This Guide is a one-stop introductory guide to Malaysian employment law, written by The Malaysian Lawyer co-founder Marcus van Geyzel , and includes categorised links to employment law articles Marcus has published on The Malaysian Lawyer.
The topics in this Guide have been selected based on feedback from in-house counsel and HR professionals, and cover the usual high-level background legal information they would like to have on-hand, particularly as professionals from other jurisdictions considering employment issues in Malaysia.
Nothing in this Guide is legal advice, and its contents will be updated from time-to-time. This Guide was last updated on 11 January 2023, and takes into account changes as a result of the Employment (Amendment) Act 2022 and Employment (Amendment of First Schedule) Order 2022 effective 1 January 2023.
The legal framework to the Malaysian employment and industrial relations ecosystem is generally provided by the Employment Act 1955 and the Industrial Relations Act 1967.
The Employment Act sets out minimum statutory benefits and entitlements. From 1 January 2023, the Employment Act applies to all employees (“any person who has entered into a contract of service”), with the exception of the sections in relation to overtime payments and termination benefits, which will not apply to employees whose wages exceed RM4,000/month.
There is no requirement for a foreign employer to establish an entity in Malaysia purely to engage an employee in Malaysia. This is of course subject to tax and permanent establishment considerations, depending on the nature of the business and the role of the employee.
While the Companies Act requires foreign companies to be registered as a foreign company in Malaysia before “carrying on business in Malaysia”, merely hiring employees does not constitute “carrying on business”.
Foreign companies can of course choose to incorporate a subsidiary in Malaysia, or register a branch or representative office.
Other common international structures such as MSPs and PEOs can also be used in the Malaysian market.
There is no regulation of pre-employment background checks, and extent of these checks are industry or employer-specific. Employers should obtain the individual’s consent for the processing of any personal data, and ensure compliance with the Personal Data Protection Act 2010.
Employees can be engaged on a permanent, fixed-term, full-time, or part-time basis.
Individuals can also be engaged as independent contractors either directly or through a service provider. There is the same misclassification risk as in most other jurisdictions. The risk level depends on a range of factors, and the courts will look at the substance of the relationship (including work instructions, level of control, exclusivity, benefits entitlements, organisational integration) over its form.
The Employment Act requires that a contract of service be in writing where the contract is for a specified period of time exceeding one month or for the performance of a specified piece of work, where the time reasonably required for the completion of the work exceeds or may exceed one month. The Employment Act also requires this written contract of service to include a clause setting out the manner in which such contracts may be terminated by either party.
Probationary periods
Probationary periods are not regulated, and it is common to see probationary periods of 1-6 months. Probationers are generally entitled to similar security of tenure as confirmed/permanent employees, and any non-confirmation of employment during or at the end of the probationary period must be reasonable.
Other employment policies
There are no compulsory employment policies. Common policies include those in relation to workplace health and safety, whistleblowing, grievance and harassment, and intellectual property or proprietary invention and assignment matters. Some employers also have a standalone data privacy policy to address the consent/notice requirements of the Personal Data Protection Act (see the “Data privacy” section below).
From 1 May 2022, the monthly minimum wage was increased to RM1,500 nationwide.
There is a temporary exemption until 1 July 2023 for employers with less than five employees. However, this exemption does not apply to employers who carry out professional activities (as classified under the Malaysia Standard Classification of Occupations published by the Ministry of Human Resources), regardless of number of employees.
The Employment Act provides statutory minimum employment rights and terms and conditions for employees. We list some of the entitlements under the Employment Act in this section.
Hours of work
An employee shall not be required under his contract of service to work —
Overtime payments
Employees with wages of up to RM4,000/month are entitled to overtime compensation under the Employment Act. Pursuant to the Employment Act, for any overtime work carried out in excess of the normal hours of work, eligible employees shall be paid at a rate not less than 1.5 times his hourly rate of pay irrespective of the basis on which his rate of pay is fixed. Here “normal hours of work” means the number of hours of work as agreed between an employer and an employee in the contract of service to be the usual hours of work per day.
