Malaysia is a thriving hub for business and commerce, attracting foreign talent from all over the world. However, hiring foreign workers comes with legal responsibilities and compliance requirements that employers must follow. Understanding Malaysia’s labor laws ensures smooth hiring processes and prevents costly legal issues. Here’s what you need to know:
Malaysia's Work Visa and Employment Passes
The Employment Pass (EP) is Malaysia's work visa issued to highly skilled foreign professionals employed in key sectors in Malaysia. It is divided into three categories based on salary and job position:
Category I: For highly skilled professionals with a monthly salary of RM10,000 and above. The pass is valid for up to five years and allows dependents and a foreign domestic helper.
Category II: For mid-level professionals earning between RM5,000 and RM9,999 per month. The pass is valid for up to two years, and dependents may be allowed.
Category III: For skilled workers with salaries between RM3,000 and RM4,999 per month. This pass is valid for up to one year and is renewable up to two times. Dependents are not permitted.
Employers must apply for an Employment Pass through the Expatriate Services Division (ESD) or the Immigration Department of Malaysia and ensure that positions are aligned with Malaysia’s economic needs and talent policies.
2. Compliance with Malaysia’s Labor Laws
Malaysia’s Employment Act 1955 and related regulations set the foundation for fair labor practices. Employers hiring foreign workers must adhere to:
Minimum wage requirements: As of 2023, the minimum wage is RM1,500 per month (subject to government updates).
Working hours: A standard workweek is 45 hours, with overtime rules applicable.
Leave entitlements: Including annual leave, sick leave, and public holidays.
Termination procedures: Proper notice periods and severance pay if applicable.
Failure to comply can result in penalties, fines, and even work permit revocations.
3. Employer Responsibilities & Worker Protections
Employers must ensure foreign workers are treated fairly and have proper employment contracts that outline salary, benefits, and job responsibilities. Additional requirements include:
Medical screening: Foreign workers must undergo a mandatory medical examination upon arrival.
SOCSO & EPF contributions: Depending on the employee’s nationality and pass type, contributions may be required.
Accommodation standards: For low-skilled workers, employers must provide adequate housing as per Malaysia’s Workers’ Minimum Standards of Housing Act.
4. Avoiding Illegal Hiring Practices
Hiring undocumented workers is a serious offense in Malaysia, punishable by fines, imprisonment, or both. Employers must:
Verify work permits before employment begins.
Ensure renewals of work permits before expiration.
Follow proper hiring channels, such as the Immigration Department or approved Employer of Record (EOR) services.
5. How an Employer of Record (EOR) Can Help
Navigating compliance and labor laws can be challenging. This is where an Employer of Record (EOR) like GP Asia simplifies the process. An EOR:
Handles work permit applications and renewals.
Manages payroll, tax compliance, and benefits for foreign workers.
Ensures full legal compliance with Malaysia’s labor laws.
Provides a seamless hiring experience for both employers and employees.
Final Thoughts
Hiring foreign workers in Malaysia requires careful planning and strict adherence to labor laws. By ensuring compliance, businesses can tap into global talent while avoiding legal risks. If you're looking for a hassle-free way to hire and manage foreign workers, GP Asia’s EOR services can take care of the complexities, so you can focus on growing your business.
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