Global Payroll Association Presents

Malaysia

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a sole source of decision making.

A brief country overview:

Malaysia boasts one of south-east Asia's most vibrant economies, the fruit of decades of industrial growth

and political stability. Its multi-ethnic, multi-religious society encompasses a majority Muslim population in

most of its states and an economically-powerful Chinese community. Consisting of two regions separated

by some 640 miles of the South China Sea, Malaysia is a federation of 13 states and three federal

territories.

Global Payroll Association Presents

Malaysia A Brief Country Overview and Payroll Highlights

13

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other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

Key Country facts Official Language: Malay (official), English,

Chinese dialects, Tamil, Telugu, Malayalam

Currency: Malaysian ringgit

Time Zone: Malaysia Time Zone (UTC+08:00)

Country abbreviation: MY

Country dial code: +60

Statutory filing payment methods: yes

National minimum wage: Malaysia has introduced a minimum wage for the first time in a move to support low income households and amid speculation that the government may call elections soon. Private

sector workers in peninsular Malaysia will receive a minimum salary of 900 ringgit ($297; £183) a month.

Fiscal Year: 1 January – 31 December

Monthly filing deadline: 10th of following month

Annual filing Deadline: Return of Remuneration from Employment, Return of Remuneration by an

Employment, Statement of Tax Deduction and Tax remittance for individual employee. Process additional

earnings for year-end tax declaration (for payroll-related items and benefits in kind as advised by the

Customer). Prepare and file the Form E (Annual Remuneration and Deductions Statement), and CP8D to

the Internal Revenue Board of Malaysia (IRBD) before 31 of March of the following year.

Public Holidays in Malaysia 2015

Date Day Holiday State

1 Jan Thurs New Year All states except Johor, Kedah, Kelantan,

Perlis & Terengganu

3 Jan Sat Prophet Muhammad's

Birthday

National

14 Jan

Wed Yang Di-Pertuan Besar Negeri Sembilan's Birthday

Negeri Sembilan

18

Jan

Sun Sultan of Kedah's Birthday Kedah

1 Feb Sun Federal Territory Day Kuala Lumpur, Labuan & Putrajaya

2 Feb Mon Federal Territory Day

Replacement Holiday

Kuala Lumpur, Labuan & Putrajaya

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other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

3 Feb Tues Thaipusam Kuala Lumpur, Putrajaya, Johor, Negeri

Sembilan, Perak, Penang & Selangor

19 Feb

Thurs Chinese New Year National

20 Feb

Fri Chinese New Year 2nd Day

National

4 Mar Wed Anniversary of Installation

of Sultan of Terengganu

Terengganu

3 Apr Fri Easter - Good Friday Sabah & Sarawak

15

Apr

Wed Declaration of Melaka as a

Historical City

Melaka

26 Apr

Sun Sultan of Terengganu's Birthday

Terengganu

1 May Fri Labour Day National

3 May Sun Wesak Day National

7 May Thurs Hari Hol Pahang Pahang

16

May

Sat Israk & Mikraj Kedah, Negeri Sembilan & Perlis

17 May

Sun Raja Perlis' Birthday Perlis

30 May

Sat Harvest Festival Sabah & Labuan

31

May

Sun Harvest Festival

2nd Day

Sabah & Labuan

1 Jun Mon Hari Gawai Sarawak

2 Jun Tues Hari Gawai

2nd Day

Sarawak

6 Jun Sat Agong's Birthday National

18

Jun*

Thurs Awal Ramadan Johor, Kedah & Melaka

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Copyright All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or

