Understanding Employment Laws in Kuala Lumpur

Employment in Kuala Lumpur is governed by laws that promote equal opportunities, supported by Article 8 of the Federal Constitution. This ensures fair treatment for all Malaysians regardless of religion, race, or gender.

All job applicants can be legally subjected to background checks. It’s important though that any processing of an applicant’s personal data is done with their consent and compliant with the Personal Data Protection Act 2010.

Once you’ve successfully hired an employee and they finish a one-month probation, they should be given employment contracts. This contract should include important job details including:

• Job description
• Compensation
• Benefits
• Working hours
• Leave entitlements
• Termination conditions

Proper classification of workers is also essential. Workers in Kuala Lumpur can be classified either as employees or independent contractors.

This classification is determined on a case-by-case basis by the Industrial Court, considering various factors such as the nature of the job, the level of control the employer has, and how the worker is treated compared to other employees.

Employees are entitled to statutory benefits like minimum wage, overtime pay, and social security, while independent contractors typically do not have access to these protections.

Hiring Foreign Employees

If your company is looking to employ foreign nationals, you’ll first need to secure approval from the Local Centre of Approval under the Ministry of Home Affairs. This approval is essential for obtaining the foreign worker quota.

Amendments to the Employment Act in 2023, also required employers to obtain approval from the Director General of Labour (DGL) for all non-Malaysian citizens and non-permanent residents who need an employment permit.

Approval from the DGL is based on several conditions, such as:

• The employer has not been convicted of human trafficking or forced labour crimes.
• There are no outstanding breaches under the Employment Act.
• The employer is compliant with social security, minimum wage, and accommodation standards.

Foreign employees are permitted to work in various sectors, including agriculture, construction, manufacturing, plantation, and services. However, it’s important to note that only certain positions are available for foreigners.

Typically, these roles are reserved for highly skilled or technical positions that cannot be filled by local talent. Common examples of such positions include:

• Top managerial roles for foreign companies operating in Malaysia
• Professional or mid-managerial positions
• Highly specialized technical roles requiring significant experience

Once the quota is approved, employers must submit the required documents to the Immigration Department. This includes the application for an employment pass along with a letter justifying why the foreign worker is needed for the position.

Successfully hire new talent for your team with our comprehensive hiring guide.

Since Kuala Lumpur is a federal territory of Malaysia, it mainly follows Malaysia Labour Laws.

One of the key pieces of legislation influencing employment in Malaysia is the Employment Act of 1955. This law outlines employment regulations for standard employee working hours, minimum wage, overtime, recordkeeping, and so on.

Leave laws in Malaysia ensure that employees have adequate time off for rest and personal needs. The Employment Act of 1955 specifies various leave entitlements, which include:

Public Holidays

Employees are entitled to 11 paid public holidays each year. If a public holiday falls on an employee’s leave period, it should be substituted with another day. And if employees work on a public holiday, they receive their regular pay plus an additional 200% premium.

Annual Leave

Paid annual leave is granted based on the employee’s length of service:

• 8 days for 1-2 years of service
• 12 days for 2-5 years of service
• 16 days for over 5 years of service

Employees with less than a year of service are not entitled to annual leave unless they leave the company.

Maternity Leave

Female employees are entitled to 98 consecutive days of maternity leave, provided they have been employed for at least 4 months prior to their due date. Leave can start no earlier than 30 days before the due date.

Paternity Leave

Fathers are entitled to a minimum of 7 days of paid paternity leave, with some employers offering up to 30 days. Eligibility requires being married to the expectant mother and notifying the employer at least 30 days before the due date.

Sick Leave

Sick leave entitlements vary by length of service:

• 14 days for 1-2 years of service
• 18 days for 2-5 years of service
• 22 days for over 5 years of service

Employees can also take up to 60 working days of hospitalization leave, requiring medical certification.

Study Leave

While not a legal requirement, study leave may be granted for short courses or exams beneficial to the employee’s career development.

Bereavement Leave

There is no specific legal entitlement for bereavement leave, but many employers provide 2-3 days of emergency leave for unforeseen circumstances.

If employees exhaust their leave options and require time off for personal matters, they may request unpaid leave, which is subject to the employer’s approval.

Learn more about Malaysia’s Leave Laws.

The Industrial Relations Act 1967 protects employees against unfair dismissal. 

Employers can terminate an employee’s contract, but it must be justified, conducted in good faith, and done fairly. If an employee believes their dismissal is unjust, they can take the matter to court.

To avoid claims of unfair dismissal, employers must have valid reasons for terminating an employee. Justifiable reasons include:

• Major misconduct (e.g., theft, sexual harassment, or ignoring safety protocols)
• Negligence in job duties
• Poor performance
• Redundancy or business closure
• Retirement
• Employee death
• Breach of contract
• Completion of the probation period
• Expiration of a fixed-term contract
• Mental health issues
• Bankruptcy
• Criminal offences
• Being absent from work for more than two consecutive days without leave or a reasonable excuse

Termination Notices

Employees should be notified of termination in accordance with the notice periods outlined in the Employment Act 1955, which depend on the employee’s length of service. The law mandates the following notice periods:

• 4 weeks’ notice for employees with less than 2 years of service.
• 6 weeks’ notice for those with 2 to 5 years of service.
• 8 weeks’ notice for employees with more than 5 years of service.

Are Terminated Employees Entitled to Severance Pay?

Eligibility largely depends on the employee’s role, salary, and the reason for termination.

Employees earning up to RM 4,000 per month or those in specific positions, such as manual labourers, drivers, domestic workers, or workers on seagoing vessels, are entitled to severance pay.

This compensation is usually provided when termination is due to company downsizing or closure. However, employees who voluntarily resign or are dismissed for misconduct or poor performance generally do not qualify for severance.

The amount of severance pay is based on the length of service.

• Less than 2 years of employment: 10 days’ wages for each year of service.
• 2 to 5 years of employment: 15 days’ wages for each year of service.
• 5 or more years of employment: 20 days’ wages for each year of service.