM7.21 per hour.

Failure to pay the minimum wage is considered an offence under Section 23 of the National Wages Consultative Council Act 2011. If found guilty, employers may face a fine of up to RM10,000 for each employee.

What is the Payment Due Date in Malaysia?

In Malaysia, employers must ensure that salary payments are made within seven days after the last day of the wage period, except for overtime, which should be paid by the last day of the next wage period. The usual wage period is one month, though it can vary based on employment contracts, but should not exceed one month.

Salary payments include the basic wage and other cash payments outlined in the employment contract, excluding items like travelling allowance, deductions, bonus, accommodation, contributions, and other incurred expenses.

Are Payslips Required in Malaysia?

All employees in Malaysia must be issued with a payslip each time they are paid. These should contain essential information such as:

• Employee’s full name
• Identification details
• Gender
• Citizenship status
• Wage payment terms
• Amount
• Payment date
• Details of other payments
• Deductions
• Employer information
• Date of issuance

Allowed Payment Methods for Malaysia Employers

There isn’t one specific payment method mandated for employers in Malaysia. Employers have flexibility in choosing payment methods for salary disbursement to their employees. Common methods include bank transfers and checks.

Employers may also opt for digital payment platforms, ensuring that payments are made within the stipulated time frame. The chosen method should facilitate accurate record-keeping, and it’s important for employers to comply with the agreed payment terms outlined in employment contracts.

If you’re looking to run payroll in Malaysia, or learn more about the payment process and relevant methods, explore our in-depth articles on running payroll in Malaysia.

What are Pay Deduction Laws in Malaysia?

In Malaysia, pay deductions are regulated by the Employment Act. Employers can make lawful deductions specified in the Act from employees’ wages. Additionally, specific deductions requested by employees in writing are permitted. For other deductions, approval from the Director-General of Labour (DGL) is required.

Under Section 24 of the Employment Act, no deductions can be made without clear provisions. The Act outlines circumstances and procedures for lawful deductions in Sections 24(2) to (6). Certain deductions, like overpayment recovery, indemnity, and advances of wages, can be made without employee requests, but others, such as payments to a trade union or for shares in the employer’s business, need written employee requests.

Malaysia Overtime Laws

Overtime in Malaysia is governed by the Employment Act 1955, which has since undergone several amendments to enhance workers’ rights and establish clear guidelines for employers. The latest amendment was made in 2022, extending the maximum number of work hours per week and expanding overtime entitlement, among others.

How Much is Overtime Pay in Malaysia?

Employees performing overtime work are entitled to a premium payment at a rate not less than 1.5 times their hourly rate of pay. Any time worked exceeding the regular working hours (maximum 8 hours per day or 45 hours per week) is considered overtime and should be paid as such.

Given the current minimum hourly wage of RM7.21 per hour for employees working six days per week, this would put overtime pay at RM10.815 per hour.

Overtime pay during paid public holidays is slightly higher, calculated at 3 times the employee’s usual hourly rate.

What Constitutes Overtime in Malaysia?

Overtime work encompasses tasks performed outside the regular working hours specified by the Employment Act 1955. This includes work done after regular business hours, on weekends, public holidays, or beyond the agreed-upon schedule between the employer and employee.

Is there an Overtime Limit in Malaysia?

The maximum monthly limit for overtime hours is 104. It’s important to note that work on rest days, public holidays, or substituted paid holidays does not count towards this limit. No employer is permitted to require an employee to work for more than 12 hours on any given day, including overtime hours.

Who is Entitled to Overtime Pay in Malaysia?

Now, not everyone is entitled to overtime pay in Malaysia. Certain groups of employees are exempted from receiving overtime pay under specific conditions.

• Employees Earning Less than RM4,000 per Month: A recent amendment to the Employment Act 1955 raised the threshold for employees entitled to overtime pay from RM2,000 to RM4,000 per month. This means that employees earning less than RM4,000 per month are eligible for overtime pay if they work beyond their normal hours.
• Employees in Certain Industries: Certain industries in Malaysia, such as banking and finance, insurance, hotel and catering, and road transport, have specific regulations regarding overtime pay. Regardless of their income level, employees in these industries are entitled to overtime pay according to their industry-specific rules.

Malaysia Time Off/Break Laws

In Malaysia, employees working more than 5 consecutive hours are entitled to an unpaid break lasting at least 30 minutes. Breaks shorter than 30 minutes within 5 consecutive hours can be provided by employers as long as they don’t interrupt the continuous working period.

For jobs requiring continuous attendance and an 8-hour workday, employees are entitled to a total of at least 45 minutes of unpaid rest to take breaks and have meals.

As for weekly time off, every employee is entitled to a whole day of rest each week, determined by the employer. For shift workers, a continuous period of at least 30 hours constitutes a rest day. Should employees need to work on their rest day, they must be paid at least twice the daily rate of pay.

It’s important to note that this doesn’t apply during maternity leave, sick leave, or temporary disablement periods. Employers can apply to the government authority to schedule the weekly rest day on another day of the month as long as the rest day is granted.

What are Malaysia Leave, Vacation, and Holiday Laws?

Leave, vacation, and holiday laws in Malaysia are designed to ensure that employees receive proper time off for rest and recreation.

The Employment Act of 1955 outlines various types of leave entitlements for employees. These include public holidays, paid leave, sick leave, maternity leave, and optional leave entitlements. Employees who have used up other forms of leave and still need to be absent due to personal matters may request unpaid leave, subject to the employer’s discretion. Check out Guide to Unpaid Leave in Malaysia to learn more.

