Japan — 9 min
Malaysia — 10 min
As a company looking to get ahead of competitors and expand your reach across new markets, you cannot afford to lose the war on talent. While some organizations may have felt safe in the more stable environment of years past, the increasingly global and quickly-changing economy has forced them to make changes and adapt quickly.
Hiring globally is one of the best steps businesses can take to remain competitive in their industry. Many global organizations are starting to consider employing in Malaysia, and with good reason. The nation is multicultural and citizens are well educated, with literacy levels of 95%. Public universities in Malaysia enroll over 500,000 students annually, most of whom study business, social sciences, and law.
Labor costs in Malaysia tend to skew higher than in other southeastern Asian countries, although they are still much lower than in other regions of the world. With such high levels of education and English literacy, Malaysia is an appealing target for companies hiring internationally.
Hiring in Malyasia comes with a multitude of benefits, but it is also a complex process. If you are hiring global employees, you must always stay compliant with local labor laws. To do this, you could launch your own business entity in Malaysia and work with local legal experts to ensure that your company pays employees, provides benefits, and stays on top of any changes in legislation. However, the costs, complexities, and time involved with this approach are immense.
There's a much easier alternative: you can simply use an employer of record (EOR) like Remote to take care of everything for you, saving you time and money, and keeping your company compliant.
In Malaysia, all employees who have worked for their employer for more than two continuous months are entitled to benefits. These include the Employees Provident Fund (EPF), Social Security Organization (SOCSO) insurance, and annual leave. Specific entitlements and eligibility criteria for employee benefits may vary depending on your company’s size, industry, and other factors.
Malaysian labor laws define an employee as an individual who has entered into a contract to perform work for an employer in exchange for compensation. The worker must be under the supervision and direction of the employer and perform work that is integral to the business. The terms of employment, such as working hours, salary, and benefits, must be specified in the employment agreement.
Malaysia is one of the most business-friendly nations in the world. However, for any company to operate or hire there, adhering to the Malaysian Employment Act is essential. This legislation outlines the mandatory benefits that you must offer your employees, including:
The duration of paid leave depends on the length of the labor relationship. The longer an employee has been at a company, the more paid time off they're entitled to.
The stipulations are as follows:
Employees with up to 2 years of employment at the company: 8 days of paid leave annually
2 to 5 years at the company: 12 days of paid leave
5 or more years: 16 days of paid leave
For maternity leave, there is a two-month minimum paid leave requirement. To qualify for this, workers need to be employed for the last four months, and with the same employer for a minimum of three months in the nine months preceding childbirth. If an employee qualifies, you are required to pay them their full salary during the leave period.
While paternity leave is not mandatory, standard practice dictates that you grant a minimum of three working days off.
Retirement contributions are automatically deducted from the employee’s monthly salary and come in two forms: the Employees’ Provident Fund (EPF) and the Social Security Organization (SOCSO). For all citizens and permanent residents of Malaysia, contributing to the EPF is mandatory. However, for non-residents and expatriates, it’s optional.
Contributions toward the EPF are made by both the employer and employee. The exact amount depends on the age and income level of the employee.
EPF salary contributions are as follows:
Employees below the age of 60 earning RM 5,000 or more: 12%
Employees below the age of 60 earning less than RM 5,000: 13%
Employees will be able to access their EPF funds from the age of 55.
EPF contributions are age and percentage-based, and are capped at around RM 69 (roughly $15) monthly.
The SOCSO and EPF benefits offered to employees should be made clear during the hiring process. Employers are required to clearly outline it in the letter of employment or offer letter.
If employees do not qualify for these retirement benefit schemes, employers are required to contribute to the Employment Insurance System.
In 2020, the government raised the monthly minimum wage for employees in Malaysia to MR 1,200 (around $270) for city council and municipal workers, and MR 1,100 (around $250) for non-council and municipal workers. Working hours in Malaysia are limited to eight hours daily and 48 hours weekly. For office work, the limit is slightly lower at 45 hours each week.
Although working hours are clear in Malaysia, there may be situations where you need employees to work longer. The government understands this and has provisions to ensure employees are fairly remunerated for overtime work.
Should an employee work beyond the set limits of 48 or 45 hours per week, employers are required to pay overtime wages. For each extra hour, employees are entitled to overtime pay at a rate of 1.5 times their regular wages.
While there are no legal requirements for insurance, employers in Malaysia are expected to provide coverage to safeguard employees. Common insurance benefits in Malaysia include:
Medical insurance for outpatient and inpatient
Personal accident insurance coverage
Along with parental leave, employees in Malaysia are entitled to sick and hospitalization leave (with approval by a medical practitioner):
Employees who have been working for less than two years are entitled to 14 days annually
Employees who have been working for two to five years are entitled to 18 days annually
Employees who have been working for over five years are entitled to 22 days annually
If an employee is hospitalized, they are entitled to up to 60 days of sick leave. During sick leave, employees are entitled to their regular pay rate.
To attract the best talent, it’s important for employers to go beyond government-mandated requirements and offer high-quality supplementary benefits. When considering what benefits to offer, there's no one-size-fits-all solution. It will depend on your company's size, industry, and what other leading companies in the region are offering.
Some popular perks and well-being benefits include:
Learning and professional development opportunities
Home office stipends
Additional paid time off (outside what is legally mandated)
Modern employees — and remote workers in particular — also expect wellbeing benefits. Such benefits are aimed at giving them a greater sense of independence and flexibility, and an overall quality of life outside of work.
Some of the wellbeing benefits workers expect include:
Freedom of movement: Give remote workers the option to relocate or work while traveling
Time flexibility: With the nature of remote work, employees do not spend time commuting and will often work across different time zones, meaning they can work more effectively outside the constraints of a 9-to-5 schedule
If you operate a small business with only a few employees and a small budget, you can still offer appealing benefits. Remote covers small business benefits in our online guide, with ideas including food and grocery assistance, fitness memberships, and personal development budgets. Such perks demonstrate that your company is focused on the welfare and growth of your employees as well as their time and salary.
There are many upsides to having an international team. One that stands out is the resiliency that it gives your company. Should there be a challenge affecting operations in one office, you’ll have other team members around the world to keep things going. Your company will also increase its global presence (opening up opportunities in new markets) and gain a broader range of perspectives to enrich your culture.
However, managing the benefits of international employees can be challenging. One requirement in Malaysia is that businesses must have a legal entity in the country in order to hire compliantly.
Fortunately, there’s a simple solution. Remote’s EOR service allows you to easily set up and manage globally distributed teams — including market-specific employee benefits.
With our team of global employment experts, you won’t have to worry about the complexities of managing global HR operations, either. Remote handles them for you, including:
Managing payroll and time off
Handling local employment taxes
Keeping you compliant with statutory and supplementary benefits
Designing competitive and equitable global compensation packages
Setting up teams in Malaysia (and other global markets) can give you access to top talent and raise your brand’s global awareness. However, it’s vital to get your global recruitment and employee benefits right. Visit Remote to learn more about working with an EOR in countries like Malaysia and beyond, so that you can compliantly scale your business — and hire and manage international team members in top markets across the globe.
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