Malaysia Legislation

Malaysia Legislation

MY03

 

Malaysia is a very attractive location for businesses, a more cost effective alternative to Singapore. The country's diverse nature also makes it easier to find the right talent for your workforce making it a great place for business ventures. However, dealing with people from so many backgrounds and ethnicities can be a challenge. To help companies prepare themselves for business, Links created legislative page of the main employment laws and best practices in Singapore. Please note that all the information listed below are to be used as a general guideline, for more detailed accounts of laws and regulations, please visit the official governmental websites.

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Company Setup


Company Registration

To register a company in Malaysia, the company need to register under SSM (Suruhanjaya Syarikat Malaysia) and every company needs at least one director who is at least 18 years of age and Malaysia resident.

Requirements to register a sole proprietorship or partnership are:

  • Owner/partner must be a Malaysian Citizen or Permanent Resident of Malaysia.
  • Aged 18 years and above.
  • Business must be carried out in Peninsular Malaysia or Federal Territory of Labuan.

For more information, visit page https://www.nbc.com.my/facts-for-registering-a-company-in-malaysia.html

(Source: Suruhanjaya Syarikat Malaysia)



Tax Registration

Every new company setup must apply for tax register to get tax reference number and this can register via e-Daftar website.

Steps as follow below:

  1. To fill in information in LHDN online registration form (http://edaftar.hasil.gov.my/dafc.php).
  2. Upload Sijil Perakuan Pemerbadanan Syarikat and Section 14 - Superform & Particulars of director/officer.

Reminder: All documents need to be submitted within 14 days from the date of application, otherwise, the e-Daftar application will be cancelled.

For more information, visit page http://edaftar.hasil.gov.my/indexBI.php


(Source: LHDN Malaysia)



Bank Account set-up

To open a corporate bank account in Malaysia, banks will generally require the following items:

  1. Account application forms signed by the authorized people.
  2. Authentic copies of the following documents:
    • A resolution by the board of directors approving the opening of corporate bank account(s)
    • Super Form
    • Constitution
    • Registration notice
  3. Copies of passports or NRIC and proofs of residential addresses
  4. Copy of Certificate of Incumbency of the holding company, an official document that lists the names of incumbent directors and officers within an organization, and their corporate position within it.

Depending on the bank, additional documents may be required, so make sure to check carefully with the local bank so you can prepare all the necessary documents.

 

Social Security & Mandatory Pension Schemes

For Malaysia residents, every employee and employer is obliged to pay a certain amount of the employee's monthly wage into 3 types of social funds body which are Employee Provident Fund (EPF), Social Security Organization (SOCSO) & Employment Insurance System (EIS).

For more information:

Employee Provident Fund (EPF) : http://www.kwsp.gov.my/portal/en/web/kwsp/home
Social Security Organization (SOCSO): https://www.perkeso.gov.my/index.php/ms/
Employment Insurance System (EIS): https://www.perkeso.gov.my/index.php/ms/

 



 

Employment Law


Work Permits

Any foreign national who is not a citizen of Malaysia intending to enter and reside in Malaysia as a permanent resident may apply for an Entry Permit in accordance with Section 10, of the Immigration Act and Regulation 4, Immigration Regulations 1963. An Entry Permit is issued is in the form of document.

http://www.imi.gov.my/index.php/en/entry-permit.html

If you are engaging foreigners to work, term & conditions as follow: http://www.imi.gov.my/index.php/en/foreign-worker.html

(Source: Immigration Department of Malaysia)

 

Minimum Wages Permits

The current minimum wage is RM1, 100 for those in the Peninsular Malaysia and RM920 for Sabah, Sarawak and Labuan.

https://www.3ecpa.com.my/resources/human-resources-immigration/summary-of-employment-laws-in-malaysia/

MINIMUM WAGES RATE

           (As per Guidelines on the Implementation of the Minimum Wages Order 2018 [P.U (A) 265/2018])

Monthly Daily Hourly
RM 1,100 Number of working days in a week RM 5.29
6 RM 42.31
5 RM 50.77
4 RM 63.46

 (Source: http://www.nhrc.com.my/minimum-wages#.XK1gVSgzbIU )

 

Maximum Working Hours

The Malaysian Employment Act defines the work weeks as 48 hours, with a maximum of 8 working hours per day.

 

Paid Annual Leave

Annual leave entitlement depends the years of service with an employer. One’s years of service begins from the day the employee starts working with the employer.

