Employer of Record in Malaysia

Velocity Global’s Malaysia Employer of Record enables an efficient and compliant business expansion without the cumbersome and prolonged entity establishment process. Through expedited employee hiring and onboarding, Velocity Global helps you take advantage of time-sensitive opportunities in Malaysia.

By designating Velocity Global as your Employer of Record, we hire your supported employees and manage all payroll, taxes, and benefits, sparing you time and frustration. Whether you hire a single supported employee or build a brand new team, our experts simplify this complicated process for you to compliantly expand your business into Malaysia.

Benefits of hiring in Malaysia

• According to the World Bank, the Malaysian economy is one of the most open in the world. As nearly half of all Malaysian employment is connected to export activities, the country’s trade and investment are essential to job creation and income growth.
• Malaysia is one of Asia’s fastest emerging countries. Malaysia has attracted significant foreign investment since it possesses a relatively inexpensive but educated workforce, developed physical infrastructure, and supportive government policies for business growth.
• Malaysia is a gateway to the region due to its strategic geographic location and ease of doing business. The country’s local business community is highly prepared to do business with international corporations, ensuring Malaysia as a strong manufacturing and export base.

Challenges of hiring in Malaysia

• Malaysia’s top export market, China, faces economic setbacks due to strained relations with the United States. Malaysia will unavoidably bear the consequences of China’s troubled relations with other countries. Maritime territory disputes persist and sovereignty issues remain as China seeks to test international order.
• As the median household income continues to grow in Malaysia, regional disparities and income inequality persist across the country.
• Malaysia faces a decrease in its price competitiveness. The Malaysian ringgit has fallen to a record low compared to the United States and Singaporean dollar, two of its three largest trading partners.

Cultural nuances and must-knows of doing business in Malaysia

• It is commonplace in Malaysian business culture to individually greet everyone in the room, even when the group is large.
• Malaysian colleagues enter a meeting and introduce themselves in order of importance, with the highest-ranking colleagues first.
• Malaysian business culture is hierarchical. Seating arrangements are chosen to showcase each colleague’s standing.
• Receiving a business card with respect is representative of the respect given to the person who provides the card. Use both hands to convey respect while receiving and providing business cards.
• All colleagues are consulted before reaching a decision, causing prolonged business deliberations.
• Malaysian business culture heavily rewards personal relationships. Building trust is essential in order to fulfill a successful business.
• As Malaysia is a predominantly Muslim country, physical touch between men and women may not be appropriate during business. Men should wait for their Malaysian colleagues to extend their hands to shake or bow instead.
• Meetings may be interrupted by practicing Muslims for their prayer sessions. It’s wise to schedule meetings before or after midday prayer.

Minimum wage

• As of May 1, 2022, the Minimum Wages Order 2022 was signed into law which set the country’s new minimum wage rate to MYR1,500 (USD337) per month.

Probation periods

• There is no legal requirement for a probation period in Malaysia but they are permissible and usually set between one and six months.

Bonuses

• There are no legal obligations for employers to reward employees with a contractual or discretionary bonus. However, a 13-month bonus is customary at the inclination of the employer.

Onboarding

• In Malaysia, the Employment Act 1955 designates that employment contracts that last longer than one month must be in writing. The only provision which is required by law in a Malaysian employment contract is the details for termination by both employer and employee.

Termination and notice periods

• Malaysia’s Industrial Relations Act provides that an employee can only be dismissed for just cause, including the following:
  • Poor performance
  • Redundancy
  • Misconduct
• Malaysia’s Employment Act provides employees a statutory minimum notice of termination of:
  • Four weeks for less than two years of service
  • Six weeks for two years but less than five years of service
  • Eight weeks for five years or more of service
• Payment in lieu of notice is permissible by either employer or employee.
• Severance pay is given to employees who are dismissed for reasons not including just cause. Severance pay depends on an employee’s length of service, as follows:
  • 10 days of pay for every year of employment, when they have been employed for less than two years
  • 15 days of pay for every year of employment, when they have been employed for two years but less than five years
  • 20 days of pay for every year of employment, when they have been employed for five years or more

Annual leave

• The Malaysian Employment Act states that after 12 months of continuous service, employees are entitled to annual leave depending on their length of service. The leave entitlements are as follows:
  • Eight days for every year of continuous service, when they have been employed for less than two years
  • 12 days for every year of continuous service, when they have been employed for two years but less than five years
  • 16 days for every year of continuous service, when they have been employed for five years or more

Parental leave

• Female employees in Malaysia are guaranteed 98 consecutive days of paid maternity leave, which can begin 30 days before childbirth and no later than the day after childbirth.
• Malaysian employees receive maternity allowance for their maternity leave, if:
  • They have worked for their employer at any period in the four months prior to childbirth
  • They have worked for their employer for at least 90 days during the nine months before childbirth
• Married male employees in Malaysia are guaranteed seven consecutive days of paid paternity leave.

