Malaysia PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Malaysia to companies willing to enter the Malaysian market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Malaysia.  However our solution allows you to start the operations in Malaysia within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. .

Malaysia fast facts

Population, million: 32,7
Land area: 330,803 km² 
Capital: Kuala Lumpur
Local currency: Ringgit (RM) (MYR)

Malaysia is a federal constitutional monarchy in Southeast Asia. It consists of thirteen states and three federal territories, separated by the South China Sea into two similarly sized regions, Peninsular Malaysia and Malaysian Borneo. Peninsular Malaysia borders Thailand in the north and Singapore in the south, Vietnam in the northeast, and Indonesia in the west; Malaysian Borneo borders Brunei and Indonesia.

Hiring, Negotiating and Doing Business in Malaysia

Necessity of written employment contract

The 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 benefits. 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.

Different forms of engagement: employment, contracting, work with private entrepreneur

• Permanent or fixed-term employees.
• Casual employees.
• Apprentices or trainees – employees.
• Employment agency staff – also called labour hire.
• Contractors and sub-contractors – hired staff.

Malaysia Employment Contract

Types of employment agreements

Full-time contracts

In Asia, most employers recognise full-time contracts to be 35 hours or more in a week. Full-time contracts basically offer job positions that are permanent with an agreed amount of salary paid either by monthly, weekly or hourly wages. Most countries in Asia provide legal protection to this type of worker such as the right to be paid a wage equal to or greater than the minimum wages set in each respective country, the right to a certain amount of rest and the right to enjoy insurance coverage or a specific number of benefits. Full-time contracts allow employees to enjoy job security and stability. In return, you’ll benefit from greater commitment and loyalty from your employees and reduce the risk of losing workers prematurely, especially good talents. Nevertheless, with permanent employees, there is limited flexibility in your workforce. Coupled with employment law protection, it is harder for you to fire or change your talent if the need arises.

Part-time contracts

Generally, part-time contract employees in Asia work fewer hours than full-time contract employees. In most organisations, they enjoy almost equal protection and benefits as full-time contract employees and are usually also permanent employees of the organisation unless stated otherwise. However, they are usually paid less and their number of work hours are clearly stated in the contracts along with the options of working overtime. Part-time contracts can be a great way to test employees before actually offering them full-time contracts. It is also good to offer part-time contracts if your company is cutting down on costs as it is understood that part-timers get paid less than their full-time counterparts. Having said that, as they get lesser wages and spend less time at the office, you’ll risk invoking a weaker sense of loyalty or work commitment from these group of employees compared to full-time contract employees.

Fixed-term contracts

Fixed term contracts are only use for a certain period of time. For example, for a specific project, or to function as a replacement for another permanent employee who is on a long sick leave. These are non-permanent contracts, therefore you must always state clearly what the terms and length of the employment contract are. In some countries, such as Malaysia, workers employed under fixed-term contracts do receive statutory employment protection while in other countries such as South Korea, they do not receive such privileges. One of the benefits of having fixed-term contracts is that you have the flexibility to increase manpower for a particular project just for a certain amount of time until the project is complete or as a temporary relief measure when a permanent employee goes on maternity or sabbatical leave. However, one of the major drawbacks of fixed-term contracts is the general loss of productivity among the other employees, as they have to spend time training these temporary workers for every project.

Malaysia working hours

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 48 per week. If employers request extra hours, they must pay 1.5 times the employee’s regular wages.

Vacation leave in Malaysia

Annual leave entitlement is as follows:

• For less than 2 years of service: 8 days for each year of service.
• For more than 2 years but less than 5 years of service: 12 days for each year of service.
• For 5 years or more of service: 16 days for each year of service.

Malaysia Maternity Leave

Female employees are entitled to maternity leave for a period of not less than 60 consecutive days, and they 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.

Malaysian Severance Laws

Notice periods

An employer may 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:

• Less than 2 years of service:  minimum 4 weeks
• 2 years or more but less than 5 years of service:  minimum 6 weeks
• 5 years of service or more:  minimum 8 weeks

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.

Malaysia Tax

Personal income tax

* Malaysian ringgit

Health Insurance Benefits in Malaysia

Employees who have a contract and whose wages do not exceed RM 2,000.00 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 to their length of service with the company:

• Less than 2 years of service: 14 days
• More than 2 years, but less than 5 years of service: 18 days
• More than 5 years of service: 22 days

EA Employees may also be eligible for 60 days of paid sick leave per calendar year if hospitalization is necessary, but they must provide a medical certificate.  Any employment agreement with an EA Employee which attempts to fix less favorable terms than what is provided in the EA will not be enforceable.

Additional Benefits in Malaysia

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.

Malaysia Holidays

There are 11 gazetted public holidays (inclusive of five compulsory public holidays; National Day, Birthday of the Yang Dipertuan Agong, Birthday of Ruler/Federal Territory Day, Labour Day and Malaysia day) in one calendar year and on any day declared as a public holiday under section 8 of the Holiday Act 1951.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.