Year of Service Days of Leave
< 2 years  8
> 2 years and < 5 years 12
> 5 years and more 16

 

 

 

 

 

 (Source: https://www.ilo.org/dyn/natlex/docs/WEBTEXT/48055/66265/E55mys01.htm#c60e)

 

Rest Day

  1. Employer must provide 1 rest day per week of one whole day.
    • A rest day comprises 1 whole day (midnight to midnight).
    • Unless under exceptional circumstances that’s agreed upon, an employer cannot compel their employees to work on a rest day.
    • An employee who is required to work on a rest day shall be paid one additional day wages at his ordinary rate of pay. 


(Source: https://www.ilo.org/dyn/natlex/docs/WEBTEXT/48055/66265/E55mys01.htm#c59)

 

Termination

  1. Advance notice in writing is required as per agreed terms in employment contract. The notice period can be off setted with annual leave.
  2. Termination without notice will require pay compensation in lieu of notice.
  3. If termination is due to misconduct, employers must hold an inquiry before taking any disciplinary action.
  4. Employers are not allowed to terminate an employee during their maternity leave unless it is due to a closure of the business.

(Source: http://www.mylabourlaw.net/quick-guides/33-termination-and-lay-off-benefits.php )

 

Payment for overtime work & work on rest day & Public Holiday

The following overtime payments apply to anyone with a monthly salary below RM2,000:

  1. Normal working days: One-and-a-half times the hourly rate of pay
  2. Rest Day: Two times the hourly rate of pay
  3. Public Holiday: Three times the hourly rate of pay

(Source: www.mohr.gov.my)

 

Work on rest day

(a) In the case of an employee employed on a daily, hourly or other similar rate of pay who works on a rest day, he shall be paid for any period of work—

  • which does not exceed half his normal hours of work, one day's wages at the ordinary rate of pay; or
  • which is more than half but does not exceed his normal hours of work, two days' wages at the ordinary rate of pay.

(b) In the case of an employee employed on a monthly rate of pay who works on a rest day, he shall be paid for any period of work

  • which does not exceed half his normal hours of work, wages equivalent to half the ordinary rate of pay for work done on that day; or
  • which is more than half but which does not exceed his normal hours of work, one day's wages at the ordinary rate of pay for work done on that day.

(c) For any work carried out in excess of the normal hours of work on a rest day by an employee mentioned in paragraph (a) or (b), he shall be paid at a rate which is not less than two times his hourly rate of pay.

(d) In the case of an employee employed on piece rates who works on a rest day, he shall be paid twice his ordinary rate per piece.

 

Work during Public Holiday

  1. For any overtime work carried out by an employee on monthly, weekly, daily, hourly in excess of the normal hours of work on a paid public holiday, the employee shall be paid at a rate which is not less than three times his hourly rate of pay.
  2. For any overtime work carried out by an employee on piece rates, be paid twice the ordinary rate per piece in excess of the normal hours of work on any paid holiday, the employee shall be paid not less than three times the ordinary rate per piece.
  3. An employee who works on a holiday shall be entitled to a travelling allowance for that day if payable to him under the terms of his agreement with his employer but such employee shall not be entitled under this subsection to receive an increased rate of any housing allowance or food allowance.

(Source: https://www.ilo.org/dyn/natlex/docs/WEBTEXT/48055/66265/E55mys01.htm#c59 )



Severance Payment & Long Service Payment

Employees who have served the company for at least 12 months are eligible for retrenchment benefits.

  • An employer is liable to pay termination/ lay-off benefits calculated in accordance with regulations of provisions to an employee who has been employed under a continuous contract of service no less than twelve months under specific conditions.

The amount of severance payment an employee is entitled to is subject to the provisions of these regulations. In any case it shall not be less than:

Employer must process this payment to employee no later than 7 days of termination date.

(Source: http://www.social-protection.org/gimi/RessourcePDF.action;jsessionid=yvh4FMXCFUuLGtTD0e_xxRCZ9bQwmNm4lyMKacRlOha5rQBOGNiv!2015759462?id=40981

 



 

Employees


Benefits In Kind

Employers have a duty to report the value of BIK provided to employees in the respective employees’ EA form as well as the company’s E form annually.

Tax are collected from employees through compulsory monthly deduction from remuneration by the 15th of the following month under the Monthly Tax Deduction (MTD) system.



Share Options

Gains and profits arising from Employee Share Option Scheme (ESOS) is subject to tax.