other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

4 Jul Sat Nuzul Al-Quran Kelantan, Kuala Lumpur, Labuan, Pahang,

Perak, Perlis, Penang, Putrajaya, Selangor & Terengganu

7 Jul Tues Georgetown World

Heritage City Day

Penang

11 Jul Sat Penang Governor's

Birthday

Penang

17 Jul*

Fri Hari Raya Aidilfitri National

18

Jul*

Sat Hari Raya Aidilfitri

2nd Day

National

31

Aug

Mon National Day /

Merdeka Day

National

12 Sep

Sat Sarawak Governor's Birthday

Sarawak

16

Sep

Wed Malaysia Day National

24

Sep*

Thurs Hari Raya Haji National

25 Sep*

Fri Hari Raya Haji 2nd Day

Kedah, Kelantan, Perlis & Terengganu

3 Oct Sat Sabah Governor's Birthday Sabah

9 Oct Fri Melaka Governor's Birthday

Melaka

14

Oct

Wed Awal Muharram National

24 Oct

Sat Sultan of Pahang's Birthday

Pahang

10 Nov*

Tues Deepavali National (except Sarawak)

11

Nov

Wed Sultan of Kelantan's

Birthday

Kelantan

16

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other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

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Nov

Thurs Sultan of Kelantan's

Birthday 2nd Day

Kelantan

18 Nov

Wed Hari Hol Almarhum Sultan Johor

Johor

22 Nov

Sun Sultan of Johor's Birthday Johor

27

Nov

Fri Sultan of Perak's Birthday Perak

11 Dec

Fri Sultan of Selangor's Birthday

Selangor

24 Dec

Thurs Prophet Muhammad's Birthday

National

25

Dec

Fri Christmas National

17

Copyright All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or

other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

The Petronas Towers, also known as

the Petronas Twin Towers (Malay:

Menara Petronas, or Menara

Berkembar Petronas), are twin

skyscrapers in Kuala Lumpur,

Malaysia. According to the Council on

Tall Buildings and Urban Habitat

(CTBUH)'s official definition and

ranking, they were the tallest

buildings in the world from 1998 to

2004 and remain the tallest twin

towers in the world replacing the

World Trade Center in New York. The

buildings are a landmark of Kuala

Lumpur, along with nearby Kuala

Lumpur Tower.

Business and culture in Malaysia

What you need to know about processing payroll in Malaysia

Establishing as an Employer in Malaysia Companies are required to register as an employer for tax,

employee’s provident funds, social security funds and HRDF (Human Resources Development Fund) (if applicable).

Other registration: To Tabung Haji and Zakat can be completed for

Muslim employees if such deduction is required.

Generally, the acts that apply in relation to employment in Malaysia include; Employment Act 1955, Income Tax Act 1967, Employees

Provident Fund Act 1991, Employee’s Social Security Act 1969,

Human Resources Development Act 2001, Industrial Relation Act 1967, etc.

Employment In Malaysia employment law is outlined in the Employment Act

1955 and the Industrial Relations Act 1967, which deal with relations between employers, employees and trade unions. The

Employment Act gives minimum terms and conditions for manual

workers and non-manual workers who earn less than a defined amount. It covers full-time, part-time, temporary and contract

employment.

Part-time work is classed as being employed for less than 70

percent of the time of a full-time employee in a similar job. Casual workers, who are hired only when needed, are not covered by the

Employment Act.

Working hours are limited by:-

1. 5 consecutive hours with a period of rest for at least 30 minutes (any break of less than 30 minutes in the five

consecutive hours shall not break the continuity of that five

consecutive hours) or 8 hours must include a period of rest (including meal) of at least 45 minutes;

2. 8 hours in one day;

3. a spread-over period of not exceeding 10 hours in one

day/48 hours in one week.

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other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

Getting down to business

Visas and work permits in Malaysia

Anyone who needs a visa to enter Malaysia must apply at the Malaysian Representative Office in their home country. The Immigration Department of Malaysia has information about entry visas and application

procedures.

Work Visas or Passes

There are three main types of work visa or pass in Malaysia: Professional Visit Pass (PVP)

Employment Pass

Visitor's Pass/Temporary Employment

Other work visas or passes include: Visitor's Pass (Professional)

Malaysia Automated Clearance System (MACS)

Short Term and Long Term Social Visit Pass

Getting an employment pass can be a long process, but harsh penalties apply for those who are caught

without a valid pass. A work pass is usually valid for six months to five years.

