— Applicable Labour Law

Employment Laws by Region

The employment laws that apply differ from region to region in Malaysia:

Peninsular Malaysia & Federal Territories

Employment Act 1955

The Employment Act 1955 applies.

Sabah & Sarawak

Labour Ordinance

Each state applies its own Labour Ordinance.

With the 2025 amendments, employment protections across the regions have largely converged and now generally apply to all employees. In Sabah and Sarawak, for example, the amended Labour Ordinance took effect on 1 May 2025, extending coverage to all employees (previously it applied only to lower-paid employees), with working hours, maternity leave and other standards adjusted at the same time.

For most Chinese companies setting up in Peninsular Malaysia, the Employment Act is the main basis for day-to-day staff management.

— Minimum Wage

Minimum Wage Requirements

RM1,700

National Minimum Wage

Per month

Malaysia’s national minimum wage is RM1,700 per month and applies to employees including foreign and part-time employees, except where the law provides otherwise.

 
The minimum wage refers to basic wage and does not include allowances, bonuses or overtime pay.

— Working Hours & Leave

Working Hours, Leave and Notice Periods

Employers must comply with statutory rules on working hours, overtime, rest days, public holidays and employee leave. The main minimum entitlements include:

ITEM
STATUTORY MINIMUM
Normal weekly working hours
Maximum 45 hours
Annual leave
8 to 16 days, depending on length of service
Sick leave
14 to 22 days, depending on length of service
Paid maternity leave
98 days
Paid paternity leave
7 days (for eligible employees)
Notice period
4 to 8 weeks, depending on length of service

Key point: the above are statutory minimums. Employment contracts and staff handbooks may offer more favourable terms, but never less than the statutory standard. The exact number of days of annual leave, sick leave and notice increases with length of service (typically in three tiers: under 2 years, 2 to 5 years, and over 5 years).

— Statutory Contributions

Mandatory Contributions and Deductions

Employers must generally register eligible employees and pay the relevant statutory contributions, including:

ITEM
DESCRIPTION
Employees Provident Fund (EPF / KWSP)
Contributions are shared by employer and employee. For local employees under 60, the employer’s contribution rate is generally 12% to 13% of monthly wages, and the employee’s is 11%
Social Security Organisation (SOCSO / PERKESO)
Covers employment injury, invalidity and similar benefits; employer and employee contribute a percentage of monthly wages, subject to a wage ceiling
Employment Insurance System (EIS)
Unemployment protection; employer and employee contribute a percentage of monthly wages, subject to a wage ceiling
LINDUNG 24 Jam (24-Hour Protection Scheme)
Effective from 1 June 2026. Covers accidents outside working hours; funded by employee contributions, with the employer responsible for deducting them
Monthly Tax Deduction (PCB / MTD)
Employers deduct employees’ personal income tax each month and remit it to LHDN by the 15th of the following month
HRD Corp Levy
Human Resources Development Fund levy, applicable to employers of certain sizes and industries (where applicable)

A few practical tips:

 
Employers must generally register with EPF, SOCSO and other agencies within 30 calendar days of hiring their first employee;
 
Contributions are generally due by the 15th of the following month; late payment attracts penalties or interest;
 
Foreign employees also have contribution arrangements, and the rules have been adjusted in recent years; check the latest requirements before hiring a foreign employee;
 
From June 2026, more social-security deduction items apply to employees’ pay; companies should update their payroll systems and employee communications accordingly;
 
Actual EPF contributions must be calculated using the official contribution table, not by simply multiplying a percentage.

— Foreign Employees

Employing Foreign Nationals

Foreign professionals generally need to apply for an Employment Pass (EP) or another applicable work pass. Depending on the circumstances, the application may also involve:

 
Registration or approval with the Expatriate Services Division (ESD);
 
Licences or approvals from the relevant industry regulator;
 
Approval from the Labour Department;
 
MyFutureJobs requirements (where applicable).

Employment Pass Salary Thresholds

From 1 June 2026, all new and renewal applications must meet higher minimum salary requirements:

CATEGORY
MONTHLY SALARY
SUCCESSION PLAN
MAX. VALIDITY
Category I
RM20,000 and above
Not required
Up to 10 years
Category II
RM10,000 to RM19,999
Required
Up to 10 years
Category III (general sectors)
RM5,000 to RM9,999
Required
Up to 5 years
Category III (manufacturing)
RM7,000 to RM9,999
Required
Up to 5 years

The implementation date for the succession plan has been postponed to 1 January 2027. In May 2026, the relevant authorities (including MyXpats Centre and MDEC) issued a notice on this and encouraged companies to start preparing and organising the relevant documents before January 2027. Accordingly, companies submitting Category II and Category III applications before 1 January 2027 may temporarily omit the succession plan, but are advised to prepare it early.

Implications for overseas companies: companies planning to second foreign managers or technical staff should, at the landing-planning stage, work out whether the foreign employees’ salary levels, the company’s capital and its business type meet ESD requirements, and allow enough time for pass approval.

— Practical Tips

Practical Employment Management Tips

 
Sign a written employment contract before the employee starts, setting out the position, salary, working hours, leave and probation terms;
 
Structure pay so that basic wage is not below the minimum wage; do not count allowances as basic wage to meet the standard;
 
Pay statutory contributions monthly and keep contribution and payroll records;
 
Before hiring a foreign employee, confirm that the company’s employment eligibility meets the pass conditions;
 
When dismissing an employee or terminating a contract, follow the statutory notice period and procedure to avoid labour disputes.

— How We Help

How We Can Assist

Yingke Malaysia can help clients understand the basic employment regulations and cost components of hiring in Malaysia, explain the registration process for statutory contributions such as EPF, SOCSO and EIS, connect clients with payroll and HR service providers, and help clients understand the work pass application requirements and procedures for foreign employees. For specific employment contract terms and labour disputes, we recommend consulting a legal adviser (Y KONG, WONG AND PARTNERS) or an HR professional separately.

※This page is for general reference only and does not constitute legal, human resources or tax advice. Malaysian labour laws, the minimum wage, statutory contribution rates, work pass conditions and approval policies may change from time to time; please refer to the latest provisions of the Ministry of Human Resources, the Labour Department, EPF, SOCSO, the Expatriate Services Division (ESD), the Immigration Department and other relevant authorities. The rules that apply may differ by industry, company size and category of employee. Before making any hiring or secondment decision, please verify the latest requirements with the relevant authorities and consult a qualified lawyer or HR consultant. Yingke Malaysia accepts no responsibility for decisions made in reliance on this page or for any loss arising from it.