Importance of Employment Law in Malaysia

By establishing a mechanism for ensuring a fair and secure working arrangement between a hiring and employed team, employment laws favour both employers and workers.


New business owners can familiarize themselves with at least the basic requirements of Malaysian work laws after forming a corporation and before hiring the workers they need. Job arrangements, remuneration or salary, occupational welfare, negotiating processes, trade relations, operating hours, discrimination safeguards, benefits or pay laws, recruitment, social security, and other legal obligations should all be followed up on progressively.


Employment Act 1955: sets down the minimum compensation that applicable employers are entitled to, which it only applies to:

        • Employees with an annual wage of less than RM2,000
        • Employees who work in manual labour, regardless of their pay.
        • Employees who work in a manually driven vehicle’s service or repair
        • Employees in charge of supervising or overseeing those employees who do manual labour
        • Employees working on a ship in some capacity (subject to certain other conditions)

Industrial Relations Act 1967: governs employer-employee relations (including labour unions), as well as the avoidance and resolution of disputes.

Trade Unions Act 1959: Regulates the membership and establishment of labour unions, as well as their obligations and responsibilities.

Employees Provident Fund Act 1991: Both contractors and most workers are required to donate to a state-managed provident fund. Contributions from foreign nationals employed in Malaysia as well as domestic servants are largely voluntary.

Employees’ Social Security Act 1969: provides income insurance benefits to all workers in the case of unforeseen circumstances, such as work-related accidents. Employers and employers are allowed by the Act to pay to the fund at the amount set out in the Act.

Employment Insurance System Act 2017: In the case that a covered individual loses their job, the scheme includes some incentives and a re-employment recruitment service, and employers and staff are required to pay to the fund at the prescribed rate.

Occupational Safety and Health Act 1994: imposes broad responsibilities on workers to ensure the safety, fitness, and well-being of employees.

Minimum Wages Order 2020: based on the employee’s place of work, provides separate minimum wage amounts owed to the employee. The minimum wage rate payable to an employee who works in one of the 16 city council areas or 40 local council areas mentioned in the Order’s Schedule is 1,200 ringgit a month, or 5.77 ringgit per hour.

Minimum Retirement Age Act 2012: 60 years old is the minimum (but not mandatory) retirement age. An employer is not permitted to terminate an employee until they meet this age.

Personal Data Protection Act 2010: Personal data and confidential personal data, including employee data, are controlled.

Register a Company Malaysia

From the first day of work, Malaysian workers are entitled to the majority of the following basic benefits (as stipulated in the Employment Act 1955):

Working Hours:

            • a time of not less than 30 minutes of leisure after not more than 5 hours of continuous work
            • In a single day, you cannot spend more than 8 hours.
            • a week of no more than 48 hours

Public Holidays: There are 11 paid public holidays specified in the gazette.

Annual Leave:

            • 8 days for every 12 months of continuous service for a period of less than 2 years
            • 12 days for every 12 months of continuous service of at least 2 years but not more than 5 years
            • 16 days for every 12 months of continuous service for a period of five years or more

Paid Sick Leave:

            • where there is no need for hospitalisation
            • if the employee has been hired for less than two years, 14 days
            • if the person has worked for at least 2 years but not more than 5 years, 18 days
            • if the employee has been with the company for at least 5 years, 22 days
          • or
            • if hospitalisation is required, as determined by a licenced medical practitioner or medical officer

Retirement: Extra contributions to the Employees Provident Fund (EPF) above and above the mandatory EPF allocation are:

  • 2% for more than one year of service and less than four years of service• 3.5% for more than 4 years of service.


  • Generalist Outpatient– A business panel doctor will provide medical care and services to an individual, one legitimate partner, and their dependent children. If an individual needs medication and services by a non-panel hospital, the employee must pay first and then file a report in compliance with the Health Plan Policy.
  • Specialist Consultation– A referral letter from a business panel doctor or an In-Plant visiting doctor to a consultant is needed for Specialist Consultation. In compliance with the Health Plan Policy, the Company will pay the Specialist Consultation.
  • Dental / Optical Subsidy– According to the Health Plan Policy, employees are entitled to dental/optical services and treatment.
  • Maternity benefit– According to the Health Plan Policy, employees/spouses are entitled to Maternity Leave (pre/post-natal appointments and delivery costs)..
  • Hospitalization & Surgical benefit– According to the Health Plan Policy, employees, one legitimate partner, and their adult children are eligible for Hospitalization and Surgical benefits..

Disability/Life Insurance:

  • Total & Permanent disability: 36 x monthly basic salary.
  • Death & Loss of body part due to accident: 36 x monthly basic salary.


  • Sick Leave: 14 days per year for the first 2 years of service.
  • Maternity Leave: 60 consecutive days for birth up to 5 surviving children.
  • Paternity Leave: Male employees are eligible to 2 working days leave for the birth of their own child up to 5 surviving children.
  • Marriage Leave: 5 days leave for first legal marriage per employment.
  • Compassionate Leave: 3 consecutive working days on the death of their immediate family member.
  • Child marriage Leave: 1 day marriage of legal child.

Employee Stock Purchase Plan: Employees are eligible to participate in the Stock Purchase Plan after 90 days of employment.

Other Benefits:

  • Vehicle Purchase Interest Subsidy– The Company shall subsidize employee’s seventy percent (70%) of the interest incurred per annum. The minimum repayment period for each loan shall be 12 months and the maximum repayment period shall be 60 months.
  • Gift for Retirees– Employee will receive appreciation retirement gift from the Company when attaining the age of 60 or optional retirement age of 55 or 56 or 57 or 58 or 59.
  • Child Birth Gift– The Company will provide maternity hamper for female employees and registered spouse who are hospitalized.
  • Birthday Gift– All employees will receive greeting card & birthday gift from the Company.
  • Professional Membership– IDL employee is entitled to reimburse 100% of one professional membership per year according to his/her profession/job needs.