Employee Benefits in Malaysia

Read our comprehensive guide to employee benefits in Malaysia to ensure your hiring strategies are effective and aligned with local labor laws.

Malaysia is a country in Southeast Asia bordered by Thailand, Brunei, and Indonesia, with maritime borders of Singapore, Vietnam, and the Philippines. With a workforce of 18.2 million people (2024) and a GDP of almost 400 billion US dollars (2023), Malaysia is a wealthy country classified as an upper-middle-income nation.

Its economy has seen significant growth over the years, with its reliance changing from agriculture to the manufacturing and service industries. Poverty rates have declined, and the economy has become diversified, specialising in the export of high-tech products. Workers in Malaysia are protected from exploitation by Malaysian labor laws, which entitle employees to certain rights such as the right to a minimum wage, set working hours, paid leave, and protection from unfair dismissal.

This help guide will provide an overview of Malaysian labor laws and the mandatory employee benefits that employers must provide when doing business in Malaysia, along with details on how Remote People can assist in simplifying hiring in Malaysia through our Employer of Record (EOR) services.

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Malaysian Employment Laws

Malaysian labor law is predominantly informed by the Employment Act of 1955. This act sets out a framework for the rights and obligations of employers and employees in Malaysia, providing insights into annual leave, overtime compensation, severance pay, and maternity/paternity leave.

It’s strongly recommended that employers hiring in Malaysia seek legal advice before confirming employment contracts to ensure that all Malaysian labor laws are being adhered to.

Mandatory Employee Benefits in Malaysia

There are several mandatory employee benefits that workers are legally entitled to when working in Malaysia; these are as follows.

Social Security Contributions

Malaysia operates under the Social Security Organisation (SOCSO), which was established to implement and enforce various laws such as the Employees’ Social Security Act of 1969.

Social Security in Malaysia aims to provide financial protection to employees via their Employment Injury and Invalidity Scheme. They also provide the following benefits:

Disablement Benefit (Permanent or Temporary)
Invalidity Pension
Survivor’s Pension
Occupational Diseases Benefit
Self-Employed Benefit
Housewife Benefit
Foreign Worker Benefit

Workers and employers must pay the following social security rates:

Party	Income Level	Rate
Employer	Less than 5,000 MYR	12%
Employer	More than 5,000 MYR	13%
Employee	All income levels	11%

Annual Paid Leave

Employees in Malaysia are entitled to 8 days for every 12 months of continuous service worked with the same employer, if they have worked for less than 2 years.

This increases to 12 days for every 12 months worked if an employee has worked for over 2 years for the same employer but less than 5 years, and 16 days for every 12 months worked for the same employer if an employee has worked for 5 years or more.

Annual leave is paid in addition to rest days and public holidays. Unused leave must be used in the following 12 months, and employees’ annual leave should be prorated if they work for less than 1 year in total.

Working Hours

Typical working hours in Malaysia are 8 hours per day for 45 hours per week. Employees must be permitted to take 1 rest day per week, as well as an unpaid lunch break of 30 minutes if working for 5 hours or more.

Night work is considered to be hours worked between 11 pm and 6 am, with no specific compensation required.

National Minimum Wage

The minimum wage in Malaysia is currently 1700 MYR per month in 2025. This applies to workers who are employed by a company with 5 or more workers.

The average salary in Malaysia currently sits at approximately 2,800 RM per month, however, this varies depending on profession, industry, location, education, and level of experience. This converts to roughly 631 US dollars per month.

Overtime Pay

If an employee works any hours over their contracted amount, these hours count as overtime and must be compensated.

Overtime work should be paid at the rate of at least 1.5 times an employee’s standard rate on a normal working day, twice the hourly wage if carried out on a rest day, or 3 times the hourly wage if worked on a public holiday.

Hours of overtime are limited to 104 hours per month, or 4 hours per day on average.

Paid Public Holidays

Public holidays in Malaysia are considered to be paid rest days (if falling on work days). The public holidays in Malaysia in 2025 are as follows:

January 29, 2025: Chinese New Year’s Day
January 30, 2025: Second Day of Chinese New Year
March 31, 2025: Hari Raya Puasa
April 1, 2025: Hari Raya Puasa Day 2
May 1, 2025: Labour Day
May 12, 2025: Wesak Day
June 2, 2025: The Yang di-Pertuan Agong’s Birthday
June 7, 2025: Hari Raya Haji
June 8, 2025: Hari Raya Haji Day 2
June 27, 2025: Muharram/New Year
August 31, 2025: Malaysia’s National Day
September 5, 2025: The Prophet Muhammad’s Birthday
September 16, 2025: Malaysia Day
October 20, 2025: Diwali/Deepavali
December 25, 2025: Christmas Day

Paid Sick Leave

Employees in Malaysia are entitled to sick leave if they are absent from work due to illness.

They may take up to 14 days of sick leave per year if they have worked less than 2 years for the same employer, or 18 days if they’ve worked between 2 – 5 years.

Employees who have worked for over 5 years for the same employer are entitled to 22 days of sick leave.

All employees may take an additional 60 days of leave for hospitalization, regardless of their length of service.

Maternity Leave

Female employees in Malaysia may take 98 days of consecutive maternity leave. This can be taken no sooner than 30 days before the expected due date of the child.

Workers must notify their employers of their intention to take maternity leave at least 60 days before the anticipated period.

Paternity Leave

Married male employees in Malaysia may take 7 paid days of paternity leave if their spouse has a baby. He must have been employed by the same employer for 12 months.

Pensions

Pensioners in Malaysia may begin claiming an old-age pension when they reach the age of 60.

Public sector employees may have access to a civil service pension, and private schemes exist for people looking to supplement their savings for retirement.

There are also tax-funded systems such as the Bantuan Warga Emas, which aims to provide a monthly supplement to those over the age of 60 who have little other source of income.

Severance Pay

Employees are entitled to severance pay in Malaysia if their employment has been indeed under particular conditions, excluding termination due to misconduct, for example.

Severance pay is typically paid as per the following:

Length of Service	Severance Pay
Less than 2 years	10 days’ wages for each year worked
2 – 5 years	15 days’ wages for each year worked
5 years or more	20 days’ wages for each year worked

Supplementary Employee Benefits in Malaysia

It’s recommended that employers offer their workers supplementary benefits in addition to mandatory benefits.

This is to attract new applicants to job vacancies and increase employee retention.

Some examples of supplementary benefits employers could offer include:

Performance bonuses
Expenses for travel, food, or housing
Enhanced pension schemes
Health/dental insurance
Additional paid leave, maternity leave, or paternity leave
Advanced training courses

Optimize Employee Benefits with Remote People

Malaysia’s labor laws can take some time to navigate, which is why many employers in other countries choose to hire an Employer of Record provider.

Remote People specialises in Employer of Record (EOR) services for companies hiring in Malaysia. Our EOR solution simplifies the hiring process by managing employee benefits, tax obligations, and compliance with Malaysian labor laws—allowing employers to focus on other critical aspects of their business.

We can also help with payroll outsourcing, hiring independent contractors, offering PEO broker services, and assisting with hiring employees via our recruitment agency. We have a highly experienced team of experts who are fluent in the local language and know the best places to advertise jobs when hiring in Malaysia.

Reach out to Remote People today to see how we can help make doing business in Malaysia a much easier process.