Labour laws in Malaysia exist to regulate the rights and responsibilities between employers and employees. These laws set the legal foundation for fair and safe working environments across various industries. For business owners, HR managers, and employees alike, understanding these regulations is essential—not only to ensure compliance but also to build a professional and productive workplace.

Why Labour Law Knowledge Matters for Your Business

Since achieving independence in 1957, Malaysia has grown into one of Southeast Asia's most dynamic economies. In just the first half of 2024, Malaysia recorded USD 35.9 billion in approved investments across services, manufacturing, and other sectors, marking an 18% increase compared to USD 28.4 billion in the same period of 2023 (source: Malaysian Investment Development Authority).

With this economic expansion comes increasing interest from both local and international companies. However, navigating Malaysia's employment regulations—especially under the Employment Act 1955—can be complex if not guided properly.

MOCHI HRMS+ is here to help you stay aligned with current regulations, avoid penalties, and streamline your HR operations.

⚖️ Core Labour Laws All Employers Must Know

1. Malaysia Time Management Laws
2. Malaysia Hiring, Contracts & Classification Laws
3. Malaysia Payroll, Wages & Payment Laws
4. Malaysia Overtime Laws
5. Malaysia Time Off & Break Laws
6. Malaysia Leave, Vacation & Holiday Laws
7. Malaysia Child Labour Laws

Key Labour Laws You Must Know in Malaysia

Malaysia has a structured framework of labour laws designed to protect both employers and employees. These laws govern everything from wages and working hours to dispute resolution and retirement. Here's a breakdown of the main Acts every SME and HR team should understand to maintain full compliance:

1. Employment Act 1955 (EA)

The Employment Act 1955 outlines the minimum terms and conditions of employment, covering areas such as:

• Working hours and rest days
• Overtime and holiday pay
• Termination procedures
• Maternity leave and sick leave
• Wage payments and payslip issuance

Latest Update: As of January 2023, the Act applies to all employees, regardless of salary level—except for certain exemptions related to managerial roles or contract nature.

2. Industrial Relations (Amendment) Act 2020 (IRA)

The Industrial Relations (Amendment) Act 2020 governs employer-employee relations, including:

• Trade union formation and recognition
• Collective agreements and negotiation rights
• Procedures for handling disputes and unfair dismissals
• Protection against victimisation for union-related activities

It provides a legal framework to resolve conflicts and promotes industrial harmony in the workplace.

3. Occupational Safety and Health Act 1994 (OSHA)

The Occupational Safety and Health Act 1994 enforces workplace health and safety standards by requiring employers to:

• Maintain a safe work environment
• Provide necessary safety training, PPE, and hazard communication
• Conduct risk assessments and workplace inspections
• Encourage proactive safety reporting and improvements

⚠️ Employers and employees both share responsibility for maintaining workplace safety under this Act.

4. Employees Provident Fund Act 1991 (EPFA)

The Employees Provident Fund Act 1991 mandates the establishment of the Employees Provident Fund (EPF), a compulsory retirement savings scheme. It requires:

• Employers to contribute 12%–13% of the employee's monthly salary
• Employees to contribute 11% of their wages monthly

These contributions go toward building long-term financial security for employees post-retirement.

5. Employees' Social Security Act 1969 (SOCSO)

The Employees' Social Security Act 1969 provides social insurance protection through the Employment Injury Scheme and Invalidity Pension Scheme. It covers:

• Workplace accidents or injuries
• Occupational illnesses
• Permanent disabilities or death
• Medical and rehabilitation benefits

Both employers and employees contribute monthly to the SOCSO fund.

6. Minimum Retirement Age Act 2012 (MRAA)

The Minimum Retirement Age Act 2012 establishes the minimum retirement age in Malaysia is 60 years for employees in the private sector.

Employers cannot compel employees to retire before reaching this age unless under legally permissible circumstances (e.g. disciplinary grounds or mutual agreement).

✅ These six core Acts form the legal foundation for all employment practices in Malaysia. MOCHI HRMS+ is designed to keep your HR processes in line with these regulations—automatically, accurately, and effortlessly.

Detailed Labour Law Requirements

1. Time Management Laws in Malaysia

Malaysia's working hour regulations are primarily governed by the Employment Act 1955, which now covers all employees regardless of wage levels (previously applicable only to those earning under RM2,000/month).

✅ Working Hours:

• Maximum 45 hours/week
• Maximum 12 hours/day (including OT)

✅ Overtime Pay:

• 1.5x hourly rate for overtime work
• 2x on rest days
• 3x on paid public holidays

✅ Minimum Wage (Effective Feb 1, 2025):

• RM1,700/month
• RM65.38/day (6-day week)
• RM78.46/day (5-day week)
• RM98.08/day (4-day week)
• RM8.72/hour (Hourly employees)

✅ Break Entitlements:

• 30-minute unpaid break after 5 consecutive working hours
• One full rest day per week

Employers are required to track all working hours accurately and maintain detailed payroll and time records for 3–5 years, with tax-related records retained for 7 years.

2. Hiring, Contracts & Classification Laws in Malaysia

Legal Employment Criteria:

• Must be a Malaysian citizen, permanent resident, or hold a valid work permit.

