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Employment in Malaysia

Malaysia’s economy is one of the most successful in Asia. The workforce in Malaysia benefits from an open, state-oriented, recently industrialized market economy with two key sectors: international trade and manufacturing.

The country is also an important center of Islamic finance, with a comparatively high number of women working in the Islamic banking sector. As in many other Asian economies, the employment statistics of Malaysia are gradually shifting towards the services sector.

Malaysia: Facing the Competition

Traditionally, Malaysia’s economy used to be focus on producing rubber, tin, and palm oil, and has been propelled by the country’s large amounts of natural resources, especially petroleum and liquefied natural gas. The local labor force has witnessed the shift from an economy based on agriculture and mining towards one fueled by the petrochemical industries in the 1970s and 1980s.

These days, a considerable number of people are still employed in Malaysia’s secondary sector, and it is one of the world’s largest exporters of electrical goods, semiconductors, and IT/CT products. However, many industries are in decline. This development is due to competition from other low-cost economies as well as the targeted expansion of the services sector.

Employment shares are spread across the three sectors as follows: 53% of the active population is working in Malaysia’s services sector, 36% are still employed in various industries, but only 11% of the active population work in the agricultural sector.

Malaysia’s Growing Economy

Despite recent attempts to move away from an over-reliance on export, the latter still dominates Malaysia’s economy. As mentioned above, laborers working in Malaysia produce petroleum-based products, semiconductor devices, electronics, textiles, palm oil, and timber as well as information and communication technology for export.

As one of the recent growth areas, information and communication technology in particular has become an increasingly important provider of employment. Other expanding sectors are science (e.g. biotechnology, nanotechnology, and renewable energies) and tourism (including medical tourism).

Major multinational companies with expat personnel working in Malaysia include Accenture, CIMB Group, Exxon Mobil, HSBC, KPMG, Maybank, Pricewaterhouse Coopers, Public Bank Berhad, Schlumberger, and Shell.

Achieving Expat Status

Before you can start working in Malaysia, you need to be granted expat status. The country has a dedicated Expat Committee, which deals with questions of expat employment.

There are two preliminary requirements which must be fulfilled by prospective expats: a minimum salary of 5,000 MYR and a minimum employment period of two years. On top of that, only people who fall into one of the following categories qualify for becoming expats in Malaysia:

  • Key post: You occupy a top managerial position in the company in question.
  • Executive post: You hold a middle management post and have relevant professional experience and academic qualifications.
  • Non-executive post: You are highly skilled thanks to your technical know-how and are thus indispensable for the company.

Malaysia: Expat Status and Social Security

Becoming an Expat in Malaysia

Before the application can be processed, the company in question must obtain approval from the authorized agency responsible for the “core business” area of the company. The Immigration Department provides a list of all such agencies and their areas of responsibility in its online portal.

All approved applications are evaluated by the Expat Committee (EC) according to several criteria, including the company’s equity and activities, relevance of the post to the company’s activities, local human resources, monthly income, age, and work experience of the expat-to-be.

At this stage, you need to apply for a visa (with reference) if your nationality requires it. If the EC has given you expat status, you should also apply for your Employment Pass. Close family members may accompany an approved expat on a Dependant Pass (i.e. Long-Term Social Visit Pass). Domestic servants can be brought along without many formal obstacles.

Social Security: Taking Care of the Population

The Malaysian Social Security System rests on two pillars: the Employees Provident Fund and the Social Insurance System. The latter administers benefits under two schemes, the employment injury scheme and the invalidity pension scheme. The Provident Fund runs two mandatory individual accounts per person to pay for old-age, disability and survivor benefits.

Money in either account of the Provident Fund may be used for other, government-approved purposes such as investment in unit trusts (account no.1) or the purchase of property, to cover education costs or to pay for the treatment of designated critical illnesses (account no.2).

Once the employee has reached the age of 55, all funds can be withdrawn without specific approval. Expats or permanent residents leaving the country after a period of employment in Malaysia can withdraw all their funds. Fill in the relevant application forms provided on the web portal of the Employees Provident Fund.

Social Security for Everyone

Every private sector employee in Malaysia automatically becomes a member of the Employees Provident Fund. Self-employed persons, domestic workers, and foreigners can opt for voluntary coverage. Social Insurance is compulsory for all non-foreign employees up to the age of 55 earning more than 3,000 MYR per month.

Employee contributions to the Provident Fund amount to 11% of monthly earnings for members up to the age of 54, and 5.5% thereafter. 70% of contributions go into account no.1, 30% into account no.2. They are complemented by an employer contribution of 12% and 6% respectively.

Social Insurance contributions are calculated at 0.5% of the employee’s monthly wage class earnings (according to 24 wage classes) for the employee. The employer also has to contribute 0.5% of the monthly payroll.

Healthcare and Etiquette in Malaysia

Cheap Healthcare, Great Service

The Malaysian healthcare system is divided into a public and a private sector. To ensure adequate medical care for the general population, all doctors are required to work in a public hospital for at least three years before going private. In order to attract medical tourists, Malaysia has taken great care to ensure high standards in hospitals and medical centers. However, rural areas often don’t offer the same high-quality facilities as big cities.

Although medical care in Malaysia is cheaper than in most Western countries, all expats are strongly advised to take out comprehensive health insurance coverage. If you pay contributions to the Employees Provident Fund, this will cover you for all necessary medical treatment and rehabilitation care in government hospitals. However, to be on the safe side, make sure you purchase at least a supplementary health insurance package from a worldwide insurance provider. This allows you treatment in private hospitals.

Income Taxes

In Malaysia, income derived from non-Malaysian sources is exempt from income tax. Under a special expat tax regime, an expat’s entire income is exempt from income tax if the expat’s period of employment in Malaysia does not exceed 60 days per calendar year.

Foreigners who work in Malaysia for more than 60 days per year but still don’t qualify as residents are taxed at a flat rate of 26% on all income from Malaysian sources. Everyone who is physically present in Malaysia for more than 182 days per year qualifies as a resident for tax purposes. In this case, income tax will be withheld from your salary and settled upon filing of the tax return after the close of the tax year.

To prevent any clashes of authority between source country and residence country over taxation matters, Malaysia has entered into double taxations agreements with 70 countries worldwide. Further information on taxation and a list of all DTAs can be found on the official website of the Malaysian Industrial Development Authority.

Business Etiquette: Faux Pas and Royal Attendance

In general, if you follow the same rules as you would in several other Asian countries, you should be safe in Malaysia. Avoid the following cultural faux pas: touching someone’s head (the seat of the soul); touching something, or worse, someone with your foot, or even pointing your foot at someone; greeting someone or eating with your left hand. All these actions are considered offensive.

When doing business, wear formal and conservative attire, but avoid the color yellow since it is reserved for royals. If you are at a meeting and nobody is smoking, this might be because a member of the royal family is present, so never be the first one to light a cigarette. As the royal family is quite large and heavily involved with the business world, this is not an unlikely scenario.

Remember that many Asian cultures are not exactly known for their directness: You can expect business negotiations to be very long-winded and not as straightforward as you might have hoped for. Learn to read between the lines, never refuse a request outright, and never lose your temper.

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  • Adam Malewski

    With all the great information on this site, getting settled in Kuala Lumpur was a piece of cake.

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    A former business partner recommended InterNations to me when I moved abroad to Malaysia. We still use it to stay in touch.

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