Malaysia Public Holidays

Employees in Malaysia are entitled to eleven paid holidays each year. Additionally, authorities can declare extra public holidays for specific years, as exemplified by the additional holiday on July 30, 2019, celebrating the coronation of the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah.

Employers must grant leave on public holidays, or if the business needs to prevent it, provide paid leave on another day. Similarly, if a public holiday coincides with an employee’s sick leave or annual leave period, the employer should substitute leave on another day.

If an employee is required to work on a public holiday, they will be eligible for holiday pay, along with an extra 200% premium on their regular pay. This applies even if the hours worked on that day are fewer than their usual working hours.

Annual Leave

Malaysian employees are entitled to paid annual leave based on their length of service.

• 8 days per year for 1-2 years of employment,
• 12 days per year for 2-5 years of employment,
• 16 days per year for over 5 years of employment.

Employees with less than a year of service are not eligible for paid annual leave, except when leaving the company. If this is the case, their leave is prorated. However, the law excludes the right to paid annual leave for employees who were absent without permission.

Parental Leave

Malaysia offers both Maternal and Paternity leave to eligible employees. 

Female employees are entitled to a total of 98 consecutive days of maternity leave – an increase from the previous 60 days thanks to the Employment (Amendment) Bill 2021, which took effect on January 1, 2023. This benefit applies to all female employees regardless of their salary level, provided that they’ve been employed in the company within 4 months prior to their due date. Expecting mothers can take their maternity leave no earlier than 30 days before their due date. 

As for paternity leave, the duration can differ among employers. Some adhere to the statutory minimum, while others provide up to 30 days of paid leave for new fathers.

As per the Employment Act of 1955, fathers are entitled to a minimum of 7 days of paid paternity leave. To qualify for paternity leave, certain conditions must be met:

• The employee should be married to the expectant mother.
• The employee must have been employed for the preceding 12 months.
• The expectant father is required to inform their employer at least 30 days before the due date.

Sick Leave

In Malaysia, employees enjoy sick leave benefits based on their length of service. If employed for 1-2 years, an employee is entitled to 14 working days of paid sick leave per year. For those with 2-5 years of service, the entitlement increases to 18 working days per year, and for employees with over 5 years of service, it extends to 22 working days per year.

Hospitalization leave is a separate category, applicable when an employee requires admission to the hospital. In such cases, employees are entitled to 60 working days of hospitalization leave per year. This leave is distinct from sick leave and necessitates certification by a registered medical practitioner, officer, or dental surgeon.

Study Leave

Employees may be granted study leave when pursuing short courses beneficial to the organization or taking exams leading to career-enhancing certifications. While there’s no legal entitlement to study leave, it’s sometimes offered to support employees’ professional development.

Bereavement Leave

Legally, there is no specific entitlement for emergency leave. However, employers in Malaysia usually give a limited emergency leave of two or three days per year. Beyond this, it could result in unpaid leave or deductions from the annual leave allocation. This kind of leave is suitable for unforeseen circumstances like attending to sick family members or dealing with unexpected personal matters. 

Learn more about Leave Entitlement in Malaysia.

What are Malaysia’s Child Labour Laws?

The Children and Young Persons (Employment) Act 1966 is the main legislation that regulates the employment of minors in Malaysia. This Act categorizes an individual below the age of fifteen as a “child.” Simultaneously, a “young person” is defined as someone aged fifteen or older but below eighteen. According to the regulations of this law:

• The minimum age for admission to light work should not be below 13 years.
• Children under 15 or those aged 15 to below 18 are not allowed to engage in any form of labour or employment unless under proper permission and supervision.
• Both children and young people are not allowed to do dangerous jobs, according to the Children and Young Persons (Employment) Act (CAYPEA). This law, updated in 2019, specifically lists hazardous work in the Fourth Schedule, such as tasks involving chemical hazards or dangerous machines. However, a young person can do hazardous work if they have personal supervision during an apprenticeship or vocational training.
• Both children and young persons are not allowed to work for more than 6 days a week. For children, specific rules dictate that they cannot work between 8 pm to 7 am, except for those involved in public entertainment. They are also restricted from working more than 3 consecutive hours without a break of at least thirty minutes. Additionally, the law prohibits children from working for more than 6 hours in a day, or more than 7 hours if they attend school, ensuring a balance between work and education.
• Young persons aren’t allowed to work between 8 pm and 6 am, except for those engaged in specific activities like public entertainment or agriculture or under the personal charge of a parent or guardian. They are not allowed to work for more than 4 consecutive hours without a break, and the daily limit is set at 7 hours or 8 hours if they attend school.

Anyone convicted of breaking the rules in the CAYPEA law could face up to 2 years in prison, a fine of up to RM50,000, or both. Repeat offenders could be looking at up to 5 years in prison, a fine of up to RM100,000, or both.

Other laws that govern child labour in the country include the Factories and Machinery Act of 1967, which prohibits child labour in factory environments or the handling of factory machinery and electronics. The Occupational Safety and Health Act of 1994, the Electricity Supply Act of 1990, and other regulations in the mining industry strictly forbid the employment of child or underage labour in Malaysia.

Important Cautionary Note

When making this guide, we have tried to make it accurate, but we do not give any guarantee that the information provided is correct or up-to-date. We therefore strongly advise you to seek advice from qualified professionals before acting on any information provided in this guide. We do not accept any liability for any damages or risks incurred for the use of this guide.