Sick

• The Malaysian Employee Act designates sick leave depending on an employee’s length of service. The leave entitlements are as follows:
  • 14 days in each calendar year, when they have been employed for less than two years
  • 18 days in each calendar year, when they have been employed for two years but less than five years
  • 22 days in each calendar year, when they have been employed for five years or more

National and regional holidays

• Malaysia has 11 public holidays in a calendar year, which are not included in the minimum paid leave entitlement and are taken in addition to annual leave. The following five holidays are national holidays recognized by all of Malaysia:
  • National Day (August 31)
  • Birthday of Yang di-Pertuan Agong (First Monday of June)
  • Birthday of Ruler of the Yang di-Pertua Negeri (August 24)
  • Worker’s Day (May 1)
  • Malaysia Day (September 16)
• Employers have the ability to choose the remaining six public holidays from the below list to complete the total 11 public holidays:
  • Birthday of the Prophet Muhammad (The specific day fluctuates each year)
  • Chinese New Year (The specific day fluctuates each year)
  • Wesak Day (The specific day fluctuates each year)
  • Hari Raya Puasa (The specific day fluctuates each year)
  • Hari Raya Haji (The specific day fluctuates each year)
  • Deepavali (The specific day fluctuates each year)
  • Christmas Day (December 25)
  • Nuzul Al-Quran (The specific day fluctuates each year)

• Malaysia’s government agencies administer the country’s benefits programs.
• The Ministry of Human Resources provides overall general supervision and administration of labor relations.
• The Malaysian social security system is called SOCSO, or PERKESO (Pertubuhan Keselamatan Sosial). It provides financial assistance to employees in the event of death, disability or illness, or an occupational disease.
• The Ministry of Health provides and administers general health benefits and procedures to Malaysian residents. Employers make contributions to the government on behalf of employees and collect contributions from employees to maintain the Malaysian Social Security scheme, which maintains pensions, survivor benefits, short-term disability, long-term disability, healthcare, and paid leave entitlements.

• Individuals are considered residents when they stay in Malaysia for more than 182 days in a calendar year.
• Non-tax residents who work in Malaysia for a period that does not exceed 60 days in a calendar year are exempt from income tax. However, a non-tax resident’s income is subject to tax when performing independent services such as consultancy.
• A non-tax resident is taxed at a rate of 30% on total income.
• Malaysian residents are lawfully required to pay income tax on only their Malaysian source income, not their global source income.

Thresholds

• As of 2022, the Malaysian income tax brackets are:
  • Up to MYR 5,000: 0%
  • From MYR 5,000 to MYR 20,000: 1%
  • From MYR 20,000 to MYR 35,000: 3%
  • From MYR 35,000 to MYR 50,000: 8%
  • From MYR 50,000 to MYR 70,000: 13%
  • From MYR 70,000 to MYR 100,000: 21%
  • From MYR 100,000 to MYR 250,000: 24%
  • From MYR 250,000 to MYR 400,000: 24.5%
  • From MYR 400,000 to MYR 600,000: 25%
  • From MYR 600,000 to MYR 1,000,000: 26%
  • From MYR 1,000,000 to MYR 2,000,000: 28%
  • Above MYR 2,000,000: 30%
• The corporate income tax rate in Malaysia is 24%.

Health

• Malaysia’s healthcare system is emerging as the leading healthcare provider in Asia. Malaysian patients receive an excellent healthcare system, highly ranked by the World Health Organization. Malaysia has significantly improved its standard of care in the past couple of decades, now competing with North America and Western Europe. Malaysia provides universal healthcare to all residents through heavily government-subsidized public facilities. The public healthcare system and private healthcare system are recognized to work well in cooperation with each other.

Pension

• Employees in Malaysia are subject to eligibility requirements for the state’s old-age retirement pension. Qualifying conditions for the state’s old-age pension include being at least 60 years of age. The pension is calculated based on the insured employee’s contributions and employer’s contributions on their behalf. There are three payment options for the pension:
  • Lump-sum payments
  • Monthly payments
  • Combination of lump-sum and monthly payments

Tax dates

• In Malaysia, the tax year is the calendar year. Tax returns need to be filed by April 30 for individuals without business income and by June 30 for individuals with business income.

Cycle

• The payroll cycle in Malaysia is monthly, where payments are made on the last working day of the month.

Average hours

• The Malaysian Employment Act designates normal working hours to not exceed more than 8 hours per day and more than 45 hours per week.

Overtime

• In Malaysia, overtime is considered time worked in excess of normal business hours. The maximum number of overtime hours is 104 per month. Employers cannot require employees to work more than 12 hours a day, including overtime hours. Overtime pay cannot be less than 150% of an employee’s regular hourly wage.