Malaysia Employment Guide

Malaysia Employment Guide

Malaysia is in Southeast Asia, spanning the Malay Peninsula and northern Kalimantan, with a superior location as a key Southeast Asian economic and transportation hub. It has ~33 million people from diverse groups, including Malays, Chinese and Indians. Its economic pillars cover manufacturing, electronics, oil and gas, palm oil, tourism and services, with Kuala Lumpur (the capital) as the political and commercial center. Malaysia’s labor laws are mainly regulated by the 1955 Labour Ordinance. It stipulates a 48-hour standard workweek, written contracts for employment relations, and requires employers to provide minimum wages, overtime compensation and statutory benefits. Dismissals need valid reasons and legal procedures, and employees are entitled to paid annual and sick leave.

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Currency

Malaysian Ringgit (MYR)

Capital

Kuala Lumpur

Official language

Malay (Bahasa Malaysia)

Salary Cycle

Monthly

Our Employment Guide in Malaysia

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Termination Requirements in Malaysia

Navigating employment termination in Malaysia requires careful adherence to complex regulations and country-specific requirements. The separation process must be managed collaboratively between employers and key stakeholders, often involving specific procedures and potential costs depending on the termination circumstances.

Malaysian law does not permit arbitrary termination by employers. Valid grounds for termination must be established, with compliant approaches including:

  • Voluntary resignation by the employee
  • Mutual agreement separation
  • Contract expiration
  • Employer-initiated termination based on:
    • Probationary period assessment
    • Objective business reasons
    • Disciplinary dismissal
    • Performance-related issues due to job incompatibility

Notice Period Requirements

Malaysian employment law mandates minimum notice periods that increase with service duration:

  • Less than two years of service: Four weeks
  • Two to five years of service: Six weeks
  • Five years or more of service: Eight weeks

For employees not covered under the Employment Act, notice periods are determined by mutual agreement. The Act typically covers manual laborers and those earning below RM 2,000 monthly.

Severance Payment Considerations

Malaysian legislation generally does not require severance payments except for employees earning below RM 4,000 monthly. However, international best practices often recommend proactive financial planning for termination scenarios.

To mitigate unexpected financial exposure during employment separation, SailGlobal implements severance accruals across all employment agreements in Malaysia. Our approach draws from extensive global expertise in managing litigation risks, with calculations based on current common law, statutory requirements, and local best practices. Should employees resign or not qualify for severance, any unused accruals are fully returned to the client.

Practical Case Examples

Consider a manufacturing company that needed to restructure its Malaysian operations. By implementing proper termination protocols and severance planning through SailGlobal's framework, the organization avoided potential legal challenges while maintaining positive employer branding.

Another case involved a technology firm facing performance-based terminations. SailGlobal's compliance framework ensured all documentation met Malaysian standards, preventing costly disputes and facilitating smooth transitions.

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