Employment contracts Malaysia

Whether you are looking for a solution to hire new team members in Malaysia as a business owner or you are a freelancer wanting to establish your employment status, you can find various advantages with Native Teams services. We provide a comprehensive guide to the best practices and legal requirements for beginning and maintaining a valid work contract in Malaysia!

What should an employment contract in Malaysia include?

Employment contracts in Malaysia typically entail the following information:

• The identities and phone numbers of the employee and employer.
• The responsibilities and tasks assigned to the new employee.
• Specific workdays and times when the employee is expected to be present.
• The salary or wage that was agreed upon, including any additional benefits or bonuses.
• Terms and conditions for contract termination, including how long each party is expected to give notice.
• Dedication to non-disclosure and confidentiality.

Both the employer and the employee should thoroughly review the terms stated in the employment agreement before signing.

What types of employment contracts exist in Malaysia?

A well-drafted employment contract is legally required in Malaysia, where employment-related problems are governed by the Employment Act 1955. The types of employment contracts in the country are:

1. Permanent employment contract

This is the most common type of contract in Malaysia, offering employment with no pre-defined end date. It provides job security and benefits such as annual leave, sick leave, maternity leave, social security and medical benefits typically associated with full-time employment.

2. Fixed employment contract 

Also known as a “limited” or “temporary” contract, this type is used for specific projects or situations where a permanent employee isn’t necessary in Malaysia. The contract will have a specified end date when the employer is expected to deliver their work.

3. Part-time employment contract

This is ideal for employees seeking flexible work arrangements. The contract will outline the specific working hours and may include benefits on a pro-rated basis.

4. Internship employment contract

This is a specific type of contract for students gaining practical work experience under the guidance of a supervisor. The agreement will typically outline the internship duration, learning objectives, and any compensation or stipend provided.

These are the main categories, but it’s important to remember that employment contracts can also be:

• Written: Most contracts are formalized in writing, but oral agreements can also exist.
• Specific to the role: The contract will detail the job duties, responsibilities, and expectations.

How to hire employees in Malaysia?

Hiring employees in Malaysia necessitates establishing a legally recognised business entity. This involves registering your business with the Companies Commission of Malaysia (CCM). The process requires submitting necessary documents, paying registration fees, and obtaining a unique registration number.

Alternatively, you can collaborate with a licensed EoR service provider. EoRs handle various employment administration tasks on your behalf, including payroll processing, employee benefits administration, and managing social security contributions. This option streamlines the hiring process and reduces administrative burdens. Native Teams offers these services and responsibilities, such as payroll administration, human resources functions, taxation affairs and more in Malaysia.

If you are interested in hiring employees in Malaysia without the hustle and tiresome bureaucracy, you can utilise Native Teams services and streamline your hiring process!