Public holidays
Employees are entitled to a paid holiday at the ordinary rate of pay on 11 of the gazetted public holidays and on any day designated as a public holiday under the Holidays Act 1951. The Employment Act provides that five of those 11 gazetted public holidays must be —
The Employment Act also provides that, if any of the public holidays falls on a rest day or another public holiday, the working day following immediately the rest day or the other public holiday shall be a paid holiday.
It is normal market practice for all employees to be granted paid holidays on all the National and State level public holidays.
Annual leave
Employees are entitled to paid annual leave of —
and if the employee has not completed 12 months of continuous service with the same employer during the year in which his contract of service terminates, his entitlement to paid annual leave shall be in direct proportion to the number of completed months of service.
Sick leave
Employees are entitled to the following sick leave, where no hospitalisation is necessary:
Where hospitalisation is necessary, employees are entitled to 60 days sick leave in the aggregate in each calendar year.
Maternity leave
Female employees are entitled to paid maternity leave of not less than 98 consecutive days.
Paternity leave
Male employees are entitled to paid paternity leave of not less than 7 consecutive days.
Minimum retirement age
The minimum retirement age in Malaysia is 60.
The Employment (Amendment) Act 2022 entitles employees to apply to their employment for a flexible working arrangement to vary the hours, days, or place of work.
An employer must approve or refuse the application within 60 days, stating the grounds for any refusal.
It is not mandatory to have a Flexible Working Policy, but it is a recommended best practice.
The collection and processing of personal data is governed by the Personal Data Protection Act 2010. Employers must obtain employee consent before collecting and processing their personal data. Explicit/express consent is required if “sensitive personal data” is involved. Employers must notify their employees of the nature and purpose of information being collected, to whom it is being disclosed, and that the employees have the right to access such data. Consent is also required before this data is shared with third parties. A bilingual (in English and Bahasa Malaysia) employee consent/notice document is required.
There is no ARD/TUPE equivalent in Malaysia. There is no mechanism for the automatic transfer of employment in sale of assets/business transaction, and employees will by default remain employed by the seller in such transactions. Any “transfer” of employees in such transactions is effected by a termination (by the seller) and rehire (by the buyer), and the seller will be exempted from paying any statutory severance payment under the Employment (Termination and Lay-Off Benefits) Regulations 1980 if the new offer from the buyer is under terms and conditions of employment not less favourable than those under which the employee was employed by the seller. An employee will not be entitled to statutory severance payment if the employee unreasonably refuses the new offer.
Termination must be with “just cause or excuse”. There is no fixed or comprehensive list of acceptable grounds for termination of employment by an employer, but the usual reasons would include misconduct, poor performance, redundancy, or closure of business.
All employees are protected from unfair dismissal.
Termination notice
Termination notice must be the same for both employer and employee, and the length of the notice can be determined by the contract. If the contract is silent, the following statutory termination notice periods apply:
Alternatively, a payment in lieu of notice can be made by either party.
Notice of termination is not required if there is a serious misconduct or a “wilful breach” of the employment contract.
Severance payments
Employees with wages of up to RM4,000/month who have been employed for 12 months or more are entitled to the following minimum statutory severance payments pursuant to the Employment (Termination and Lay-Off Benefits) Regulations 1980:
For employees with wages of more than RM4,000/month, the entitlement to severance payments depends on the employment contract. If the contract is silent, there is no statutory right to termination benefits, but in some circumstances there is a general expectation that a financially-able employer should pay reasonable severance compensation.
When carrying out a retrenchment exercise, employers must lodge a notification with the nearest Department of Labour, using the standard “Borang PK” form at least 30 days before the termination of employment.
Retrenchments can be justified by various reasons, such as redundancy, or for financial reasons. However, if challenged, employers must be able to prove that the retrenchment was carried out for genuine reasons. Employers must also use the “Last In, First Out” (LIFO) principle, or an alternative fair and objective selection criteria.
Employers are encouraged (but not required) to abide by the Code of Conduct for Industrial Harmony when implementing a retrenchment exercise.
Poor performance is one of the acceptable reasons which constitute just cause for a unilateral termination. However, the employee has to be treated fairly. An employer who dismisses an employee for poor performance faces the risk of a successful unfair dismissal claim by the employee if the termination was not carried out fairly. Whether or not the termination was fair will be determined on a case-by-case basis.
