Employment in Peninsular Malaysia and Labuan is governed by the Employment Act 1955, while Sabah and Sarawak have their own labour ordinances. Some protections, such as overtime pay and termination benefits, apply only to employees earning RM4,000 a month or less and to manual workers. Here is what employers need to know about leave, pay, tax and ending employment.
The Employment Act sets minimum paid annual and sick leave that grow with length of service. Leave entitlements for part-time employees are pro rata.
8 days a year with less than 2 years’ service, 12 days with 2–5 years and 16 days with 5 years or more. Pro rata in the first year.
14 days (under 2 years’ service), 18 days (2–5 years) or 22 days (5+ years), plus up to 60 days a year in total when hospitalisation is needed.
Consecutive days. Eligible employees receive a maternity allowance at their ordinary rate of pay from the employer.
Consecutive paid days for married fathers with at least 12 months’ service, for up to 5 births.
Set up each Malaysian leave type in IceHrm with its own accrual, carry forward and approval rules, including entitlements that step up with length of service and pro-rata leave in the first year. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
A single national minimum wage applies across Peninsular Malaysia, Sabah, Sarawak and Labuan, set by a Minimum Wages Order under the National Wages Consultative Council Act.
From 1 February 2025 (1 August 2025 for employers with fewer than 5 employees). Hourly and daily rates apply for part-time work. Domestic workers are excluded.
And no more than 8 hours a day. Overtime is limited to 104 hours a month.
Overtime on a rest day is paid at 2× and on a public holiday at 3× the hourly rate of pay.
Overtime, rest day and public holiday pay rules apply to employees earning RM4,000 a month or less, and to manual workers regardless of pay. For others, overtime terms are a matter for the employment contract.
Capture attendance and overtime in IceHrm, including rest day and public holiday work, and feed the hours straight into payroll so premiums reflect what was actually worked. Time & attendance →
Tax residents pay progressive rates on chargeable income after reliefs. Employers deduct monthly tax (PCB/MTD) from pay and remit it to the Inland Revenue Board (LHDN) by the 15th of the following month.
| Chargeable income | Rate | Tax on this income |
|---|---|---|
| RM0 – RM5,000 | 0% | Nil |
| RM5,001 – RM20,000 | 1% | 1% of the amount over RM5,000 |
| RM20,001 – RM35,000 | 3% | RM150 plus 3% over RM20,000 |
| RM35,001 – RM50,000 | 6% | RM600 plus 6% over RM35,000 |
| RM50,001 – RM70,000 | 11% | RM1,500 plus 11% over RM50,000 |
| RM70,001 – RM100,000 | 19% | RM3,700 plus 19% over RM70,000 |
| RM100,001 – RM400,000 | 25% | RM9,400 plus 25% over RM100,000 |
| RM400,001 – RM600,000 | 26% | RM84,400 plus 26% over RM400,000 |
| RM600,001 – RM2,000,000 | 28% | RM136,400 plus 28% over RM600,000 |
| Over RM2,000,000 | 30% | RM528,400 plus 30% over RM2,000,000 |
Employers give each employee a Form EA summarising the year’s pay by the end of February and file the employer return (Form E) by 31 March.
Employers contribute to the Employees Provident Fund (EPF/KWSP) and to social security run by PERKESO (SOCSO), and many also pay the HRD Corp training levy. Contributions are due monthly.
13% for wages of RM5,000 or less, 12% above that, for Malaysian citizens and PRs under 60. Employees contribute 11%. Foreign workers: 2% each.
Employment injury and invalidity cover, with 0.5% from the employee. Calculated on wages up to RM6,000 a month.
Matched by 0.2% from the employee, on wages up to RM6,000 a month.
Of monthly wages for employers with 10 or more Malaysian employees in covered sectors. 0.5% for those with 5–9 who register voluntarily.
Build Malaysian pay the way you already structure it, with your own salary components, deductions and formula columns, such as EPF, SOCSO and EIS columns. Want to know how well IceHrm handles payroll calculations for Malaysia? Contact us or see Payroll →
Dismissal must be with just cause or excuse. Employees who believe they were dismissed unfairly can file a representation with the Industrial Relations Department within 60 days, and the Industrial Court can order reinstatement or compensation. Dismissal for misconduct should follow a due inquiry.
| Length of service | Notice |
|---|---|
| Less than 2 years | 4 weeks |
| 2 years to less than 5 years | 6 weeks |
| 5 years or more | 8 weeks |
Employees covered by these rules (earning RM4,000 a month or less, or manual workers) with at least 12 months’ service are entitled to termination benefits when dismissed for reasons other than misconduct, such as redundancy. Other employees rely on their contract or a collective agreement.
| Length of service | Benefit per year of service |
|---|---|
| Less than 12 months | Nil |
| 12 months to less than 2 years | 10 days’ wages |
| 2 years to less than 5 years | 15 days’ wages |
| 5 years or more | 20 days’ wages |
Employers must report retrenchments to the Labour Department. Retrenched employees who contributed to EIS may claim job loss benefits from PERKESO.
Employees are entitled to 11 paid gazetted public holidays a year. Five are compulsory: National Day, the Agong’s Birthday, the state Ruler’s Birthday (or Federal Territory Day), Labour Day and Malaysia Day. The employer chooses the other six from the gazetted holidays and publishes them in advance.
Each state also has its own holidays, such as the Ruler’s Birthday, New Year’s Day in most states and Thaipusam in several, and the weekend falls on Friday and Saturday in some states.
Leave groups give each office its own holiday calendar, so staff in Kuala Lumpur, Penang and Johor each get their own state holidays and the employer’s chosen days off automatically. Holiday calendars →
A contract of service for more than one month must be in writing and include a termination clause. Its terms can never be less favourable than the Employment Act.
The law does not set a maximum probation period. Periods of 3–6 months are common, and probationers still have statutory rights and protection from unfair dismissal. There is no statutory limit on fixed-term contracts, but repeated renewals for permanent work may be treated as permanent employment.
Send contracts for e-signing, store them on the employee’s record, and track onboarding with task lists, from EPF and PERKESO registration to work pass documents, so nothing is missed. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for Malaysia, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for Malaysia? Talk to us.
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