In general, applicants must be over 23 years old (for the IT sector) and 27 years old for all other sectors.

In addition to these work visas, foreigners can apply for the Malaysia My Second Home (MM2H)

Programme. Applicants accepted on the scheme are granted a multiple-entry Social Visit Pass which is valid for ten years in the first instance and is renewable. It is open to everyone regardless of age and

foreigners with a pass can bring their partners, and children up to the age of 21, with them. Those granted a pass via the MM2H scheme can set up a business in the country and work part-time. Full

details of the scheme, the entitlements it brings, how to apply and information on living in the country can be found on the MM2H website. All the necessary forms to make an application can also be downloaded.

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Copyright All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or

other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

Tax & Social Security

Tax Budget 2014 was announced in October 25, 2013. As expected, GST was introduced in the budget and it is

scheduled to be implemented in 2015. In line with the implementation of GST, the government has also reviewed the personal income tax rates. Here are some of the key highlights:

1. Personal income tax rates is set to be reduced by 1 to 3 percentage points for all tax payers.

We expect the reduction to apply for all income group brackets but the final rate of deduction is to be finalized by LHDN.

2. Chargeable income group to be increased from exceeding RM 100,000 to exceeding RM 400,000

3. Maximum tax rate to be reduced from 26% to 24%

4. Tax rate to be reduced from 19% to 16% for chargeable income group of between RM 50,000 to RM 70,000

5. Special tax relief of RM 2,000 for those with a monthly income of up to RM 8,000 for year 2013 only. This will result in a tax savings of RM 480 for each tax payer

6. Tax payers are no longer required to submit their annual tax returns if their salaries are already being deducted under the MTD (Monthly Tax Deduction). Tax payers are to submit their annual

returns because the MTD is just an estimation of tax payable and most of the time, tax payers are

paying more than what they are expected to without taking into consideration the tax reliefs that each individual tax payer is entitled to.

All measures announced above will be effective in the year 2015 assessment

Social security The Malaysian Social Security system is called SOCSO, or PERKESO (Pertubuhan Keselamatan Sosial). It provides financial assistance to employees and their families in the event of an accident which results in

death, disability or illness, or an occupational disease. SOCSO provides two kinds of insurance:

1. Employment injury insurance 2. Invalidity pension scheme

Only Malaysian citizens and permanent residents are eligible to contribute to SOCSO and to benefit from

its services. The following individuals are exempt from paying SOCSO:

Business owners and their spouses

Domestic servants

Foreign workers

Government employees Self-employed people

SOCSO is funded by contributions from both the employer and the employee. The amount paid into the

scheme depends on an employee's earnings.

Tax reporting year The tax year in Malaysia is from 1 January to 31 December. Income tax returns must be filed before 30

April of the following year.

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other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

Payslips Employers must provide employees with a payslip each month. Each month, the payslip should include a

detailed list of all deductions to the employee’s salary including taxes, social insurance and voluntary

contributions.

Compliance

Starters/Registration An employer’s obligations for managing new starters is as follows:

Establish a formal employment contract directly with each employee; Compile and provide employee personal demographic details, employment details, payment details

(monthly salary) preferably

statutory details ( employee tax ID), EPF ID and SOCSO ID

sign off registration forms and submit (only applicable for employees with no existing EPF, SOCSO

and tax numbers), KWSP 3 (Application For Member's Registration and Amendment Of Member's Particulars for EPF), Borang 2 (Registration of new starters with the Social Security) and CP22

(New employee income tax registration notice).

It is the employer's responsibility to ensure that their employees are registered with SOCSO; a new

employee must be registered within 30 days of starting work. Coverage under the SOSCO system is optional for employees earning more than RM 3,000 per month.