Generally, to be deemed fair, a termination based on poor performance would require the following:
Where an employer is uncertain as to whether the dismissal is fair (if the employee brings an unfair dismissal claim, the burden will be on the employer to show that the dismissal was fair), or wants the employee to agree to additional post-employment covenants, some employers opt to offer an ex gratia payment in return for the signing of a mutual separation agreement. This then would no longer be a termination of employment by the employer, but a mutually-agreed separation.
The benefit of a mutual separation agreement is it reduces the likelihood of an employee bringing an unfair dismissal claim. However, the release of claims cannot effectively bar an employee from making such a claim.
Post termination non-compete restrictions are void and unenforceable pursuant to Section 28 of the Contracts Act, as they are a form of restraint of trade.
Post termination non-solicitation restrictions (of customers and employees) do not directly breach Section 28 of the Contracts Act, but are difficult to enforce and are typically only enforceable to the extent that there has been a breach of confidentiality, or misuse of confidential information or trade secrets.
An employee can lodge an unfair dismissal complaint at the Industrial Relations Department within 60 days of his/her last employment date. This is a strict deadline.
Upon receiving a complaint, the Industrial Relations Department will arrange an informal conciliation meeting between the employer and employee to attempt to mediate a settlement. If the parties cannot reach a settlement, the matter will proceed to an Industrial Court trial.
The potential financial exposure for an employer in the event of a successful unfair dismissal claim is —
This Guide to Malaysian Employment Law is intended to be a high-level introduction to Malaysian employment law. Please share the Guide with others who may find it useful. It will be continually updated. Please leave a comment below if you have any feedback, or requests or suggestions for other employment law issues that should be included in this guide. You may also want to browse articles on The Malaysian Lawyer using some of these tags: employment law / Industrial Court / retrenchment / unfair dismissal .
Marcus van Geyzel / [email protected]
Peter Ling & van Geyzel / plvg.my
Good morning. We have one question about employee termination which without one month notice. How to calculate the penalty?
anuradha P radhakrishnan 18 March, 2022 / 7:39 amcontract workers who are entitled to socso but are not provided for
where is the avenue for them to seek help
Great! The Employment Act also requires that this written contract of service include a paragraph describing how either party may end the contract. Thank you.
Anonymously yours 15 May, 2022 / 6:50 pmHi Marcus, Could you quote on the employment law that covers the Front Liners in general, and niche it into duty during lockdown. This would greatly help those abang polis on duty during the MCO, hoteliers, front desk officers and hospital/hospitality worker.
muniandy 15 July, 2022 / 1:48 pmrecently have tender my 24 hours resignation notice and in my offer letter nothing stated about notice period can HR sue me against ? my pay is above 5k, hr said already started in hand book but not regarding the notice period but it was not acknowledge by me….. kindly advise. thanks
muniandy
I have been unfairly treated by this company without a reason and failed to asses the email beforehand I have provided this company with. I have been working for 2 years in this company with no epf&socso and I work overtime. The company have failed to provide me with trainings as well as they keep changing my position as they like without my concern. Whenever I speak Tomy MD he failed to act upon but use my personal information to take leverage upon me. I have been taken completely advantage by this company and this company have been delaying each time when I speak about my confirmation. For 2 years not only they have not provided me with a confirmation letter but also changing my positioned profession to their accordance. I need some guidance on this.
Keech 22 July, 2022 / 10:02 amHi Marcus, just curious, are you still required to work as usual after serving the resignation notice or just finalize handovers?
Concerned Suami 25 July, 2022 / 10:38 amHi, Thanks for taking your time to read this.
Im writing in to ask if employers are allowed to 1) include the extension of the resignation period by 1 week on top of the 3 month resignation notice that has been included in the employment contract
2) reject the option of buying out by the employee
3) assign labour work to staff which are not hired for labour purposes such as moving of stock during stock checking as the staff is hired as an accountant
4) force(or verbally threatening the lack of teamwork) the staff to attend motivation training(which are by no means related to skill growth of the staff in any form) in languages which are not understood by the staff This is in reference to a practice of a company that my wife works for as we are trying to find an option where she can resign with a slightly short period of notice rather than 3 months in the employment contract. Diplomatic negotiations to shorten the period of notice have failed and that have caused the loss of opportunity with several companies which were looking to hire my wife. Thank you again for reading through this.
