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Malaysia is an economic powerhouse of Southeast Asia, and is ranked one of the easiest countries in the world for doing business. With a highly educated populace and close trade relationships with both other Asia-Pacific nations and Europe, Malaysia is a prime destination for international expansion and hiring.

While the Malaysian system of commercial and labor law is closely related to English common law and relatively business-friendly, it is worth seeking the advice of a global partner to ensure full compliance with all local laws.

Facts & Stats

Population

33,871,400 (16.6M labor force)

Capital City

Kuala Lumpur

Languages Spoken

Malay (67th most spoken globally), English (1st) Cantonese (23rd)

Currency

Malaysian Ringgit (MYR)

GDP per capita

$11,371

Ease of Doing Business

12th in the world

Minimum Wage

MYR 1,500/month

Average Wage

MYR 6,000/month

Paid Leave

8 days

Malaysia: Business Environment

A founding member of the Association of Southeast Asian Nations (ASEAN), Malaysia remains a leading regional power. Malaysia’s business environment is noted for its openness and stability. The country ranked 12th in the most recent World Bank Ease of Doing Business survey and 27th in the World Economic Forum’s Global Competitiveness Report. Malaysia’s workforce is highly educated and although Bahasa Malaysia or Malay is the official language, English is used widely in business settings. Successive Malaysian governments have focused on the continued upskilling of the workforce and diversifying the economy. An emphasis on developing the knowledge-based and service sectors as well as high technology manufacturing is moving Malaysia closer towards becoming a high-income country.

Business outlook in Malaysia

The Malaysian economy has recovered strongly from the economic shock of the Covid-19 pandemic. The lifting of restrictions on movement in June of 2021 began the economic uptick, with GDP growing by 3.1% in 2021. Following two successive quarters of economic growth in the first half of 2022, both the Central Bank of Malaysia and the World Bank revised their growth forecasts. The World Bank’s headline GDP forecast for 2022 revised upward from 5.5% to 6.4%.

Business regulation in Malaysia

Malaysia’s labor laws are primarily covered under the Employment Act (1955), which sets out the minimum terms of employment for individuals. The minimum terms of employment cover aspects including; wage rates, hours of work and various forms of leave such as annual and maternity leave. Other notable pieces of legislation relating to employment law include; the Employees’ Social Security Act (1969), the Employees Provident Fund Act (1991), and the Employment Insurance System Act (2017).

Although the Employment Act establishes certain minimum terms, employment relationships are primarily governed by employment contracts. Trade unions exist in Malaysia and negotiate collective agreements on behalf of employees working for large enterprises in ‘dominant’ industries, such as manufacturing, organized agriculture and professional services.

Business culture in Malaysia

Malaysia’s diverse population comprises Malaysian, Chinese, and Indian among other nationalities and the country follows Muslim traditions that extend to the workplace. As with other Asian countries, workplaces in Malaysia tend to follow strict hierarchies based on age and role. For example, in business meetings, it’s customary for higher-ranking attendees to introduce themselves first and take their seats before others.

Negotiations and decision-making may take longer than you are used to. Malaysians prefer to avoid instances where one party may be seen to lose face over outright rejections of proposals or disagreements in opinions. As well as patience, an ability to be subtle and ask open-ended questions is useful in business settings.

Recruiting employees in Malaysia

Recruiting employees in Malaysia — Overview

When hiring employees in Malaysia, it’s crucial you stay in compliance with various aspects of Malaysian employment law. Various processes require advanced planning and in-country know-how, for example, it’s compulsory that employers register all new employees with Malaysia’s state pension scheme, the Employee Provident Fund (EPF), within the first week of their employment.

By partnering with Horizons as your Malaysia PEO you gain access to our in-house recruitment team. As experts in Malaysian employment law, we ensure compliance at every phase of your hiring project, from the sourcing, recruiting, and onboarding of new employees in Malaysia to the subsequent handling of HR and payroll functions.

There are a number of recruitment trends emerging in Malaysia. The events of 2020, particularly the restrictions on movement, led to some Malaysian employers implementing entirely digital recruitment processes and including remote work clauses in employment contracts.

Most important recruitment tools in Malaysia

The following job portals are the most popular methods of sourcing and qualifying talent in Malaysia.

Jobstreet
Jobstreet.com.my
Used by over 90,000 employers and with over 3 million active job seekers, Jobstreet is Malaysia’s most popular job platform. The platform offers a range of employer branding services.

