Employer of Record in Malaysia
With a GDP of 208.77 billion US dollars in 2022, registering a growth of 8.7% compared to the previous year, Malaysia offers numerous opportunities for growing businesses looking to expand into Southeast Asia. Foreign direct investments indeed reached 28.63 billion US dollars in 2022, showing a significant increase of 21.3% compared to the previous year. However, the country has its own legal and administrative characteristics, and it is in this context that wage portage in Malaysia comes into play as a practical solution to streamline the development process.
On this page, discover how we simplify Employer of Record in Malaysia for you, guiding you step by step. Our goal is to enable you to focus on your business to ensure success in this dynamic Southeast Asian economy.
Employer of Record in Malaysia: What is it?
Wage portage in Malaysia involves a local intermediary that facilitates the existing connection between employer and employee. Positioned as an Employer of Record (EOR), Salveo takes on responsibilities for legal and regulatory compliance in areas such as immigration, employment, and payroll.
EOR in Malaysia: What are the benefits?
With outsourcing and Employer of Record services come numerous advantages, including:
Strategic benefits for the company:
- Rapid and cost-effective local presence.
- Avoiding complexities of local legal structure.
- Eliminating waiting periods (up to 6 months) for market testing.
Focus on core business:
- Delegating administrative and regulatory tasks to us.
- Concentrating on the core activities of the business.
Building trust and value:
- Cultivating trust with clients through a local presence.
- Reassuring clients with proximity in the same time zone.
Why choose Salveo to succeed in your EOR ?
As an Employer of Record and a subsidiary of the ADIT Group, Salveo is ready to redefine your HR experience in Malaysia. With over 750 employees and an impressive turnover of 156 million euros, Salveo offers a comprehensive suite of wage portage services tailored to businesses of all sizes.
Our expertise covers the creation of employment contracts compliant with Malaysian labor laws, facilitation of immigration processes, precise payroll management, ensuring seamless compliance with social security and income tax regulations, as well as skillful management of the entire contractual process. Additionally, we offer optional services such as recruitment assistance, flexible office space solutions, and comprehensive international mobility management.
Choosing Salveo not only optimizes your HR costs but also ensures compliance, frees up valuable resources for your core business activities, and enhances your ability to attract and retain top talent.
The practical information to achieve your EOR objective
Types of employment contracts in Malaysia
The employment contracts in Malaysia should cover several critical provisions, including a detailed job description and the associated duties, a comprehensive overview of the compensation and benefits package, clear specifications regarding termination requirements, and a defined structure for severance pay in case of employment cessation.
Malaysia offers two main types of employment contracts:
Types of contract | Probation period | Termination notice period | Severance |
Open-ended contract | 3-6 months | – 0 to 6 years of employment: 4 weeks’ notice required – 2 to 5 years of employment: 6 weeks’ notice required – More than 5 years of employment: 8 weeks’ notice required | – 0 to 1 year employment: none |
Fixed-term contract |
Common Probation Period Practice in Malaysia
While Malaysia does not legally mandate setting an employee on probation before hiring, it is advisable to follow this as a best practice. There are no stipulated minimum or maximum durations for a probationary period, but it is customary to implement a period ranging from 3 to 6 months. Typically, a three-month probationary period is suggested for non-executive and non-management roles, while executive and management positions may have a recommended six-month probationary period.
Working hours and overtime in Malaysia
The standard working hours in Malaysia typically are 40 hours, from Monday to Friday. Employees should not work more than 48 hours per week. There’s a maximum limit of 60 hours per month and 300 hours per year for overtime across all industries and sectors.
Any overtime hours must be compensated financially, the minimum overtime rates are as follows:
Overtime working period | Overtime compensation |
On daily working days: | 150% of the usual salary rate |
On rest days: – not exceeding half of the normal hours – Exceeding normal hours |
– 100% of the usual salary rate – 200% of the usual salary rate |
On public holidays : – First eight hours – Exceeding eight hours |
– 200% of the usual salary rate – 300% of the usual salary rate |
Annual paid leave
Employees in Malaysia are entitled to paid annual leave, the duration of which depends on their length of service with a company. The following table outlines the annual vacation leave based on the employee’s seniority within the company.
Length of Employment | Annual Vacation Leave |
Less than 2 years | 8 days |
2 to 5 years | 12 days |
More than 5 years | 16 days |
Male employees with three years of service can avail themselves of up to 30 days of paid religious leave, limited to a one-time occurrence.
National Holidays
The following table indicates the Malaysian national holidays and their dates for 2024.
Holiday | Date |
Lunar New Year’s Day | From 22nd to 23rd January |
Hari Raya Puasa (Tentative Date) | From 22nd to 23rd April |
Labour Day | 1st May |
Wesak Day | 4th May |
The Yang di-Pertuan Agong’s Birthday | 5th June |
Hari Raya Haji (Tentative Date), Hari Raya Haji holiday (Tentative Date) | From 29th to 30th June |
Muharram/New Year (Tentative Date) | 19th July |
Malaysia’s National Day | 31st August |
Malaysia Day | 16th September |
The Prophet Muhammad’s Birthday (Tentative Date) | 28th September |
Diwali/Deepavali | 12th November |
Christmas Day | 25th December |
Minimum wage
In Malaysia, the minimum wage is set by the government and is reviewed periodically. The current minimum wage in Malaysia is RM1,500 per month, which is equivalent to approximately US$333. This minimum wage applies to all employees in all sectors, regardless of their location or occupation.
Minimum wage rate | |
Monthly | RM1,500 |
Daily | Number of working days in a week:
|
Hourly | RM7.21 |
However, there are some exemptions to the minimum wage. For example, employers with less than five employees are not required to pay the minimum wage. Additionally, employers who carry out professional activities that are classified under the Malaysia Standard Classification of Occupations (MASCO) are also exempt from the minimum wage requirements.
Employment contract Termination
Navigating the termination process in Malaysia is challenging, as it is generally complex. Dismissing employees without valid reasons can potentially result in claims of unfair dismissal. Recognized justifications for termination include factors such as inadequate performance and misconduct. Employers can determine the notice period, which is typically outlined and mutually agreed upon in the employment contract.
In instances where the contract remains silent regarding the notice duration, statutory requirements dictate that the notice period must not fall below a specific period based on the employee’s years of services:
- For service periods of less than two years: a minimum of four weeks’ notice.
- For service periods spanning two to five years: a requisite notice of six weeks.
- For service periods exceeding five years: an obligatory notice period of eight weeks.
Employers must adhere to these statutory guidelines to prevent potential legal implications. In cases of unfair dismissal leading to legal proceedings, employers may find themselves obligated to make a mandatory payment equivalent to 24 months’ worth of the employee’s salary. This underlines the importance of a thorough understanding of termination regulations to mitigate risks and ensure legal compliance.
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