Hiring in Malaysia

Basic salary only: allowances, bonuses and housing don't count toward the threshold. Manufacturing-related services roles have a higher Category III floor.

Succession plan: for Categories II and III, show how a Malaysian employee will be trained to take over the role within the pass period.

Sponsoring company: your company registers with the Immigration Department's Expatriate Services Division (ESD) to sponsor passes. Manufacturing and selected services companies apply through MIDA instead.

Who gets termination benefits: employees with at least 12 months of service, earning up to RM4,000 a month or doing manual work, when employment ends for reasons such as redundancy. For other employees, the contract sets the terms.

Unfair dismissal: under the Industrial Relations Act, any employee can challenge a dismissal made without just cause or excuse.

Foreign employees leaving: notify LHDN (Form CP21) at least 1 month before they leave Malaysia, and hold back final pay until you receive tax clearance.

Working hours: up to 8 hours a day and 45 hours a week, with at least 1 rest day a week.

Overtime rates: 1.5 times the hourly rate on normal days, 2 times on rest days, and 3 times on public holidays.

Who is covered: employees earning up to RM4,000 a month, and manual workers. For everyone else, the contract sets the terms.

Flexible work: employees can apply for flexible working arrangements, and you reply in writing within 60 days.

Contracts typically cover start date, duration, workplace and hours, salary and benefits, job scope, probation, time off, notice and termination, health and safety, and anti-discrimination clauses.

Probation: probationers are employees, so their statutory rights apply from day one.

Records to keep: employment letters, commission slips, expense claims and leave records.

Personal data: under the Personal Data Protection Act (PDPA), collect employee data with consent for clear purposes and keep it secure.

SOCSO (PERKESO): employers contribute about 1.75% and employees about 0.5% for employees below 60, on wages up to RM6,000. From age 60, only the employer's 1.25% Employment Injury contribution applies.

Foreign employees: covered by the Employment Injury Scheme, with an employer contribution of 1.25%.

Employment Insurance System (EIS): employer and employee each contribute 0.2% for Malaysian employees aged 18 to 60, on wages up to RM6,000.

Reporting: report workplace accidents to PERKESO promptly so employees can claim benefits.

Register new hires with EPF, SOCSO and EIS when they join.

HRD levy: mandatory at 1% for employers with 10 or more Malaysian employees in covered sectors. Employers with 5 to 9 can opt in at 0.5%. Levies fund training you can claim back.

Monthly tax deduction (PCB): deduct tax from each employee's salary and pay it to LHDN by the 15th of the following month.

Resident tax rates are progressive, from 0% on the first RM5,000 of chargeable income to 30% above RM2 million.

Non-resident employees (in Malaysia fewer than 182 days a year) pay a flat 30%.

Annual filing: issue Form EA to employees by the end of February, and file your employer return (Form E) by 31 March.

New and departing staff: notify LHDN of new hires within 30 days (Form CP22). For foreign employees leaving, file Form CP21 at least 1 month before departure.