I’d worked in my current company for over 10 years. Previously signed a confirmation letter and had to wait 6 months notice to leave. It has now been 2 months since I submitted my resignation letter. The boss has verbally promised to let me leave early if I finish my part of the job, but now it seems to be Never End Story. I have been forced by the company to do work that is not within my job scoops。。。。
What can I do to get out of my job early, apart from paying the company money?
Hi, I wish to enquire re Section 15(2) of the EA where an employee has been absent from work for more than 2 consecutive days without notifying the employer is considered as breach of contract.
(1) what is the status of the employee in the company for this breach of contract?
(2) or can this be considered as voluntarily resign by the employee?
(2) or can it be treated as automatic termination of work? Your reply is appreciated.
Thank you
Insightful!
However, can a company change their sales rep commission scheme without notifying their sales rep?
So, I joined this company, and they have shared with me their comm plan. While I chase my sales and finally hit my target and the projected revenue overall, they suddenly change the comm plan.
The incentive that I was aiming at, now gone.
FYI, I finally got my confirmation after being delayed for 3 months. Is this allowed?
Hi wanna check if I am force to take a professional course and i have resigned before completing the course, can employer ask me to pay back the fee incurred?
Lumiin Vong 3 November, 2022 / 9:33 amHi, if an employee has fully utilised the 22 days of sick leave (employee has been employed for more than 5 years) during the year due to 2 times of Covid19+ & normal sick. Does the employee still entitle additional days of paid sick leave, other than the 22 days?
wilford 25 November, 2022 / 2:49 pmif my employment under company ABC and the owner of business sell over the company company DEF. after 1 year , company DEF decided to move every employee employed under ABC to DEF by signing the new employment letter with observed all the term& condition from previous ABC company.
1. May i say this is change of ownership in term of employment law? Employment ( termination and lay-off benefits) regulation 1980, (8) – change of ownership of employees?
2. Do you think employee from ABC will possible claim termination benefit if refuse to transfer employment to DEF although the address are same?
I have given one month notice to my company and have two earned pro-rate leave. However, they only paid me 28 days salary and considered the two days earned leave is already add up in the one month salary. What I do understand is that the one month notice is served and I should lawfully have one month pay instead of 28 days only and they mentioned the two days leave is paid in the one month salary already irrespective whether the cut off date of the pay roll is on the 20th or 30th of the month.
I have checked with the Labour Office and they have the same thoughts as me. I even checked with my present company HR, they also has the same answers as me but the problem is that they deny that I only worked 28 days. Guys, please give me your thoughts and opinion on this. Thank you.
i am retiring at minimum retirement age of 60 but not notice has been served to me. What should I do. Can I continue working assuming that the company still wants my service.
Mathew John 12 January, 2023 / 8:37 amIf your contract of service states that your retirement is at 60 years, you shall retire at 60 years. Technically there is no need for another letter. However it has been a good HR practice to issue a letter of retirement thanking the employee for his past services. In the event you continue working because you did not receive any letter, the Company will then stop you.
MVD International 17 January, 2023 / 8:23 pmIt is really a great work and the way in which you are sharing the knowledge is excellent. Thanks for your informative article
David 31 January, 2023 / 8:17 pmThe termination clauses in my Employment Letter does NOT have this clause “Either party may terminate the employment by serving ___ months notice, or ___ months’ pay in lieu of notice.” My notice period is 3 months. I intend to buyout 2 months penalty. Can my current employer reject?
Dave 3 February, 2023 / 5:56 pmThe termination clause in my Employment Letter does not include “Either party may terminate the employment by serving 3 months notice, or 3 months’ pay in lieu of notice.” I intend to buyout 2 months penalty. Can my employer reject my buyout even when I am willing to pay the penalty?
