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World Wide Work Permit provides PEO and employer of record services in Malaysia for customers that want to hire employees and run payroll without first establishing a branch office or subsidiary. Your candidate is hired via World Wide Work Permit’ Malaysia PEO in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. The individual is assigned to work on your team, working on your company’s behalf exactly as if he or she were your employee to fulfill your in-country requirements.
Our solution and Global PEO service enable customers to run payroll in Malaysia while HR services, tax, and compliance management matters are lifted from their shoulders onto ours. As a Global PEO expert, we manage employment contract best practices, statutory and market norm benefits, and employee expenses, as well as severance and termination if required. We also keep you apprised of changes to local employment laws in Malaysia.
Your new employee is productive sooner, has a better hiring experience and is 100% dedicated to your team. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. World Wide Work Permit allows you to harness the talent of the brightest people in more than 185 countries around the world, quickly and painlessly.
When negotiating terms of an employment contract and offer letter with an employee in Malaysia, it may be useful to keep the following standard benefits in Malaysia in mind:
It is best practice is to put a strong employment contract in place in Malaysia, in the local language, which spells out the terms of the employee’s compensation and benefits, in addition to the above-mentioned termination requirements. An offer letter and employment contract in Malaysia should always state the salary and any compensation amounts in Malaysian Ringgit rather than a foreign currency. The employment contract template is part of the service with World Wide Work Permit; no need to draft a separate template if you use our employer of record and PEO service in Malaysia.
The Malaysia workweek is 40 hours, with a standard workday of 8 hours. Normal business hours in Malaysia are from 9 am. to 5 pm., Monday through Friday. Workers are entitled to one rest day for every 6 days worked, and cannot be compelled to work on that rest day.
Work hours should not exceed more than 45 per week. The spread-over period of work shall not exceed more than 10 hours per day exclusive of overtime (inclusive of breaks for rest). The flexible working arrangement is by referring to the applicable law.
Every employee in Malaysia is entitled to no less than 13 traditional holidays per year, as follows:
If a public holiday falls on a rest day, the working day immediately following the rest day shall be a paid holiday in substitution.
Employees in Malaysia are entitled to paid annual leave, with the total amount dependent upon their tenure with the company. Annual leave entitlement is as follows:
When an employee has not completed 12 months of continuous service with the same employer, the employee’s entitlement to paid annual leave is proportionate to the number of completed months of service.
Male employees who complete 3 years of service with a company can take paid religious leave not exceeding 30 days (including holidays). Such leave is permitted only one time per person. Upon returning from religious leave, the employee must submit a certificate issued by the sacred place to his supervisor within 7 days.
Employment law in Malaysia falls under the Employment Act of 1955 amended by Act #1651. Employees who have a contract and whose wages do not exceed RM 4,000.00 per month and those who are involved in specific work such as manual labor and vehicle operation are covered by this Act and are known as EA Employees. All other employees are not covered by the Act.
EA Employees are entitled to paid sick leave in accordance with their length of service with the company:
If no medical certificate is presented or the employer is not informed about the sick leave within 48 hours, the employee will be considered absent without permission, which is a possible justification for termination of employment.
Workers who are not covered by the Employment Act receive sick leave benefits as stated in their employment contracts or in the company’s policy.
Effective Sept 2022, Female workers also get no less than 98 consecutive days of maternity leave and are entitled to a maternity allowance. Maternity leave may commence anytime within 30 days prior to the expected birth date, but cannot be later than the day immediately following the birth. Female employees qualify for maternity allowance if they have fewer than 5 surviving children and have been employed for at least 60 days in the 3 months immediately preceding the birth.
Employees paid on a monthly pay rate will receive a monthly allowance based on their monthly wages. Otherwise, the maternity allowance is the ordinary rate of pay for one day or RM6 per day, whichever is higher, for 60 consecutive days.
A male employee who has been legally married and who has completed no less than 12 months of continuous service will be entitled to 7 consecutive days of paid paternity leave on the day of birth or immediately after the birth of his legal child.
Malaysia has compulsory universal healthcare which is funded through payroll taxes and the general budget. Private health care is also available. The public healthcare system in Malaysia is quite good, but often has long lines, which is why some prefer to pay a premium for private healthcare.
The 13th-month bonus is not legally required but is common. Performance-based bonuses are also common in Malaysia. Some companies also offer Group Private Health Insurance, Group Life Insurance and Group Accident Insurance. World Wide Work Permit does not have a Group Private Health Insurance, Group Life Insurance, or Group Accident Insurance. If you would like to offer these benefits, we recommend negotiating a monthly allowance with the employee.
Probationary periods are typically between 1 and 3 months in Malaysia. The initial probationary period may be extended for a further 1-3 months. The employee must be informed of the extension in writing before the end of the initial period.
An employee may resign by giving notice of resignation or termination to the employer.
An employer may also dismiss an employee by giving notice of termination. In both situations, the length of notice is the same, pursuant to the employment contract. Where the period of notice of termination is not specified in the employment contract, the notice period shall be:
It is possible for either the employer or employee to terminate the employment contract without giving notice by paying the other party an indemnity in lieu of notice.
An employee is not entitled to termination or lay-off benefits under the following circumstances:
An individual (resident or non-resident) is taxable if they earn an annual employment income of at least RM34,000 (after the EPF deduction), according to LHDN.
The Malaysian Social Security system is called SOCSO and provides financial assistance to employees and their families in the event of an accident resulting in death, disability, or illness. SOCSO provides two types of insurance: Employment injury and Invalidity pension scheme.
SOCSO is funded by contributions from both employers and employees. The amount paid into the scheme depends on an employee’s monthly earnings. The contributions are calculated at 0.5% of the employee’s monthly wages for the employee, and the employer contributes 1.75% of the monthly payroll.
The Employment Provident Fund covers pension funds but also allows employees to withdraw their savings for specific purposes like buying a house or for medical reasons. The EPF essentially acts as a savings fund with contributions made by employees and their employers. Employees must contribute to the EPF at a rate of 9% on gross worldwide income. Employers contribute 12% of their employees’ gross monthly wages to the EPF for employees earning above MYR 5,000 per month, and 13% for employees earning less than MYR 5,000 per month. This is optional for foreign employees and is mandatory for all Malaysians and Permanent residents.
It can be challenging to figure out how to set up a subsidiary or branch office in Malaysia, which historically was the first and most complex part of hiring an employee in Malaysia. World Wide Work Permit’ Global Employer of Record solution makes it easy to hire employees in Malaysia with minimal time and expense. We put your employee on our locally compliant payroll and you get a simple monthly invoice. We can also process expense reports, take care of personal income tax issues, and set up the employee’s statutory local benefits in Malaysia with the streamlined ease of a company that has done it hundreds of times before, enabling you to skip the difficulty of creating a subsidiary and instead focus on your company.
If you would like to discuss how World Wide Work Permit can provide a seamless employee leasing or PEO solution for hiring an employee in Malaysia, please contact us today.
If you would like to discuss how World Wide Work Permit can provide a seamless employee leasing or PEO solution for hiring employees in Malaysia, please contact us.