Employment Contract Requirements:

All employees beyond the probation period (typically 1 month) must receive a written contract detailing:

1. Job role & scope
2. Salary & benefits
3. Working hours
4. Termination conditions
5. Health & safety obligations

Employee vs Contractor Classification:

This distinction carries legal weight. Misclassification can lead to penalties up to RM20,000 per employee or imprisonment. The Industrial Court uses factors like:

• Work structure
• Level of supervision
• Duration of work
• Integration into company operations

❌ Dismissal & Termination Laws

Under the Industrial Relations (Amendment) Act 2020, termination must be:

• Fair and justified
• Not discriminatory
• Provided with written notice:

Years of Service	Notice Period
Less than 2 years	4 weeks
2 to 5 years	6 weeks
More than 5 years	8 weeks

3. Payroll, Wages & Payment Law in Malaysia

Malaysia's Minimum Wage Law (Effective February 1, 2025)

Malaysia's national minimum wage was officially increased by 13% in 2025 — a move to improve worker welfare and reduce the cost-of-living gap nationwide.

What is the New Minimum Wage in Malaysia?

As of 1 February 2025, the minimum monthly wage has been revised to:

Work Schedule	Daily Wage	Monthly Wage	Hourly Rate
6 days/week	RM65.38/day	RM1,700/month	RM8.72/hour
5 days/week	RM78.46/day	RM1,700/month	RM8.72/hour
4 days/week	RM98.08/day	RM1,700/month	RM8.72/hour

✅ Applies to:

• All employees across Peninsular Malaysia, Sabah, and Sarawak
• Private-sector employees in Sarawak
• All full-time, part-time, and contract-based workers (unless exempted)

Does not apply to:

• Domestic workers (maids, drivers, gardeners, etc.)
• Apprentices under a registered training scheme of at least 2 years

When Must Employers Pay Wages?

Under the Employment Act 1955, employers must adhere to the following wage payment timelines:

• Monthly salaries: Paid within 7 days after the end of each wage period
• Overtime pay: Must be settled by the next wage cycle

What is Included in 'Wages'?

"Wages" under Malaysian law refer to:

✅ Includes:

• Basic salary
• Agreed allowances (e.g. shift allowance)
• Statutory payments (EPF, SOCSO, etc.)

❌ Excludes:

• Bonuses
• Travel or meal reimbursements
• Accommodation
• Gratuities or discretionary payments

⚠️ Penalty for Non-Compliance

Failing to comply with Malaysia's minimum wage law is a serious offence. Under Section 23 of the National Wages Consultative Council Act 2011, employers found guilty of underpaying staff can face:

• A fine of up to RM10,000 per employee

Are Payslips Mandatory in Malaysia?

Under Malaysian labour law, every employee must be issued a payslip each time they are paid.

✅ Payslip Must Include the Following Details:

• Full name of the employee
• Identification number (NRIC / passport)
• Gender and citizenship status
• Wage payment terms (e.g. monthly/hourly)
• Gross salary amount
• Date of payment
• Additional payments (e.g. overtime, allowances, commissions)
• Statutory and other deductions (e.g. EPF, SOCSO, advances)
• Employer's company name and details
• Date of payslip issuance

Payroll Taxes in Malaysia

1. Corporate Income Tax (CIT) Rate

Company Type	Tax Rate (YA 2023)
SMEs (≤ RM2.5M paid-up capital)	15% on first RM150,000 17% on next RM450,000 24% on the balance
Non-SMEs / Large companies	24% flat rate

3. Employees Provident Fund (EPF)

Contributor	Rate
Employer	12% or 13% (based on salary bracket)
Employee	11%

4. Social Security Organization (SOCSO / PERKESO)

Scheme	Employer Rate	Employee Rate
Employment Injury + Invalidity Scheme	1.25% (max)	0.5%

5. Employment Insurance System (EIS)

Party	Rate
Employer	0.2%
Employee	0.2%

⏰ Malaysia Overtime Laws

How Much Is Overtime Pay in Malaysia?

Type of Overtime Work	Minimum Overtime Rate	Example (RM8.72/hr)
Regular OT (after 8 hrs/day or 45 hrs/week)	1.5x hourly rate	RM13.08/hr
Rest Day Work	2x hourly rate	RM17.44/hr
Paid Public Holiday Work	3x hourly rate	RM26.16/hr

Overtime Limitations (Legal Caps)

• Maximum of 104 overtime hours per month
• No more than 12 hours of total work (normal + OT) per day
• ⚠️ Overtime hours on rest days or public holidays do not count toward the 104-hour cap

❗ Who Is Not Entitled to Overtime Pay?

