Boasting a total of 16 Free Trade Agreements (FTAs), Malaysia is a potential market of 4 billion consumers. Business establishment costs in the country are more favourable than in the more highly developed nations of South-East Asia. A diverse market, cheap labour, a digital economy and a focus on technology-driven growth make Malaysia an attractive business destination.
Work Permit/Residence Permit for Foreign Nationals
Malaysia allows businesses to recruit foreign nationals in five sectors only – manufacturing, construction, agriculture, plantation and services. Applicants must be between 18 and 45 years of age, certified as healthy by a recognised health centre, and registered with the Immigration Department of Malaysia, in their home country. Foreign nationals can work for up to 10 consecutive years, although those registered under the 6P program are permitted only 3 successive years.
Employment contracts
A “contract of service” is a detailed document for hiring employees in Malaysia. It includes numerous details, of which the most important ones are:
- Responsibilities of the employee or the job role.
- Duration of employment (if not mentioned considered permanent).
- Remuneration and benefits.
- Working hours and overtime.
- Work location (if not applicable, it should be specified).
- Leave.
- Confidentiality clauses.
- Contract termination terms and notice period.
Working Hours and Overtime
Malaysia has a five-day week with eight working hours per day. Employees are entitled to at least a 30-minute break for every 5 consecutive hours of work. An employee can work for a maximum of 10 hours in a day and 45 hours in a week.
Minimum Wage
Malaysia launched the Progressive Wage Policy (PWP) as a labour market reform to raise income levels in the country. Under this scheme, the minimum wage, effective February 2025, will be RM 1,700 ($383).
Cost of Living
Excluding rent, the average cost of living in Malaysia for an individual is RM 2,268.20 ($510.50) while for a family of four, it is RM 8,042.10 ($1,810).
Vacation Allowance
Employees are entitled to a varying number of vacation days depending on the duration of their employment with the organisation:
- 8 days per year in the first 2 years
- 12 days per year for 2 to 5 years of employment
- 16 days per year for over five years of employment.
Note that the year is calculated as 12 months from the date of joining. Leave not used by the employee can be carried over to the following year or compensated for with regular pay, equal to that of the number of leave days not taken.
Separate allowance for sick leaves
- 14 days per year: First 2 years of employment
- 18 days per year: 2 to 5 years
- 22 days per year: Over 5 years.
Sick leave is calculated on a calendar-year basis.
Termination
Both the employer and employee are entitled to terminate the contract with a notice period equal to the duration mentioned in the employment agreement. If the employment agreement does not mention the notice period, the government has set varying periods depending on the years completed with the organisation.
Notice Period
- 4 weeks: Up to 2 years of employment.
- 6 weeks: 2 to 5 years of employment.
- 8 weeks: Over 5 years of employment.
If either the employer or employee wants a waiver of the notice period, the other party is entitled to a monetary compensation equal to the pay for the notice period.
Legislative Initiatives for 2025
Malaysia has recently launched a tax-free scheme for the newly opened special financial zone in Johor. Under this scheme, family offices in the Forest City Financial Zone (FCSFZ) will be liable to 0% tax for the first 10 years. The eligibility criteria include at least RM30 million ($6,746,228.43) worth of assets. Additionally, foreign technology and global services businesses are liable to pay corporate tax of 0% to 5% of their income.
How Access Financial Can Help
Access Financial helps corporate clients, recruitment agencies and professional contractors mitigate tax liabilities, minimise administration load, ensure compliance, and boost take-home pay while fully subscribing to Malaysian labour laws. Our EOR and Employed solutions include comprehensive wage and employee management services.
Please speak to our team today!
🌏 Website: www.accessfinancial.com
📩 Email: [email protected]
☎ Phone:
Switzerland: + (41) 22 365 4620
UK: + (44) 20 7017 3110
Cyprus: + (357) 25 820 640
Luxembourg: + (352) 621677847
Germany: + (49) (6105) 4074016
India: + (91) (0120) 682 9432
UAE: + (971) 503075121
China: + (86) 21 5269 8801
Malaysia: + (601) 66999095
Email: