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Payroll and Benefits Guide Malaysia

Last updated: May 10, 2023

Currency

Malaysian Ringgit (MYR)

Employer Taxes

18.95%-22.45%

Payroll Frequency

Monthly

Employee Costs

17.2%

Capital

Kuala Lumpur

Date Format

dd/mm/yyyy

Fiscal Year

1 January - 31 December

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Contribution

Employer Payroll Contributions
12.00% – 13.00%	Provident Fund (employees under the age of 60) salary below 5,000MYR is charged at 13% and salary above is charged at 12%, foreign workers are exempt.
4.00%-6.50%	Provident Fund (employees over the age of 60)
1.75%	Social Security (SOCSO) (for workers below the age of 60 monthly salary ceiling of 5,000 MYR)
0.20%	Employment Insurance (EIS) (monthly salary ceiling of 5,000 MYR)
1.00%	Human Resource Development Fund (over 10 employees)
18.95%-22.45%	Total Employment Cost

Employee Payroll Contributions
11.00%	Provident Fund (employees under the age of 60) salary below 5,000MYR is charged at 13% and salary above is charged at 12%, foreign workers are exempt.
0.00%-5.50%	Provident Fund (employees over the age of 60)
0.50%	Social Security (SOCSO) (for workers below the age of 60 monthly salary ceiling of 5,000 MYR)
0.20%	Employment Insurance (EIS) (monthly salary ceiling of 5,000 MYR)
11.70% – 17.20%	Total Employee Cost*
Employee Income Tax
0.00%	Up to 5,000 MYR
1.00%	5,000 – 20,0000 MYR
3.00%	20,000 – 35,000 MYR
6.00%	35,000 – 50,000 MYR
11.00%	50,000 – 70,000 MYR
19.00%	70,000 – 100,000 MYR
25.00%	100,000 – 400,000 MYR
26.00%	400,000- 600,000 MYR
28.00%	600,000 – 2,000,000 MYR
30.00%	2,000,000 MYR and over

*Expat workers are subject to different contribution rates.

Employer taxes

Highest

Lowest

Employee taxes

Highest

Lowest

Minimum Wage

General

The National Wage in Malaysia is 1,500 MYR per month.
The wage increase is only applicable to companies in the private sector with five or more employees.

MINIMUM WAGE (PER MONTH)

Highest

Lowest

Payroll

Payroll Cycle

The payroll cycle in Malaysia is generally monthly with payments made on the last working day.

13th Salary

In Malaysia, it is customary to pay a 13th-month payment at the end of the year. This will be stipulated within the employment contract.

Working Hours

General

Standard working hours are eight hours per day up to a maximum of 45 hours per week, though it is common to work 40 hours per week.

Overtime

All work more than the standard working hours per week is to be paid as overtime and is regulated by the Employment Act, the employment contract, and the collective agreements. Generally, the Employment Act is used as guidance, although it is only legally relevant to manual and non-manual employees with a salary of less than 2,000 MYR.

The act states that overtime hours during the week on a working day are paid at 150.00% of the regular salary rate and overtime hours worked on rest days and weekends are paid at 200.00% of the regular salary rate.

Payment for overtime worked on public holidays is paid at a rate of 300.00% of the regular salary rate.

Leave

Annual Leave (vacation)

Paid leave in Malaysia is outlined in the employment contract as dependent upon the years of employment. This paid leave is in addition to any public holidays.
An employee within the first two years of employment is entitled to eight days of paid leave per year.

From the second to the fifth year of service, the employee is entitled to 12 days per year, which increases to 16 days for employees with more than five years of service. It is common to start with 12-15 days per year and increase with seniority. Leave is accrued from January to December.

Public Holidays

Employees are entitled to 11 paid public holidays per year, determined by the state of the worker.

Public holidays falling on Sundays are moved to a working day in lieu.

Date	Day	Holiday	Notes
1 Jan 2024	Monday	New Year’s Day
25 Jan 2024	Thursday	Thaipusam	Kaula Lumpur, Putrajaya, Selangor, major states of Malaysia
1 Feb 2024	Thursday	Federal Territory Day	Federal Territory – Capital City
10 Feb 2024	Saturday	Chinese New Year
11 Feb 2024	Sunday	Chinese New Year
12 Feb 2024	Monday	Chinese New Year	Day off in Lieu
28 Mar 2024	Thursday	Nuzul Al-Quran
10 Apr 2024	Wednesday	Hari Raya Aidilfitri
11 Apr 2024	Thursday	Hari Raya Aidilfitri
1 May 2024	Wednesday	Labour Day
22 May 2024	Wednesday	Wesak Day
3 Jun 2024	Monday	Agong’s Birthday
17 Jun 2024	Monday	Hari Raya Haji
7 Jul 2024	Sunday	Awal Muharram
8 Jul 2024	Monday	Awal Muharram – Replacement
31 Aug 2024	Saturday	Merdeka Day
16 Sep 2024	Monday	Malaysia Day
16 Sep 2024	Monday	Prophet Muhammad’s Birthday
17 Sep 2024	Monday	Malaysia Day Holiday	Day Off in Lieu
31 Oct 2024	Thursday	Deepavali
11 Dec 2024	Wednesday	Sultan Selangor’s Birthday	Selangor
25 Dec 2024	Wednesday	Christmas Day

Sick Days

Paid sick pay in Malaysia is set in the employment contract as dependent upon the years of employment and the provision of a professional medical certificate.
The amount of paid sick leave entitlement is based on the number of years of service.

