HRMS
Malaysia Tax Compliance Guide
Form E is a yearly report that all employers in Malaysia must submit to Lembaga Hasil Dalam Negeri (LHDN). It shows:
You may be fined RM200 to RM20,000, jailed for up to 6 months, or both โ under the Income Tax Act 1967.
Since 2016, ALL companies in Malaysia must submit Form E, even if they:
โ Freelancers and gig workers (non-employers) are not required to submit Form E.
Report employee income if they:
If none of your employees meet this threshold, just put "0" in the employee section.
Let MOCHI HRMS handle your Form E preparation with ease:
| ๐ Feature | โ Benefit |
|---|---|
| Auto Income Summary | Auto-calculate and generate employee earnings report for Form E |
| LHDN-Ready Reports | One-click export format for e-Filing upload |
| Employee Flagging | Only employees who meet income threshold are included |
| Legal Compliance | Stay fully compliant with Malaysia's latest tax and HR laws |
No more last-minute rush or manual errors!
HRMS
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 essentialโnot only to ensure compliance but also to build a professional and productive workplace.
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 regulationsโespecially under the Employment Act 1955โcan 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.
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:
The Employment Act 1955 outlines the minimum terms and conditions of employment, covering areas such as:
Latest Update: As of January 2023, the Act applies to all employees, regardless of salary levelโexcept for certain exemptions related to managerial roles or contract nature.
The Industrial Relations (Amendment) Act 2020 governs employer-employee relations, including:
It provides a legal framework to resolve conflicts and promotes industrial harmony in the workplace.
The Occupational Safety and Health Act 1994 enforces workplace health and safety standards by requiring employers to:
โ ๏ธ Employers and employees both share responsibility for maintaining workplace safety under this Act.
The Employees Provident Fund Act 1991 mandates the establishment of the Employees Provident Fund (EPF), a compulsory retirement savings scheme. It requires:
These contributions go toward building long-term financial security for employees post-retirement.
The Employees' Social Security Act 1969 provides social insurance protection through the Employment Injury Scheme and Invalidity Pension Scheme. It covers:
Both employers and employees contribute monthly to the SOCSO fund.
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).
โ 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 regulationsโautomatically, accurately, and effortlessly.
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).
Employers are required to track all working hours accurately and maintain detailed payroll and time records for 3โ5 years, with tax-related records retained for 7 years.
All employees beyond the probation period (typically 1 month) must receive a written contract detailing:
This distinction carries legal weight. Misclassification can lead to penalties up to RM20,000 per employee or imprisonment. The Industrial Court uses factors like:
Under the Industrial Relations (Amendment) Act 2020, termination must be:
| Years of Service | Notice Period |
|---|---|
| Less than 2 years | 4 weeks |
| 2 to 5 years | 6 weeks |
| More than 5 years | 8 weeks |
Malaysia's national minimum wage was officially increased by 13% in 2025 โ a move to improve worker welfare and reduce the cost-of-living gap nationwide.
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 |
Under the Employment Act 1955, employers must adhere to the following wage payment timelines:
"Wages" under Malaysian law refer to:
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:
Under Malaysian labour law, every employee must be issued a payslip each time they are paid.
| Company Type | Tax Rate (YA 2023) |
|---|---|
| SMEs (โค 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 |
| Contributor | Rate |
|---|---|
| Employer | 12% or 13% (based on salary bracket) |
| Employee | 11% |
| Scheme | Employer Rate | Employee Rate |
|---|---|---|
| Employment Injury + Invalidity Scheme | 1.25% (max) | 0.5% |
| Party | Rate |
|---|---|
| Employer | 0.2% |
| Employee | 0.2% |
| 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 |
Under Section 59 of the Employment Act:
For employees working a standard 8-hour workday, they are entitled to a minimum of 45 minutes unpaid rest, which can include:
All employees are entitled to:
If employees are required to work on their designated rest day:
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 |
Under the Employment (Amendment) Act 2022, effective 1 January 2023:
As of 2023, employers must provide minimum 7 days of paid paternity leave if:
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.
Under the Fourth Schedule of the Act, children and young persons are prohibited from:
| 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 |
Several other Acts reinforce child labour protections:
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 Site: https://www.payrollpanda.my/labour-laws/malaysia-labour-laws/#leave
โ With MOCHI HRMS+, companies can flag age-sensitive roles, automate compliance checks, and store employment documents securelyโensuring minors are only engaged within legal boundaries.
MOCHI HRMS+ automatically generates legally compliant payslips with all required fields in PDF or digital formatโready to share and archive.
With MOCHI HRMS+, all statutory calculations, payroll tax deductions, and submission reports are automated โ ensuring 100% compliance with LHDN, KWSP, SOCSO, and EIS requirements.
HRMS
Malaysiaโs leave laws are designed to ensure employees are not only fairly compensated for their workโbut also entitled to adequate time off for rest, recovery, family responsibilities, and personal matters.
Under the Employment Act 1955 and other supporting regulations, employers are required to provide various types of leave including:
This guide explores the key provisions of Malaysia's leave entitlements and how companies can stay compliant while supporting employee wellbeing.
๐ Whether you're an HR professional or SME owner, understanding these laws is essential to building a healthy, legally compliant workplace culture.
