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Entering Employment in Malaysia: A Simple Guide for Employers and Employees

Introduction: Entering into an employment relationship in Malaysia involves a series of considerations, from contract terms to probationary periods and legal requirements.

Whether you're an employer looking to hire or an employee seeking clarity on your rights, understanding the basics is crucial.

This article explores the essentials of the employment landscape in Malaysia, offering insights into contract types, probationary periods, and legal obligations.

Basics of Entering into an Employment Relationship:

i. Employment Relationship:

  • Employment contracts can be written or oral but a contract of service for a specified period of time exceeding one month or for the performance of a specified piece of work, where the time reasonably required for the completion of the work exceeds or may exceed one month, shall be in writing.

  • Terms of employment may also be found in an employment handbook, often referenced in the contract.

  • Fixed-term contracts are recognised but can be considered permanent if repeatedly renewed.

  • The Minimum Retirement Age Act sets limits on fixed-term contracts.

ii. Probationary Periods:

  • Probationary periods are recognised in Malaysia.

  • There's no statutory minimum notice for probationer dismissal; termination depends on the contract.

  • All employees, including probationers, are governed by the EA.

  • Probationers have the right to lodge complaints for unfair dismissal under the Industrial Relations Act 1967

iii. Establishing a Presence:

  • Foreign companies can hire employees in Malaysia without official registration.

  • However, actively soliciting business or concluding contracts may be considered conducting business in Malaysia.

  • Engaging independent contractors or employees might create a permanent establishment (PE) in Malaysia.

  • Having a PE in Malaysia subjects income generated to Malaysian income tax.

  • Employers must pay benefits under various schemes, including employee provident funds, SOCSO, and employment insurance.

iv. Employment Act 1955

The Employment Act 1955 is a cornerstone of labour law in Malaysia, providing crucial protections and regulations for both employees and employers.

v. Industrial Relations Act 1967

The Industrial Relations Act 1967 is pivotal in managing workplace relations and resolving disputes between employers and employees in Malaysia.

Conclusion: Understanding the basics of entering an employment relationship in Malaysia is essential for both employers and employees.

It encompasses contract types, probationary periods, and legal requirements.

Employers must navigate these aspects while ensuring compliance with local laws, and employees should be aware of their rights and protections under the law.

By adhering to these principles, both parties can foster a fair and productive working relationship within the Malaysian employment landscape.

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