As many companies shift gears and lean into a remote-first work environment, employers are looking beyond borders when it comes to recruiting skilled employees. Often, this is because countries, like Malaysia, offer incredibly talented employees at a lower cost compared to many Western countries.
Salaries are essential when budgeting for new hires in Malaysia, but there are numerous other costs to consider. From overtime and severance to social security contributions, hiring overseas employees requires more than calculating your new employee’s wage.
Employers should be aware of soft benefits like coworking passes, gym memberships, and lunch stipends. Doing this will help with employee retention and satisfaction.
Overall, it’s challenging to determine how much you should budget for your new hire. This article will guide you through the cost of hiring an employee in Malaysia.
Mandatory Costs
When hiring employees in Malaysia, you’ll need to consider numerous mandatory costs. These include wages, taxes, benefits, overtime pay, and severance pay. Adherence to these costs will ensure that you are compliant with local labor laws and regulations.
Salary
Determining the salary of your new employee is crucial. While the minimum wage in Malaysia is MYR 1500.00 per month — USD 331.00 — the average salary in the country is MYR 6590 per month, which is approximately USD 1480.00.
Ultimately, though, the wage is dependent on the industry. When hiring an employee in Malaysia, consider the industry they’re in and look at the average salary there. For instance, the average salary of a software engineer in Malaysia is MYR 6610.00, or USD 1460.00, per month. In the financial services sector, the average salary for employees is MYR 7160.00, or USD 1580.00 per month.
Despite salaries fluctuating across industries in Malaysia, the cost of hiring an employee is still lower than in the United States and Canada. Malaysia’s cost of living index ranks 101st in the world, with an overall score of 35.0, well below most countries in the Americas and Europe. Hiring employees in Malaysia provides employers with the opportunity to acquire highly skilled employees while minimizing costs.
Taxes and Benefits
When hiring in Malaysia, it’s vital to be aware of the mandatory taxes and contributions. Employers are required to pay 12% of their employee earns over MYR 5000.00 per month. If it’s less than MYR 5000.00 per month, employers are to contribute 13%. This goes towards the Employee Provident Fund. For social security, employers are required to contribute 1.75%.
Paid Leave
Employees in Malaysia are entitled to take numerous types of paid leave if they meet the necessary criteria. When it comes to paid time off, it depends on the employee’s tenure with the company. If it’s under two years, they’re entitled to eight days. For two to five years, they receive 12 days. If the employee has worked with the same company for over five years, they receive 16 days off.
Malaysia also has 13 national public holidays, in which employees are not required to work. However, these holidays vary by region; some regions may have more holidays than others. This is an extra cost to consider.
New mothers are also entitled to 60 consecutive days of maternity leave, which is paid by the employer.
Male employees are entitled to 30 days of fully paid religious leave if they’ve been with the company for a period of three years. However, this is only a one-time action.
The amount of sick leave an employee is entitled to depend on their tenure with the company; it can go anywhere from 14 days to 22 days. If a medical certificate is provided, the employee’s sick leave is paid by the employer.
Overtime Pay
The standard work week in Malaysia is 48 hours. If an employee works more than that, they are to receive 150% of their standard hourly wage. This is another cost to be aware of when hiring in Malaysia.
Severance Pay
Severance pay in Malaysia varies on the employee’s length of service with the company.
- Less than 1 year of service: No severance
- 1-2 years of service: 10 days pay
- 2-5 years of service: 15 days pay
- 5+ years of service: 20 days pay
In addition to statutory benefits, employers may also choose to provide supplemental benefits. Offering additional benefits will help attract top talent, motivate staff, and increase retention.
Benefits
Making sure your new hire is happy and healthy is vital. You can support their health by offering a strong benefits package. While many employers choose to offer private health insurance for their employees, doing so comes at an extra cost.
The price will significantly vary depending on the type of private health insurance and coverage. Common health insurance providers in Malaysia include Allianz Worldwide, AXA, and Cigna Global. On average, private health insurance costs MYR 2500.00, or USD 550.00, per year.
An EOR like Borderless will typically offer a benefits package. This will usually include medical, vision, dental, and life insurance along with a retirement savings plan.
Bonuses and Extras
Malaysia doesn’t have any mandatory bonuses, such as the 13th month bonus that’s common in many other countries. However, performance-based bonuses and signing bonuses are common. Additionally, employers may want to consider offering employees a lunch or coffee stipend.
Employers also need to take workspace costs into account when hiring employees in Malaysia. Since new hires will typically be working remotely, they’ll need to set up a home office or access a coworking space.
Providing a home office stipend can be hugely beneficial. It can go towards a company laptop, ergonomic office chairs, or antivirus software.
Coworking spaces have become the go-to for many employers. Not only do coworking spaces provide employees with a designated workspace, but they also encourage networking and collaboration.
The costs of coworking offices in Malaysia vary by location. In Kuala Lumpur, employers can expect to pay approximately MYR 400-500 per month, which comes to about USD 120.00. For example, Regus, a coworking chain with locations scattered across the country, offers monthly memberships for MYR 540.00, or USD 120.00, per month in the center of Kuala Lumpur.
In Penang, however, the price of a monthly permanent desk comes to approximately MYR 480.00 per month, which comes to about USD 100.00.
Work With Borderless
Determining how much it costs to hire a new employee in Malaysia may feel overwhelming, especially with so many different factors to be aware of. Working with an Employer of Record (EOR) can help take the stress out of global hiring and budgeting.
An EOR like Borderless will do the heavy lifting, guaranteeing that you compliantly hire and pay employees in Malaysia. To get started, book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