Hiredly
my.hiredly.com
Previously known as Wobb, but rebranded as Hiredly in 2021 the platform helps top Malaysian companies connect with rising talent. The platform consists of a job portal and a headhunting solution, both of which cater to a wide range of specialisms.

LinkedIn
LinkedIn.com
Of its 6.7 million users in Malaysia, 65% are between the ages of 25 and 34 years of age. LinkedIn’s user demographics are relevant, particularly as younger Malaysian job seekers become more selective about the employers they choose to work with. In this regard, LinkedIn serves as a powerful tool for employer branding.

Interviewing candidates in Malaysia

Interviewing candidates in Malaysia — Overview

Although in-person interviews are the preferred method for assessing job candidates in Malaysia, virtual or online interviews are increasingly popular. The most common format for job interviews is a one-on-one interview but panel interviews are used, particularly when hiring for more senior roles.

Can I ask the candidate’s previous salary in Malaysia?

The short answer is yes. From a legal standpoint, there is currently no legislation that bans employers from asking candidates about their salary history.

It should be noted, however, that there is an ongoing debate in Malaysia around the ethicality of asking candidates about their salary history or requesting previous pay slips.

What is the typical salary increase at a new job in Malaysia?

Skilled recruiters and human resource professionals in Malaysia tend to be aware of the current market standards for a particular role. In Malaysia, the typical salary increase usually falls within a range of 10 to 30% increase on the previous salary.

Onboarding employees in Malaysia

Onboarding employees in Malaysia — overview

The onboarding process is the chance to assimilate new employees and set them up for success in their roles. Aside from ensuring new employees start building their understanding of company policy and get the chance to introduce themselves to relevant colleagues, Malaysian employment law sets out some mandatory tasks that must be completed as part of the onboarding process.

For example, within the new employee’s first week, employers must register the details of new employees with mandatory social insurance programs. Malaysia has various social insurance programs that employers are required to contribute to, including:

Employee Provident Fund or EPF (the state retirement fund);
Social Security Organisation or SOCSO (insurance coverage for injury and invalidity);
Employment Insurance Scheme or EIS (unemployment protection & reemployment training).
Companies that employ 10 or more Malaysian employees are also required to register with the Human Resource Development Corporation. The HRD Corp collects a levy that funds upskilling and modernization programs.

Best remote working tools to use in Indonesia

Increasingly, Malaysian employment contracts include remote working or work-from-home clauses. A 2021 survey conducted by EY found that 9 out of 10 Malaysian employees want increased flexibility in where they work.

There has been considerable growth in the use of remote working tools such as videoconferencing and work management platforms that facilitate collaborative working.

Slack is an app designed specifically for workplace communications. The app is popular amongst remote teams, mainly for its clean user interface that allows users to send instant messages, share files and easily search logs of previous messages.
In terms of video conferencing solutions, both Zoom and Webex are popular in Malaysia.
Asana is a work management platform that allows managers to map out the various steps that make up a workflow in visual dashboards. The platform is popular with Malaysian employers employing distributed teams.

Holiday season in Malaysia — 2023

The Employment Act (1955) makes various forms of leave minimum entitlements for employees in Malaysia.

Annual leave is calculated on a pro-rata basis. Employees with…

Up to 2 years worth of service with the same employer are entitled to a minimum of eight days’ paid leave per year;
Between 2 and 5 years worth of service earn a minimum of 12 days’ paid leave;
More than 5 years worth of service earn a minimum of 16 days’ paid leave.

On top of paid annual leave, the Employment Act also entitles Malaysian employees to take 11 public holidays per year. Malaysia celebrates public holidays at both a state and national level.

5 public holidays are celebrated nationwide by all employers.

Holiday Schedule in Malaysia [2023]

Malaysia has a range of national public holidays that are celebrated annually. In 2023 these holidays are:

Date	Holiday name
22 Jan, 2023	Lunar New Year’s Day
23 Jan, 2023	Second Day of Lunar New Year
22 Apr, 2023	Hari Raya Puasa (Tentative Date)
23 Apr, 2023	Hari Raya Puasa Day 2 (Tentative Date)
1 May, 2023	Labour Day
4 May, 2023	Wesak Day
5 Jun, 2023	The Yang di-Pertuan Agong’s Birthday
29 Jun, 2023	Hari Raya Haji (Tentative Date), Hari Raya Haji holiday (Tentative Date)
30 Jun, 2023	Hari Raya Haji (Day 2) (Tentative Date)
19 Jul, 2023	Muharram/New Year (Tentative Date)
31 Aug, 2023	Malaysia’s National Day
16 Sep, 2023	Malaysia Day
28 Sep, 2023	The Prophet Muhammad’s Birthday (Tentative Date)
12 Nov, 2023	Diwali/Deepavali
25 Dec, 2023	Christmas Day

