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Employer of Record Malaysia

Our Employer of Record in Malaysia service enables clients to hire employees without the need to operate a local legal entity there.

It makes a big difference to develop a new market with your own personnel on the ground. Particularly for functions related to sales & marketing, business development, distributor management, and service & maintenance, our customers are very satisfied using our Malaysia Employer of Record Service. 

Our customers and their local teams can be free of the distractions of administrative tasks and complex local requirements. So you can fully focus on the development of your core business.

If your local business grows large enough, you can easily transfer the employees to your own subsidiary. It also provides a quick exit strategy if necessary. In addition to Malaysia, we offer Employer of Record services in several other countries.


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Stephan Dorn FMC Group

Employer of Record Malaysia - FMC Group's Approach

  • Quick, flexible, and easy entry into Malaysia in compliance with local employment laws
  • Complete control over business development with your own team
  • Good option for building up, managing, and supporting your distributors and key accounts by directly observing local developments and adjusting the strategy whenever necessary
  • Using our comprehensive recruitment experience for international clients, we can form a local team that fits your corporate culture.
  • Focusing on your core business instead of dealing with the time-consuming and complex local administrative tasks
  • Allowing for easy market exit if necessary
  • Integrating your employees into our team through motivational events and special meetings

EOR Malaysia Management & Reporting Flow

Management and Reporting Flow Chart

Hiring an Employee

Employment Contract – indefinite vs. fixed term

For hiring in Malaysia, it is highly important to create a robust employment contract, which is written in both English and Malay, is considered a recommended approach. Employment agreements in Malaysia should encompass the following key aspects:

  • Job responsibilities and duties
  • Compensation and employee benefits
  • Termination conditions
  • Severance package

It is crucial that letters of offer and employment contracts specify salary and compensation in the local currency, Malaysian Ringgit (MYR).

Probation Period

In accordance with probationary policies in Malaysia, the typical probationary period ranges from three to six months. Once an employee completes one month of probation, they are accorded the status of a regular employee and are entitled to all the associated benefits in Malaysia.

During their probationary period, employees are entitled to the basic services outlined in their employment agreement. However, there are no provisions that exclude probationary employees from enjoying the standard benefits provided to full-time employees.

Work Week, Overtime & Maximum Working Hours

The standard workweek in Malaysia consists of 40 hours, with a regular workday lasting 8 hours. Typical working hours in Malaysia run from 9 a.m. to 5 p.m., Monday through Friday. Employees are entitled to one rest day for every 6 consecutive days worked, during which they cannot be required to work.

Work hours should not surpass 45 hours per week, and the maximum daily spread-over period of work should not exceed 10 hours.

Malaysia’s compensation laws also govern overtime pay. When employees work more than 48 hours per week, any additional hours must be compensated at a rate that is 1.5 times their regular wage.

Income Tax

Gross Income Tax Rate (%)
MYR 0–2,500 0%
MYR 2,501–5,000 1%
MYR 5,001–10,000 3%
MYR 20,001–35,000 7%
MYR 35,001–50,000 12%
MYR 50,001–70,000 19%
MYR 70,001–100,000 24%
MYR 100,001–150,000 26%
MYR 150,001–250,000 26%
MYR 250,000+ 26%

*Non-resident individuals are taxed at a flat rate of 30%

Typical Benefits

  • Guaranteed benefits in Malaysia include Health Insurance, where the country has a mandatory universal healthcare system funded through payroll taxes and the general budget. Additionally, Maternity Leave and Paid Annual Leave are also provided.
  • As for Supplementary Benefits, although not legally mandated, the 13th-month bonus is a common practice in Malaysia. Performance-based bonuses, such as sales commissions, are a standard practice and are often expected by employees but are not obligatory. Some companies may also offer supplementary benefits like group private health insurance, group life insurance, and group accident insurance.

Visa for the Employees

A work visa in Malaysia is granted once your employer submits the necessary Malaysian work permit for your employment in the country. There are several requirements to meet when applying for this visa.

It’s important to note that obtaining a Malaysia work permit without a job offer may not be feasible. Therefore, it’s advisable to secure employment before initiating the application process. Additionally, it’s possible to transition from a business visa to a work permit if needed.

Typically, the processing time for this visa ranges from two to six weeks after the submission of the application

Time off Policies

Public Holidays

In Malaysia, employees have the right to a minimum of 11 public holidays annually. These include 5 mandatory national holidays and 6 optional public holidays determined each year. The 5 compulsory national holidays are as follows:

  • National Day
  • Birthday of the Yang di-Pertuan Agong
  • Birthday of the Ruler of the Yang di-Pertua Negeri
  • Workers’ Day
  • Malaysia Day

In cases where a public holiday falls on a rest day, the following day is considered a paid holiday for employees. If employees are required to work on a holiday, they are entitled to receive compensation equivalent to their three-day monthly income.

Annual Leave

Employees in Malaysia are granted paid annual leave, and the total entitlement is contingent on their length of service. The calculation for 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 or more years of service: 16 days for each year of service.

If an employee has not completed 12 months of continuous service with the same employer, their entitlement to paid annual leave is proportionate to the number of completed months of service.

Sick Leave

Employees in Malaysia are entitled to paid sick leave, and the calculation for this entitlement is based on their tenure as follows:

  • Less than 2 years of service: 14 days of paid sick leave.
  • More than 2 years but less than 5 years of service: 18 days of paid sick leave.
  • More than 5 years of service: 22 days of paid sick leave.

In addition to these standard sick leave entitlements, employees may qualify for an additional 60 days of paid sick leave per calendar year if hospitalization is required. However, they must provide a medical certificate to substantiate their need for this extended sick leave.

Other Leave Types

Pregnant workers in Malaysia are guaranteed a minimum of 98 consecutive days of maternity leave and are eligible for a maternity allowance. Maternity leave can begin at any time within 30 days before the expected delivery date but must not extend beyond the day immediately following the birth. Pregnant employees qualify for maternity allowance if they meet the following criteria:

The expectant mother was employed within the 4 months prior to her due date.

The expectant mother was employed for at least 90 days in the 9 months preceding her due date.

During maternity leave, an employee cannot be terminated from employment. Furthermore, if employees do not return to work immediately after their maternity leave ends, they are granted a grace period of 90 days within which they can resume their employment.

Terminating an Employee

In Malaysia, both employees and employers have the option to terminate the employment relationship by providing notice of resignation or termination. If the employment contract doesn’t specify a notice period, the following notice periods are generally applicable:

  • For employees with less than 2 years of service: A minimum of 4 weeks’ notice.
  • For employees with 2 years but less than 5 years of service: A minimum of 6 weeks’ notice.
  • For employees with 5 or more years of service: A minimum of 8 weeks’ notice.

Employees are entitled to termination benefits based on their length of service:

  • If the employee has been employed for less than 2 years, they are entitled to 10 days’ wages for each year of employment.
  • If the employee has been employed for 2 to 5 years, they are entitled to 15 days’ wages for each year of employment.
  • If the employee has been employed for 5 or more years, they are entitled to 20 days’ wages for each year of employment.

However, employees are not eligible for termination benefits if they have been employed for less than 12 months at the time of termination.

In cases of employee misconduct, the employer has the discretion to terminate the employee immediately or demote them, depending on the circumstances.

Disclaimer: Although we carefully researched and compiled the above information, we do not give any guarantee with respect to the actuality, correctness, and completeness.