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Labor law
in Malaysia.

SALARY PAYMENT IN Malaysian Ringgit (MYR, RM)

CONTRACT LANGUAGES Malay / English

PAYROLL TAX 13.22%

PAYROLL CYCLE Monthly

TIME TO HIRE 24 hours

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Labor law in Malaysia – Overview

The key piece of legislation relating to Malaysia’s Labor Law is the Employment Act (1955). Covering statutory benefits and entitlements such as; working hours; wages & overtime pay; and time off, the Employment Act broadly governs the terms and conditions of employment in Malaysia. 

The Industrial Relations Act (1967) is also central to Malaysia’s labor law, providing the means to deal with trade disputes and matters arising between employers, workmen and trade unions.

Notice period laws in Malaysia

Dismissals in Malaysia

Employees are entitled to the following minimum notice periods:

Dismissal Notice (or immediate termination + payment in lieu):

  • 4 weeks’ notice if the employee has been so employed for less than 2 years;
  • 6 weeks’ notice if the employee has been so employed for 2 years or more, but less than 5 years;
  • 8 weeks’ notice if the employee has been so employed for 5 years or more.

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

Other than in extraordinary circumstances, resigning employees are required to give notice to their employer:

During and after probation: 

  • 0 to 2 years employment – 4 weeks
  • 2 to 5 years employment – 6 weeks
  • 5+ years employment – 8 weeks

Resignations in South Malaysia

Resignation periods for employees in Malaysia are exactly the same as the required notice periods for employers, where there is the same length of employment.

Severance laws in Malaysia

The Employment (Termination and Lay-Off Benefits) Regulations 1980 entitles employees who have been employed for 12 months or more and receive wages of up to RM4,000 per month to the following minimum statutory severance payments:

  • 0 to 1 year employment – n/a
  • 1 to 2 years employment – 10 days salary
  • 2 to 5 years employment -15 days salary
  • 5+ years employment – 20 days salary

Hiring in Malaysia, Made Easy

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FAQs

The Employment Act (1955), The Industrial Relations Act (1967), and The Employment (Termination and Lay-Off Benefits) Regulations 1980 are key pieces of legislation relating to employment law in Malaysia. 

Yes, it is possible to terminate an employee’s contract during the probationary period, however, employers must provide “just cause and excuse.” The Industrial Relations Act (1967) prohibits Malaysian employers from terminating a probationer at their “pleasure and will.”
Employers must provide a notice period of 4 weeks when terminating employees who have been employed for less than 2 years. 

Just as employers can terminate employment agreements during the probationary period, employees can resign during their probationary period. Employees who have been employed for less than 2 years should provide a minimum notice period of 4 weeks, unless otherwise stated on the employment agreement. 

Companies in Malaysia should ensure they implement a proper internal dismissal procedure/due inquiry process. For example, employers should issue a warning letter that shows the cause for the dismissal. Outside extraordinary circumstances, employers are required to provide the notice period agreed in the employment contract.

Note that the Employment (Termination and Lay-Off Benefits) Regulations 1980 entitles employees who have been employed for 12 months or more certain minimum statutory severance payments.

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