If the share option exercised by the employee is received in the form of cash and not shares, tax will be imposed on the date the option is exercised.

Employer must ensure MTD for the perquisite is calculated based on the Additional Remuneration Formula in the month the perquisite is received.

MTD Calculation for ESOS refer to website below:

(Source: http://www.hasil.gov.my/bt_goindex.php?bt_kump=50&bt_skum=1&bt_posi=1&bt_unit=8&bt_sequ=4&bt_lgv=2)

 

New Employees

For every new employees, you are required to register for tax number, EPF, SOCSO & EIS for monthly contribution.

In order to register these statutory board, there are few forms require to fill in and submit over the statutory board counter.

  1. EPF: http://www.kwsp.gov.my/portal/en/employers/employers-responsibility/forms-related-to-employer
  2. SOCSO: https://www.perkeso.gov.my/index.php/en/social-security-protection/employer-employee-eligibility/employer-employee-registration
  3. EIS: https://www.perkeso.gov.my/index.php/en/our-services/forms/employment-insurance-system-eis
  4. Tax: http://edaftar.hasil.gov.my/indexBI.php


Discrimination Laws

Ministry Of Human Resources (MOHR) is a ministry of the Government of Malaysia that is responsible for skills development, labour, occupational safety and health, trade unions, industrial relations, industrial court, labour market information and analysis, social security.

Employers are expected to follow the guideline from Ministry Of Human Resources (MOHR).

(Source: http://www.mohr.gov.my)
 





Statutory Benefits


Maternity Leave

According to the Malaysia Employment Act, every female employees shall be entitled to 60 days of maternity leave subject to all maternity leave requirements in the Malaysia Employment Act.  

Maternity Leave entitlement for case below:

  • Benefit is applied in case of miscarriage or medical termination of pregnancy (provided that at least 22 weeks of pregnancy).
  • Benefits is not applied if it is a voluntary termination.
  • Any rest day or public holiday and sick leave that falls due during maternity leave is counted as part of the maternity leave and will not give rise to any additional leave or payment.
(Source: https://www.ilo.org/dyn/natlex/docs/WEBTEXT/48055/66265/E55mys01.htm#p9 )

 

Paternity Leave

Male employees are eligible to 2 working days leave for the birth of their own child up to 5 surviving child.



Sickness

Malaysia employees who have completed their probation are entitled to paid sick leave.

  1. Employees are entitled to sick leave where no hospitalization is necessary of:
    Year in Service Minimum Entitlement
    1st to 2nd 14
    3rd to 5th 18
    6th and above 22
  2. of sixty days in the aggregate in each calendar year if hospitalization is necessary, as may be certified by such registered medical practitioner or medical officer:
    Provided that the total number of days of paid sick leave in a calendar year which an employee is entitled to under this section shall be sixty days in the aggregate;
    And provided further that if an employee is certified by such registered medical practitioner or medical officer to be ill enough to need to be hospitalized for any reason whatsoever, the employee shall be deemed to be hospitalized for the purposes of this section.

(Source: https://www.ilo.org/dyn/natlex/docs/WEBTEXT/48055/66265/E55mys01.htm#c60f)

 





Tax


Financial Filing

The financial filing is counted from January to December.


Tax Payment to Authority

Tax payments should be processed electronically.  

Annual Employer Returns

EA form & E form

Submission Methods

LHDN E-Portal

 





Payments


Bank Accounts and Paying Salaries

Salaries are paid electronically via giro through employee bank accounts by producing a file and sending it to the bank.  A local in-country bank account is required.

 

13th Month and Bonus Payments

Bonuses are treated as ‘Additional Wages’ along with commissions etc.  

The Annual Wage Component is made up of the Annual Wage Supplement (AWS) and any other annual bonuses.

 

Timetable

Period covered – January - December.

Employer is to complete E & EA form provide to employees by 1st March each year.  Employees are to then file returns not later than 30th April each year.

 

Submission Methods

LHDN E-Portal

 





Local Information


Malaysia Public Holidays 2019

Public Holiday in Year 2019 may differ depending on the state’s calendar. Make sure to track according to the location in question.

https://publicholidays.com.my/2019-dates/

 

Summer / Winter Working

Business closed follow Kuala Lumpur Public Holiday. Most businesses are closed for 2 days during Chinese New Year & Hari Raya.


 

Local office working hours and Time Zone

General Working Hours: 08:30-17:30

Standard time zone: UTC/GMT +8 hours

 
 
 
 
 
 
 
 

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