Arc 19 April, 2023 / 1:42 amDo u have to get the reply? I’m also facing such issue whereby the employer not willing to let me off although I want to pay for one month and serve the notice one month which total 2 month or in lieu of. Can we insist and fight for the in lieu of wording? As my current company they don’t even bother about the in lieu and keep want to serve full notice
Jing Yi 19 April, 2023 / 1:43 amDo u have to get the reply? I’m also facing such issue whereby the employer not willing to let me off although I want to pay for one month and serve the notice one month which total 2 month or in lieu of. Can we insist and fight for the in lieu of wording? As my current company they don’t even bother about the in lieu and keep want to serve full notice
Nur 6 February, 2023 / 10:36 amWhat is the standard notice period for resignation if in the offer didn’t mention anything about it ? For staff which is still under probation ?
Timothy 27 February, 2023 / 5:37 pmIf there is a clause in my Contract stating that there can be no termination of contract within the first 3 years. Termination can only be done starting from the 4th year.
In this situation can I still terminate the Contract within the first 3 years by giving sufficient amount of time of notice?
To put it in simple words is it legal for a contract of service to have no termination for 3 years?
What should we do if a member of the staff requests to work for an international company that offers a low salary and no fixed allowance?
BL Koh 30 March, 2023 / 1:16 pmCan the employer terminate staff on long sick leave issued by hospital arising from motorbike accident. The staff was on medical leave since Jan 2022 until now and he can’t ascertain when can be back to work when asked. We have the following termination clause in his appointment letter”- Termination by Company in certain events Your service with the Company may be terminated by the Company without prior notice if you shall at any time:- (a) Be incapacitated or prevented by illness, injury, accident or any other circumstances beyond your control from discharging in full your duties for a period exceeding one (1) months. (b) Be guilty of grave misconduct or willful neglect in the discharge of duties. (c) Failure to abide by any of the Company’s rules and regulations. Provided always that after your confirmation, employment may be terminated by the company at any time giving you one (1) month notice or paying one (1) months’ salary in lieu thereof. Likewise, you are also required to give one (1) months notice to that effect or paying one (1) months’ salary in lieu thereof. In the event that you are found to have committed gross misconduct, the Company reserves the right to terminate you without notice or payment in lieu of notice.
MS 10 April, 2023 / 12:18 amCan a senior manager of a company disclose the status of a staff (father has passed away) to company suppliers to ask for wreath and condolence money without discuss with the company affairs?
LSW 20 April, 2023 / 11:21 pmIs it legal for a company to payout salary increment to employees but without issuing a formal letter?
Michelle Lim 28 April, 2023 / 2:16 pmHi,
We have a employee resigned today, 28-Apr-2023. In his employment contract, we have included the following clause : – Clause 4 Notice of Termination or Payment in Lieu of Notice
During probation period, either party is required to serve seven days written notice or pay seven pays wages in lieu of such notice. After confirmation, the termination notice period is one calendar month, or payment equal to one calendar month’s wages in lieu of such notice. Clause 5
B. With notice
Subject to clause 4 Your employment may be terminated by either party, giving the other , one(1) month of notice in writing or payment in the amount in lieu of notice required.
The Company will decide whether you will be required to serve full notice, part notice or no notice depending on management’s decision. So question the company decided that employee do not need to serve notice although employee insist to get pay with this 1(one) month notice that he is willing to serve. Can Company don’t pay and ask employee no need to serve notice and leave immediately?
Hi Marcus, If we are not a confirmed staff, if we were to resign what is the shortest notice period that we can provide to the company ? or is there any standard
Shasha 9 May, 2023 / 6:30 pmWhat are the benefits probation staff can enjoy?
No Annual Leave
Unpaid Leave (Limited based on company’s discretion?
Medical Leave (Limited based on company’s discretion?
EPF , Socco , EIS ?
My role was made redundant in early March and I have been paid ˜50% of the total package 5days after my last day. The remaining they said will be with held pending tax clearance. I have a resident pass and not leaving the country. It has been more than 2months and I have not recieved the rest of my pay. They are claiming it is still pending tax clearance, which I know should just be 14days. How long should my employer hold my remaining redundancy pay?
