What are the statutory contributions for employees and employers in Malaysia?
Employee Income Tax
The Malaysian tax system applies a progressive tax structure, with rates as follows:
| Taxable Income | Tax Rate |
|---|---|
| MYR 5,000 | 0% |
| MYR 5,000 – MYR 20,000 | 1% |
| MYR 20,000 – MYR 35,000 | 3% |
| MYR 35,000 – MYR 50,000 | 8% |
| MYR 50,000 – MYR 70,000 | 13% |
| MYR 70,000 – MYR 100,000 | 21% |
| MYR 100,000 – MYR 250,000 | 24% |
| MYR 250,000 – MYR 400,000 | 24.5% |
| MYR 400,000 – MYR 600,000 | 25% |
| MYR 600,000 – MYR 1,000,000 | 26% |
| MYR 1,000,000 – MYR 2,000,000 | 28% |
| above MYR 2,000,000 | 30% |
Employer Payroll Contributions
Employers are required to contribute to their employees’ social insurance accounts, including the Employee Provident Fund (EPF), with rates as follows:
| Employee’s Status | Monthly Salary Rate | Stage 1 (Below 60 years old) | Stage 2 (Age 60 and above) |
|---|---|---|---|
| MalaysianPermanent Residents (PR)Non-Malaysians (registered as member before 1 August 1998) | No limit | Applicable for (1) only Employees share: 0% Employer’s share: 4% |
|
| MYR 5,000 and below | Employees share: 11% Employer’s share: 13% |
Applicable for (2) and (3) only Employees share: 5.5% Employer’s share: 6.5% |
|
| More than MYR 5,000 | Employees share: 11% Employer’s share: 12% |
Applicable for (2) and (3) only Employees share: 5.5% Employer’s share: 6% |
|
| Non-Malaysians (registered as member from 1 August 1998) | No limit | Employees share: 11% Employer’s share: RM5.00 |
Employees share: 5.5% Employer’s share: RM5.00 |
For more details on EPF contribution, visit this KWSP page on EP
Employers must contribute to their employees’ SOCSO (Social Security Organization) or PERKESO (Pertubuhan Keselamatan Sosial) and the Employment Insurance System (EIS). To download the latest SOCSO and EIS’ contribution rate, visit this PERKESO page.
Should employers employ more than 10 Malaysian employees, they must also contribute to the Human Resource Development Fund (HRDF) with 1% levy of the monthly wages for each Malaysian employee
Overall, the contribution rates vary depending on the employee’s number, age, and salary, but the total ranges up to 15.95%.
Employee Payroll Contributions
Employees are required to contribute to their own social insurance accounts, including the Provident Fund, SOCSO, EIS, and Human Resource Development Fund. The contribution rates vary depending on the their age and salary, but the total generally ranges up to 9.70%.
What is the minimum wage in Malaysia?
Malaysia sets a monthly minimum wage of MYR 1,200 for employees in City Council or Municipal Council areas, and MYR 1,100 in other areas.
What is the payroll cycle in Malaysia?
The standard payroll cycle in Malaysia is monthly, with pay dates falling on the last day of the month.
It is also stipulated in the employment contract that employers need to pay a 13th month salary at the end of the year.
How long is the working hours in Malaysia?
Under the Employment Act, Malaysia sets a maximum working hours of 48 hours per week. If employees are required to work outside of these hours, they are entitled to overtime pay. Overtime is set on a higher pay rate and differs depending on whether it occurs during a standard work day or a holiday.
How many leaves are employees entitled to?
- Standard paid time off — employees in Malaysia are entitled to at least 8 days of paid annual leave during their first two years of service, which accrues gradually over time.
- Compulsory annual public holidays — there are 6 compulsory national public holidays and 10 optional public holidays in Malaysia. Employers may choose at least 5 optional holidays; however, it is common for companies to close on all 10. The rest are state public holidays which varies from state to state.
Minimum paid sick leave — employees in Malaysia are entitled to 14 days of paid sick leave during their first two years of service, which accumulates progressively as follows:
| Length of Service | Sick Leave Entitlement |
| 1-2 years | 14 days |
| 2-5 years | 18 days |
| more than 5 years | 22 days |
What are the public holidays in Malaysia?
Here is the list of public holidays in Malaysia for 2023:
| Date | Holiday |
| 22 Jan | Chinese New Year |
| 23 Jan | Chinese New Year Holiday |
| 21 Apr | Hari Raya Aidilfitri |
| 23 Apr | Hari Raya Aidilfitri Holiday |
| 1 May | Labour Day |
| 4 May | Wesak Day |
| 5 Jun | SPB Yang di Pertuan Agong’s Birthday |
| 29 Jun | Hari Raya Haji |
| 19 Jul | Awal Muharram |
| 31 Aug | National Day |
| 16 Sep | Malaysia Day |
| 28 Sep | Prophet Muhammad’s Birthday |
| 25 Dec | Christmas Day |
How long is the maternity and paternity leave in Malaysia ?
- Statutory maternity leave — female employees in Malaysia are entitled to up to 90 consecutive days of paid maternity leave for their first five surviving children.
- Statutory paternity leave — male employees in Malaysian public sector are entitled to 7 days of paternity leave, while those in the private sector are not entitled to any.
- Statutory parental leave — there is no mandatory parental leave in Malaysia.
What rights do employees have upon leaving employment due to certain conditions?
Employers can terminate employees for valid reasons such as poor performance or misconduct, but this must be done via providing a legal notice based on the Labor Law requirements. When an employee’s service with a company is terminated for certain reasons, they are entitled to certain rights and benefits, including:
- Notice period — there are no statutory notice periods in Malaysia, but 30 days’ notice is commonly given to employees.
- Severance pay — employees are entitled to mandatory severance pay, which varies based on the length of service as follows:
| Length of Service | Severance Pay Entitlement |
| 1-2 years | 10 days per year of service |
| 2-5 years | 15 days per year of service |
| more than 5 years | 20 days per year of service |
- Probation period — employees generally have one to three months of probation period.
What is the type of visa for employees in Malaysia?
In order to be granted an employment visa in Malaysia, the applicant must be a certified foreign expert in the field they will be working. The employer must be a sponsor to the visa as well as being an accredited company that may hire foreign employees.
Malaysia offers a variety of work visa: employment pass, professional visit pass, and temporary employment pass, each with their own criteria for acceptance and stipulations that the employee must qualify.
Standard VAT Rate
The standard VAT rate in Malaysia is 10% for sales tax and 6% for service tax.
Is there a maximum length of contract for employees?
There is no specific maximum length of time for employees to be employed on a contract basis in Malaysia. The length of a contract varies according to the agreement between the employer and the employee.
What is the retirement age in Malaysia?
Under the Employment Act 1955 and the Employment (Amendment) Act 2012, the retirement age for employees in Malaysia is set at a minimum of 58 years and a maximum of 60 years.