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Staff Recruitment in Malaysia

Malaysia has a relatively young and educated population, with approximately 70% of its 30 million population of working age. For Malaysia to become an advanced economy, investment in its workforce is integral. The Eleventh Malaysia Plan 2016-2020 sets out the country’s commitment to investing in education as well as technical and vocational training, with the target to achieve a highly skilled workforce by 2020, which equals that of developed countries.

The Ministry of Human Resources (MOHR) is responsible for labour and employment. The Employment Act (1955) covers the legislation in place for any person who works under a contract of service and does not earn more than RM5,000 (US$1,162) a month in West Malaysia. The respective labour ordinances of Sabah and Sarawak cover certain types of employees. Any worker not covered by the Employment Act and the ordinances, common law relating to employment will apply. Hong Kong companies should be aware of key points about staff recruitment in Malaysia, as set out below:

  • Employment of foreign workers is permitted, although it is government policy that jobs should be filled by Malaysians eventually. Approvals for foreign worker employment are given by different authorised bodies or agencies depending on the core business of the company, and the minimum paid-up capital must be fulfilled before an application for a foreign worker can be submitted:
Malaysian-owned companyMYR250,000 (US$58,200)
Malaysian and foreign-owned companyMYR350,000 (US$81,500)
100% foreign owned companyMYR500,000 (US$116,300)
Company undertaking distributive trade and foreign owned restaurantMYR1,000,000 (US$232,000)
  • Minimum wages are applicable with monthly rates at MYR1,000 (US$230) for Peninsular Malaysia and MYR920 (US$215) for Sabah, Sarawak and Labuan.

  • Hours worked must not exceed eight hours in one day or 48 hours in one week.

  • There is a mandatory requirement to make monthly contributions to:

    • The Employees Provident Fund (EPF), if workers are Malaysian citizens or permanent residents. The EPF rates vary between 6% and 13% for employers and 4% and 8% for employees, with higher rates paid for younger employees. It is not a requirement for foreign workers to make monthly EPF contributions, although they can elect to pay. Employers will have to contribute RM5 (US$1) per person and employees pay a set rate of 8%.

    • The Social Security Organisation Scheme (SOCSO) which covers Employment Injury (EIIS) and Invalidity Pension Scheme (IPS). The amount payable is based on the employee’s monthly wage, restricted to a maximum of RM69.05 (US$16) for employer and RM19.75 (US$5) for employee respectively.

  • Any companies engaged in the manufacturing or services sector may be required to contribute to the Human Resources Development Fund (HRDF). The eligibility criteria are available on the HRDF website – the applicable monthly levy is set at 1% of the employee’s monthly wage.

  • All employees can join a trade union and are bound by the Trade Unions Act (1959) and Industrial Relations Act (1967). General unions are not allowed and memberships are confined to employees of a particular industry, trade or occupation. All trade unions must be lodged with the Registrar of Trade Unions.

 

A Practical Guide to Doing Business in Malaysia

  1. Regulatory Environment
  2. Establishing a Presence
  3. Intellectual Property Protection
  4. Staff Recruitment
  5. Tax Considerations
  6. Import/Export Procedures
  7. Further Information


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