If an employee has less than two years of service, they are entitled to 14 days of sick leave per year
An employee with two to five years of service will be entitled to 18 days of sick leave per year
Employees with more than five years of service are entitled to up to 22 days of sick leave per year

Workers who are admitted to the hospital are entitled to hospitalization leave of 60 days per year in addition to the regular sick leave.

Maternity Leave

In Malaysia, the statutory maternity paid leave period for employees in the private sector is 98 consecutive days (paid in full).
The maternity leave period cannot start earlier than 30 days before the due date. All maternity leave in Malaysia is only applicable to a female employee’s first five surviving children.

The female worker can resume work anytime during the 98 days, with consent from her employer & certified fit to resume work by a medical practitioner.

Paternity Leave

In Malaysia, married fathers, with 12 months of service are entitled to seven consecutive days of leave per birth, paid in full. Employers must be informed 30 days ahead of the expected due date.

Parental Leave

There is no statutory parental leave in Malaysia.

Other Leave

There is no other statutory leave in Malaysia.

Vacation Days

Public Holidays

Highest

Lowest

PAID MATERNITY LEAVE (DAYS)

Highest

Lowest

Termination

Termination Process

The termination process is standard in Malaysia and is based on labor law requirements unless an employer can provide sufficient cause for dismissal without notice.
Notice of termination must be in writing and sent to the relevant governmental authorities.

There are restrictions on terminating pregnant workers except for cases of breach of employment contract, misconduct, or company cease operation.

Notice Period

Employees are entitled to the following minimum notice periods:

4 weeks’ notice if the employee has been employed for less than 2 years on the date on which the notice is given
6 weeks’ notice if the employee has been so employed for 2 years or more, but less than 5 years on such date
8 weeks’ notice if the employee has been so employed for 5 years or more on such date

Alternatively, a payment in lieu of notice can be made by either party.

Severance Pay

In Malaysia, severance pay is mandatory if applicable, but the amount differs based on the length of service.

Ten days of severance pay at the regular salary pay rate for every year of service completed for employees within the first two years of employment
For employees who have completed between two and five years, the payment is calculated at 15 days per year of service
For an employee with five or more years of service, the entitlement is 20 days per year of service

Probation Period

The probation period in Malaysia for permanent employees is generally between 1 and 3 months. Although, the Employment Act confirms that there is no difference applicable to entitlements to employees whether they are within their probation period or not.

VISA

The employer must sponsor the visa and must be an accredited company that may hire foreign employees. The employee must be a certified foreign expert in the field they will be working. Malaysia also has a reported critical occupations list (COL), highlighting job types where there is a skills shortage within the country that supports work permits/visa applications.

In Malaysia, there are three work permit/visa types: an employment pass, a professional visit pass, and a temporary employment pass. Each type of pass has its criteria for acceptance with several stipulations that the employee must meet to qualify.

Prior approval of the director-general is needed before employing foreign employees.

The employer must notify director general within 30 days if/when foreign employee is terminated.

VAT

General

The standard rate of VAT in Malaysia is 10.00% for sales tax, 8.00% for service tax.

Version History

May 1, 2022

The monthly minimum wage increased to 1,500 MYR for companies in the private sector with five or more employees.

February 28, 2022

Payroll contributions and personal income tax rates have been updated.

January 1, 2021

The employee contribution to the mandatory Employees Provident Fund (EPF) rate has been reduced to 9%.

Questions & Answers

4 Comments

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Nor R.

3 years ago

Who is covered by the employee act or are all employees covered?

Emily Kuhnert

3 years ago

Reply to Nor R.

Hi Nor, thank you for your question. Not all employees are covered by the Employment Act. People who earn less than 2,000 Ringitt per month, manual laborers (regardless of income level), and foreign workers who are legally in Malaysia are covered. Hope this helps!

Shirin

1 year ago

If employee pays Social security fund in home country then, is there a need to pay Social Security contribution in host country?

Erez Greenberg

1 year ago

Reply to Shirin

Please be advised that the Social Security contribution is mandatory in the country where is the employment contract made. As a result, even if the employees are paying social security in their home country, they are still liable to pay social security contributions in the host country as well.

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Payroll and Benefits Guide Malaysia

Table of contents

Contribution

Employer taxes

Employee taxes

Minimum Wage

General

MINIMUM WAGE (PER MONTH)

Payroll

Payroll Cycle

13th Salary

Working Hours

General

Overtime

Leave

Annual Leave (vacation)

Public Holidays

Sick Days

Maternity Leave

Paternity Leave

Parental Leave

Other Leave

PAID MATERNITY LEAVE (DAYS)

Termination

Termination Process

Notice Period

Severance Pay

Probation Period

VISA

VISA

VAT

General

Stay up to date on payroll & employment law changes

Version History

Questions & Answers .a{fill:#838383;}.b,.d{fill:none;}.b{stroke:#838383;}.c{stroke:none;}

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Payroll and Benefits Guide in Malaysia

See how Papaya can help you automate your global payroll or EoR whilst staying 100% compliant with local labor laws

Payroll and Benefits Guide in Malaysia

Public Holidays Calendar

Questions & Answers

Payroll and Benefits Guide
in Malaysia