To meet the 11-day limit, the remaining 6 days of public holidays are determined by the employer who chooses which public holidays to celebrate from a list of gazetted public holidays. Malaysia is an incredibly diverse country with multiple ethnicities and religions represented, so employers and employees can agree to certain public holidays for religious or other reasons.

What is the typical salary increase employees in Malaysia expect?

Generally, Malaysian employees expect a salary increase in line with, or slightly above, the rate of inflation. Mercer, an asset management firm, is predicting a median salary increase of 5% for Malaysian employees in 2023.

FAQs

Should I hire freelancers or employees in Malaysia?

The decision will depend on your business’s circumstances and the objectives for your expansion into Malaysia. With the rise of remote work, some employers in Malaysia have been trialing alternative contracts, however, such agreements generally don’t provide the same level of security, for both employer and employee, as permanent contracts. Contact our in-country experts for a free consultation on your Malaysia hiring project.

Can I hire foreigners in Malaysia?

Yes, provided you have obtained the relevant Malaysian work visas for your foreign workers. There are several types of work visas for foreign citizens planning to work in Malaysia. The process of obtaining a Malaysian work visa is complicated by protections on certain industries and labor markets; essentially, Malaysian employers planning on hiring foreign workers have to demonstrate that the role cannot be filled by a Malaysian citizen. Our Malaysia immigration experts can offer reliable advice and tailored outsourcing services to support you through Malaysia’s immigration process.

How do I open a Malaysia subsidiary?

Foreign organizations can establish a branch office in Malaysia by registering with the Companies Commission of Malaysia (SSM). The registration process is extensive and can incur a fee of MYR70,000. Alternatively, businesses looking to expand into Malaysia can opt to partner with Horizons who act as a single point of contact handling everything from PEO, immigration solutions, recruitment, and payroll management.

How do I hire employees in Malaysia?

There are several ways to go about hiring employees in Malaysia, from online job portals to recruitment agencies. However, these types of individual services are restrictive in that the service offering is limited. Instead, businesses looking to expand into Malaysia efficiently can opt to contract a Malaysia PEO that can also source, recruit and onboard employees whilst acting as the legally compliant Employer of Record.

Hiring in Malaysia, Made Easy

Your business can easily hire employees in Malaysia without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 180+ countries worldwide. All you need to do is focus on your business.

Success stories from businesses we’ve helped enter and grow in new markets.

Client Testimonials

"As a seed-stage, London-based startup, we were initially hesitant to expand internationally due to the administrative workload involved. Horizons completely took the headache out of the process, allowing us to hire a team of software engineers in Germany."

Gabor SzedlakCo-founder & COO

"I truly appreciated the thoroughness and the professionalism of Horizons personnel while we hired internationally with them. When they advised our international expansion, they spoke confidently and were knowledgable on all subject matters pertaining to international employment."

Gary PaskyVice President of Software Development

"On deciding to begin commercial activities in Asia Pacific, we needed a provider to handle the employment and remuneration of our workforce. With Horizons the result was fast, efficient, and fit-for-purpose. We recommend Horizons as an EOR provider.”

Chris MorrellManaging Director

"The collaboration with the Horizons team is excellent. Both our local employee as well as our HQ in Germany are more than pleased with the support provided and the simplicity of the service. We can highly recommend the Horizons solution to anyone."

Christoph EngelbertCo-Founder & CTO

"We needed an EOR that could provide expert support for payroll in APAC. We are pleased with Horizons’ expertise and the fact that they are flexible, responsive, and easily accessible from Belgium. They were able to provide services within the short timeline we required."

Katia FlamandHuman Resources

Horizons has been very effective in providing our company support in all the administrative procedures, sometimes complex, required by the Singaporean administration.

Gerald iannoneSales Director

Horizons’ team provided a superb service from start to finish, making a complex process a simple one. Everything was taken care of in an efficient and accurate manner, with quick communication whenever required. Highly recommended and would use again in the future if the need arises.

Philipp RinbergerManaging Director

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Hire Employees in Malaysia — Overview