1. Employees earning above RM4,000/month
   • These employees are not entitled to OT under the Employment Act
   • However, companies may still choose to offer OT as part of internal policies or contracts
2. Employees in regulated sectors with separate rules:
   • Banking & Finance
   • Insurance
   • Hospitality (Hotel/Catering)
   • Road Transport

🛑 Malaysia Time Off & Break Laws

⏸️ Rest Breaks During Working Hours

Under Section 59 of the Employment Act:

• Employees who work more than 5 consecutive hours must be given at least 30 minutes of unpaid rest
• For work periods under 5 hours, employers may provide shorter breaks that do not disrupt continuous work

🍽️ Meal & Rest Time for Full-Day Workers

For employees working a standard 8-hour workday, they are entitled to a minimum of 45 minutes unpaid rest, which can include:

• Lunch breaks
• Tea breaks
• Prayer breaks (if applicable)

📅 Weekly Rest Days

All employees are entitled to:

• At least 1 full rest day per week, determined by the employer
• For shift workers, a continuous 30-hour rest period qualifies as a rest day

💰 Pay for Work on Rest Days

If employees are required to work on their designated rest day:

• They must be paid at least 2x their daily wage

🏖️ Malaysia Leave, Vacation & Holiday Laws

🎉 Public Holidays

• Employees are entitled to 11 paid public holidays annually
• The government may declare additional national or state holidays
• If a public holiday overlaps with sick or annual leave, employers must reschedule the leave to another day
• If employees are required to work on a public holiday, they must be paid: ✅ Public holiday wage + 200% of their regular daily rate

🌴 Annual Leave

Annual leave is granted based on length of service:

Years of Service	Annual Leave Entitlement
1 to 2 years	8 days
2 to 5 years	12 days
Over 5 years	16 days

🤱 Maternity Leave

Under the Employment (Amendment) Act 2022, effective 1 January 2023:

• Female employees are entitled to 98 consecutive days of paid maternity leave
• Eligible if employed for at least 4 months before expected delivery
• Leave can begin 30 days before the due date

👨‍👶 Paternity Leave

As of 2023, employers must provide minimum 7 days of paid paternity leave if:

• The employee is married to the expectant mother
• Has served the company for at least 12 months
• Gives at least 30 days advance notice

🏥 Sick & Hospitalization Leave

Paid sick leave entitlements based on years of service:

Years of Service	Sick Leave Entitlement (Per Year)
1 to 2 years	14 days
2 to 5 years	18 days
Over 5 years	22 days

Additionally, employees are eligible for up to 60 days of hospitalization leave, which is separate from outpatient sick leave and must be certified by a registered medical practitioner or dentist.

👶 Malaysia's Child Labour Laws

Definitions

• Child: A person under 15 years of age
• Young Person: A person aged 15 to below 18 years

🔞 Minimum Age for Employment

• The minimum legal working age is 13, but only for light work and under strict conditions.
• Employment must not interfere with schooling and must be supervised where applicable.

⚠️ Employment Restrictions & Prohibited Work

Under the Fourth Schedule of the Act, children and young persons are prohibited from:

• Handling hazardous substances or chemicals
• Operating or working near dangerous machinery or tools
• Working in environments with high physical or health risk (e.g., mining, construction, industrial factories)

⏰ Working Hour Regulations

For Children (Under 15):

• Not more than 6 days a week
• No work is allowed between 8:00 PM and 7:00 AM (except in public entertainment with a permit)
• Max 3 consecutive hours of work without a 30-minute break
• Daily limit: 6 hours, or 7 hours (if attending school)

For Young Persons (15 to below 18):

• Not more than 6 days a week
• No work is allowed between 8:00 PM and 6:00 AM, unless in public entertainment or agriculture under parental or guardian supervision
• Max 4 consecutive working hours without a break
• Daily limit: 7 hours, or 8 hours (if attending school)

❗ Penalties for Violation

Offence Type	Penalty (First Offence)	Repeat Offence
Employing minors illegally	Fine up to RM50,000 or 2 years' imprisonment, or both	Fine up to RM100,000 or 5 years' imprisonment, or both

Supporting Laws

Several other Acts reinforce child labour protections:

• Factories and Machinery Act 1967 – Prohibits employment of children in factory settings or with machinery
• Occupational Safety and Health Act 1994 (OSHA) – Requires employers to ensure a safe environment for all workers
• Electricity Supply Act 1990 – Prevents underage labour in the energy sector
• Mining Regulations – Completely ban children from working in mining-related jobs

⚠️ Important Cautionary Note

The information provided in this guide is for general informational purposes only.

While every effort has been made to ensure the accuracy and completeness of the content, MOCHI Technologies Sdn Bhd makes no warranties or representations regarding its reliability or legal standing.

Users are strongly advised to consult qualified professionals or relevant authorities for specific legal, regulatory, or compliance-related advice. Do not rely solely on this material to make decisions involving statutory obligations or employment practices.

Reference

Reference Site: https://www.payrollpanda.my/labour-laws/malaysia-labour-laws/#leave

Additional Resources

✅ With MOCHI HRMS+, companies can flag age-sensitive roles, automate compliance checks, and store employment documents securely—ensuring minors are only engaged within legal boundaries.

MOCHI HRMS+ automatically generates legally compliant payslips with all required fields in PDF or digital format—ready to share and archive.

With MOCHI HRMS+, all statutory calculations, payroll tax deductions, and submission reports are automated — ensuring 100% compliance with LHDN, KWSP, SOCSO, and EIS requirements.