Employee Benefits in Malaysia: A Complete Guide

As an employer in Malaysia, providing attractive employee benefits is crucial for attracting and retaining top talent. Malaysia’s Employment Act 1955 outlines mandatory benefits that must be offered to employees. In addition to that, many companies also provide additional perks to enhance their overall compensation packages. 

In this article, we will explore employee benefits in Malaysia that are required by law and typical additional benefits offered by employers.

Employee Benefits Entitlement in Malaysia

As per the Employment Act 1955, all employees under a contract of services/ employment contract in Malaysia and who have worked for the employer for over 2 months are entitled to employee benefits in Malaysia. This also includes foreign employees working in Malaysia based on a valid work permit or valid work visa.

However, independent contractors such as gig workers or freelancers are not eligible for employment benefits in Malaysia. 

Statutory Employee Benefits

Employees Provident Fund (EPF)

The Employees Provident Fund is a mandatory retirement savings scheme in Malaysia that requires contributions from both employers and employees. The current EPF contribution rates are:

• For employees earning RM5,000 or less monthly: 11% from the employee and 12% from the employer.
• For employees earning above RM5,000 per month: 11% from the employee and 13% from the employer.

Both employers and employees are required to contribute to the EPF, which serves as a retirement savings scheme. The current contribution rates are 11% for employees below 60 years old and 12% for employees aged 60 and above, with a minimum contribution from the employer.

Social Security Organization (SOCSO) Contributions

Social Security Organization offer social security protection such as medical benefits, disability benefits, and employment injury benefits to employees in Malaysia. The Employment Injury Insurance Scheme (EIIS) and Invalidity Pension Scheme (IPS) fall under SOCSO. 

The SOCSO contribution rate for employers is a maximum of 1.25% while employees contribute 0.50% of their salary.

Employment Insurance System (EIS)

The employment insurance scheme in Malaysia supports private sector employees who lose their jobs due to redundancy or similar reasons. The EIS contribution rate is 0.2% of an employee’s monthly salary, payable by both the employer and the employee.

Maternity Leave in Malaysia

Under the Employment Act 1955, female employees in Malaysia are entitled to 98 days of maternity leave. This is an increase from the previous 60 days based on the Employment (Amendment) Act 2022/ Act A1651.

To qualify for maternity leave pay, a female employee must:

• Have worked for her employer for at least 90 days in the last 9 months.
• Have been with the same employer for the last 4 months before her baby is born.

If eligible, she will receive her regular daily pay or a rate set by the Minister, whichever is higher, for each day of her maternity leave.

Paternity Leave

Paternity leave is a statutory benefit provided to married male employees in Malaysia. Based on the Employment (Amendment) Act 2022, married male employees can take 7 consecutive paid days off to support their spouses and welcome their newborn child.

To be eligible for paternity leave, a married male employee must meet the following conditions:

• Must be employed by the same employer for at least 12 consecutive months before taking paternity leave.
• Inform the employer of his spouse’s pregnancy at least 30 days before the expected due date, or as soon as possible after the baby is born.

The paternity leave is granted for each childbirth of the employee’s spouse. However, the entitlement is restricted to a maximum of 5 times, regardless of the number of spouses the employee has.

Sick Leave

Employers are required to provide paid sick leave to employees under the Employment Act 1955. The exact entitlement depends on the length of service and whether hospitalization is necessary or not.

If no hospitalization is required, the sick leave entitlement is as follows:

• Less than 2 years of service: 14 days per calendar year
• 2 years to less than 5 years: 18 days per calendar year
• 5 years or more: 22 days per calendar year

If hospitalization is required, the employee is entitled to:

• 60 days per calendar year

As per the law, employees in Malaysia are also entitled to paid sick leave after dental examination.

Annual Leave

According to Article 60E of the Employment Act, employees in Malaysia are entitled to paid annual leave based on the years of employment.

Here is a quick overview of paid annual leaves for employees in Malaysia: 

If an employee’s contract ends before completing 12 months of service, their annual leave is prorated based on the full months worked. For example, if the employee only worked for 6 months, they would get 4 annual leaves. 

Moreover, keep in mind that the annual leave allocation is separate from rest days and public holidays.

Public Holidays

In addition to annual leave, Employees in Malaysia are also entitled to 11 paid public holidays throughout the year. While five of these public holidays are specified by the law, employers can choose any day from the gazetted national or state holidays calendar for the remaining 6 days.

According to Article 60D of the Employment Act, 5 compulsory gazetted public holidays are:

• National Day
• Workers’ Day
• Malaysia Day
• Birthday of the Yang di-Pertuan Agong (King)
• Birthday of the Ruler or the Yang di-Pertua Negeri (Governor) of the state where the employee works, or the Federal Territory Day if the employee works in a Federal Territory

Furthermore, Malaysian authorities may announce cuti peristiwa / occasional holidays under section 8 or section 9 of the Holidays Act 1951. It is mandatory for employers to observe all holidays declared under Section 8 of the Holidays Act 1951.

However, additional holidays declared under section 9 are not mandatory for companies that observe only the minimum 11 gazetted public holidays.

Supplementary Employee Benefits in Malaysia

While Malaysian employers are legally required to provide certain mandatory benefits, some companies go a step further and offer supplementary benefits to enhance their overall compensation packages. 

These additional perks help to attract and retain top talent and demonstrate the employer’s commitment to their employees’ well-being. Some of these additional benefits include the following.

Flexible Work Arrangements

To make employment more attractive, it is common among employers to offer flexible work arrangements for employees in Malaysia. 

The Malaysian Employment Act also allows employees to submit an application for flexible work arrangements to their employers. Employers must approve or reject such applications within 60 days. Moreover, if rejected, the employer must explain the reason for refusal. 

Comprehensive Insurance Coverage

Although not legally mandated, many employers in Malaysia choose to provide comprehensive insurance coverage as a supplementary benefit to their employees. 

This includes:

• Health Insurance: This may cover hospitalization, outpatient treatment, dental care, and other medical expenses for employees and their dependents.
• Life and Personal Accident Insurance: Some employers also include life insurance and personal accident insurance policies in their benefits package for the financial security of employees and their families.

Transportation Allowance

In addition to comprehensive insurance coverage, it is also common among employers in Malaysia to offer transportation allowance to their employees. This is a monthly allowance that covers the cost of transportation to and from work. 

You can also offer company transportation for employees as an alternative to transportation allowance.

Also Read: Cost of Hiring Developers in Malaysia

Hire Employees in Malaysia with RecruitGo

If you plan to hire and retain talent in Malaysia in compliance with Malaysian laws, it is advisable to partner with a local expert who understands the market and legal requirements.

RecruitGo helps employers hire and manage employees in Malaysia through our Employer of Record service in Malaysia. We have access to a vast talent pool and will help you hire the top talent that meets your needs in a matter of days, not weeks.

Moreover, as a local service provider, we do not rely on third-parties to deliver you the services. Everything is handled in-house, with the help of our local experts, and at a 40%-60% of cost than what Global EOR services charge.

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