Leavers/De-registration

An employer’s obligations for managing leavers is as follows:

Provide Ceridian with leaver’s name and employee number, date and cessation reason, any

additional payments due to the employee such as pro-rated bonus, leave encashment, etc.; Sign-off Form CP21 (Notification by Employer of Departure from Country of an Employee) and

Borang 3;

Inform the employee that he/she must withdraw EPF contributions before he/she leaves the country;

For employees who are about to depart from Malaysia after the cessation of employment, advise

Ceridian the amount to withhold from employee’s net salary (if applicable);

Withhold all monies due to a foreign employee upon cessation, until Internal Revenue Board of

Malaysia (IRBM) notifies the Customer of the amount of taxes due; Make tax payments to IRBM with monies that were withheld from foreign employee and return the

balance to employee;

File the Form and retain all tax payment receipts for non-citizens.

Data Retention

Employers must maintain original employees and payroll documents, including key payroll register reports and statutory reports Tax Listing (CP39), EPF Listing (KWSP6), Retirement Fund and SOCSO Listing

(Borang 8A) for a minimum of ten (10) years or as required by the local law. Electronic storage is acceptable.

111

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other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

Statutory Absence/Payments

Annual leave

Every employee is entitled to ten out of any of the gazetted public holidays (four of which shall be the

National Day; the Birthday of the Yang di-Pertuan Agong, the Birthday of the Ruler of the State and the Workers’ Day) and any day declared as a public holiday by the Federal/State Government under S.8 of the

Holidays Act 1951 in any one calendar year.

As for annual leave, in accordance to the Employment Act, 1955, an employee is entitled to the following

amount of paid annual leave:- 1 to < 2 years – 8 days

2 to < 5 years – 12 days

5 years - 16 days.

The employer shall grant and the employee shall take such leave not later than twelve months after the

end of every twelve months continuous service and any employee who fails to take such leave at the end of such period shall thereupon cease to be entitled thereto: provided that an employee shall be entitled to

payment in lieu of such annual leave if, at the request of his employer, he agrees in writing not to avail himself of any or all of his annual leave entitlement.

Maternity leave As long as you have worked for your employer for at least 90 days in the four months before starting

maternity leave. Under the 1955 Employment Act, you are then entitled to at least 60 consecutive days of

maternity leave at full pay.

Your employer cannot fire you or give notice of termination during your maternity leave.

In some cases, you may be entitled to more than the statutory two-month maternity leave:

mums in the civil service can apply for additional five years of unpaid leave after their maternity leave;

banks and some state government employees also enjoy 90 days of maternity leave;

some multinational companies provide even more than 90 days of maternity leave.

Maternity benefits generally apply to the first five children, under the law, you will not be entitled to

maternity leave for a sixth child and any subsequent children.

Under the law, you are also not entitled to maternity leave after adopting a child however some employers

are starting to offer this on a case by case basis.

Paternal leave

Unlike maternity leave, there is no law that actually requires employers to provide paternity leave. As such,

although the overwhelming majority of employers in Malaysia do allow paternity leave, some are more

generous than others. So how much paternity leave allowed depends entirely on the employer.

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other electronic or mechanical methods, without the prior written permission of the publisher. Disclaimer Every effort has been made to ensure that all information in this booklet is correct at time of publication. This information should be used as reference only and not as

a sole source of decision making.

In general;

Malaysian civil servants are entitled to seven days' paternity leave; some state government

employees can take up to 14 days. Some companies only provide one to three days of paternity leave. On the more generous end of

the spectrum, some multinationals allow male employees up to 14 days to a month.

Many companies also allow new dads to take unpaid leave, compassionate leave or use their

annual leave for this purpose.

Sickness The number of days of paid sick leave which an employee is entitled to in each calendar year is as follows:-

1. Less than 2 years – 14 days

2. 2 to <5 years – 18 days 3. > 5 years – 22 days.