Desperate Employee 29 May, 2023 / 10:32 amHi Marcus I have submitted resignation on 2nd May and will serve 3 months notice until 2nd Aug. And recently I have received an offer from a company who intended to buy me out for a month thus, my serving notice is estimated to be shorten to 2nd July. Im writing in to ask if employers are allowed to reject the option of buying out with a reason stating that buy out option requires agreement from respective manager. Diplomatic negotiations to shorten the period of notice likely to be unsuccessful and that may cause the loss of my future opportunity. The contract reads as 1. Nothing shall be taken to prevent either the employer or employee from waiving their right to a notice. Either party may waive their right to the applicable notice set out in 3 months by paying to other party an indemnity of a sum equal to the amount of wages which would have accrued to the employee during the term of such notice or during the unexpired term of such notice, and in which event, the termination shall take effect from the date of notice of waiver. 2. All voluntary termination by employee must be accepted by their respective People Manager. Upon the acceptance of each voluntary termination, a letter acknowledging the termination will be issued to the employee stipulating the required notice period to be served by the employee in relation to the termination. 3. Either the company or you may, at the time, terminate the agreement by giving 3 months prior written notice, provided that if such notice is given by you, the company shall have a right to waive the notice of termination or any part thereof under this agreement at any time prior to the expiry of the applicable notice period. The company may also terminate this agreement by paying you salary in lieu of written notice, or place you on garden leave for all or any part of the applicable notice period. Thank you for taking time to read this. I really appreciate your help.
Akashi Mansor 6 June, 2023 / 12:09 pmHi , As employer currently use our personal phone to perform company collaboration and including weekend on-call support and night time on-call support , We have been forced to use our personal phone and there is no allowance are provided for this support . Kindly let me know this is against our Malaysian Labour law.
Chan Kit Mei 15 June, 2023 / 9:22 am Does the employer need to contribute EPF for “8 days paid back annual leave ” to the employee ? ANITHA SINGAM 27 June, 2023 / 9:28 pmHi Marcus, Is there any labour law that governs the employment of an individual 60yrs and above?
Will he/she be employed under a contracted agreement? What are the hidden factors in this way of employment or is it normally straightforward? Any terms and conditions? Advanced thanks for your guidance Warm regards,
Anitha
I am an expat worker, worked here under employment pass. I got terminated stating poor performance based on 3 topics, which there were no question asked during interview. Was given 3 months performance improvement period to prove my ability. But no training provided. I had to prepare myself during the period. I asked them to help me or provide any training multiple times, but they kept on saying that they don’t see any improvement and did not provide any training. Finally terminated after 2 months. Stating company has rights to terminate any employee when ever they wanted and it is mentioned in the offer letter. I was asked to leave the country in a short span. How can an expat like me file a case against the organisation now?. I don’t stay in this country, i checked with the layers in my country and they are helpless. When they hired they didn’t give me the pay I asked for, instead they proudly narrated about the job security in this well known German MNC which is known for logistics business. After joining, there was not much job for me and they were unable to move me into any other team too. Since I was under probation, they utilised the situation and played a well narrated drama. I want to file a complaint against this company. But not sure how much the labour court in this country will support a foreigner.
Fung 3 August, 2023 / 10:55 amRegarding sick leaves, my employer prorated the medical leave I am allowed to take e.g. only 2 days if I have served 2 months. Is that legal?
Reen 22 August, 2023 / 1:53 amMy company is asking us to sign code of conduct but no training was provided to the staff to clarify the terms. We have been given a deadline to sign.
Can we indicate under our signature that no training was provided?
Notice period, which to follow? The offer letter indicated notice period is two (2) months, signed date on 27th August 2022. However in the company system showed one (1) month. The NEW system activated on 1st Dec 2022. May I know which to follow? Even until now the system still showed notice period is one (1) month. The NEW system covered most of the stuff such as KPI, performance review, company info and employee files.
suresh 3 October, 2023 / 10:03 amI ‘m in a situation where there was a merger between two countries, Malaysia and SIngapore where with this merger, they, the company of new structure only might require a single person to do the job and not two. They have made me report to the new head and I’m no more reporting to the GM directly. There was a message from the GM to me, to look for another job but this was done casually. They have plan to bring in another role that will compliment the current new person in-charge. That makes my position redundant and make me feel not so significant anymore.
What is the advice, should I leave or wait for the company to discuss on my fate.
Thanks.