Sample Employment Contract for Foreign Worker in Malaysia

The minimum retirement age for workers in Malaysia is 60, although employment contracts may provide for an earlier age. In fact, retirement age must be included in all employment contracts if an employer wants to avoid being liable for the payment of severance pay to older employees. Although non-compete obligations are difficult to enforce in the country, employment contracts can and should prohibit former workers from sharing confidential information they received during their employment and interfering with the activities of their former employer. This means that while employers will have difficulty enforcing a general non-compete clause, they can take legal action if a former employee debauchs clients or colleagues. Termination of an employment contract Employers and employees have the right to terminate an employment contract. If no mandatory notice period is specified, the notice period must correspond to the length of time the employee has worked for the company. For example, employees who have worked for:• Less than two years must be dismissed or received four weeks in advance;• Two to five years must be dismissed six weeks in advance;• More than five years must be notified eight weeks in advance. If an employer terminates an employee`s employment contract without giving the employee the required notice period, he must pay his employee the same salary as if he had been dismissed. Employers can terminate an employee`s contract without proper notice due to misconduct – although they must conduct an appropriate investigation into the situation. However, since the Labour Code does not exhaustively define what constitutes misconduct, employment contracts must be very clear about the types of measures it represents.

You should also explain the effects of such actions. – First published by ASEAN Briefing. Since its inception in 1992, Dezan Shira & Associates has guided foreign clients through Asia`s complex regulatory environment, assisting them in all aspects of legal, accounting, tax, internal control, human resources, payroll and audit. As a full-service consulting firm with operational offices in China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For any inquiries, please send an e-mail to usat info@dezshira.com. Further information about the law firm is available at www.dezshira.com. Any form of employment that lasts more than one month must be formalized by a written contract. This contract should specify the main terms of the employment relationship, including the place of work, scope, wage rates, pay period, leave, social benefits and health and safety issues. In Malaysia, all employment contracts are governed by the Employment Act 1955, which stipulates that the right of workers to participate in or join trade unions may not be restricted. Employers are also required to keep these contracts for six years after they expire.

But a historical sensitivity to abusive labor practices and the resulting litigation means that foreign investors should proceed with caution if they come into conflict with local labor laws or trigger costly labor disputes. To solve the problem, Malaysia, along with other members of the Association of Southeast Asian Nations (ASEAN) trading bloc, such as Indonesia and Vietnam, have distinguished themselves by imposing the need for a formal, written employment contract signed by all parties involved. If these formal contracts are drafted with a solid understanding of Malaysia`s regulatory landscape and labour laws, they can serve as a solid foundation for human resource management in the country. Employment contracts can be fixed-term or open-ended. However, if a fixed-term contract is renewed several times, malaysian courts may consider the employee concerned to be a permanent employee in the event of dismissal. Although the Labour Code does not provide for a maximum probationary period, it usually lasts up to three months. Employers also have the right to extend the probationary period if a new employee is not up to date. Employment contracts, on the other hand, should explicitly state the length of an employee`s probationary period, the expected labour standards and subsequent remedies if these standards are not met. “Any form of employment that lasts more than a month must be formalized by a written contract.” Malaysia remains an attractive destination in Southeast Asia for foreign direct investment, providing foreign employers with a skilled workforce at competitive prices. Malaysia uses several tax brackets depending on an employee`s salary and tax status.

Employees who work in the country for 182 days or more each year are generally considered tax residents. Non-tax residents are taxed at a flat rate of 28%. Employers and employees must contribute to a person`s social security through the Employees` Provident Fund (EPF) and the Social Security Organization (SOCSO), which cover survivors` benefits, retirement, disability and medical payments. National and foreign employees, self-employed persons and spouses of the self-employed are not bound by the ETH or SOCSO. Rather than viewing the task of preparing and signing a clear and comprehensive employment contract as a bureaucratic task imposed on them by Malaysian law, foreign investors should see it as an opportunity to create a solid foundation for positive employment relationships, promote workforce stability and help limit disputes and disruptions in the process. Labour Court, depending on the preferences of both parties and the severity of the collision. The Labour Court is a statutory tribunal created specifically for the settlement of disputes between employers and employees or between employers and trade unions. . Pension fund (for employees under 55 years of age). .