Hiring in Malaysia: Tips for Attracting and Retaining Top Talent

Hiring in Malaysia can be challenging, especially in a competitive market. The country’s dynamic economy and diverse industries, from manufacturing to technology and finance, create a high demand for skilled professionals. Employers must navigate a landscape where the competition for top talent is fierce, and the stakes are high.

A recent survey by Robert Walters revealed that 60% of employers in Malaysia may struggle to retain their top talent, as 48% of professionals expect salary increases due to the rising cost of living [1]. This heightened employee demand emphasises the need for effective recruitment and retention strategies.

With the right strategies, employers can attract and retain the best candidates, ensuring their business stays ahead. This involves offering competitive salaries and creating a work environment that fosters growth, innovation, and job satisfaction. For instance, companies that invest in employee development and well-being tend to see higher retention rates and increased productivity. According to a Gartner survey, workers think enhancing their skills beyond their job duties is now more important than before the COVID-19 pandemic. Furthermore, the survey revealed that employees depart from their current employers for improved professional development opportunities (45%) and higher compensation (48%) at similar rates [2].

In the sections that follow, we will delve deeper into specific strategies that can help employers in Malaysia attract and retain top talent. From crafting effective job descriptions to leveraging social media for recruitment and building a strong employer brand; these tips will equip you with the tools needed to succeed in the competitive Malaysian job market. Furthermore, we will explore how partnering with an Employer of Record (EOR) can simplify the hiring process and ensure compliance with local regulations, allowing you to focus on growing your business.

Understanding the Malaysian Job Market

Economic Overview

Malaysia’s economy is diverse, with significant contributions from manufacturing, services, and the oil and gas sectors. The country’s strategic location, at the heart of Southeast Asia, makes it an attractive destination for businesses looking to expand in the region.

In 2023, Malaysia’s GDP was estimated to be $1,595 billion. By 2024, it had increased to $1,666 billion, reflecting steady growth driven by domestic consumption and international trade [5].

Palm oil is a cornerstone of agricultural output, making Malaysia the world’s second-largest producer of this commodity. It contributes about RM40 billion annually to the GDP. The manufacturing sector, accounting for RM1.2 trillion of the GDP, includes key sub-sectors such as chemicals, automotive, and electrical and electronics (E&E), each playing a vital role in economic growth [6].

The services sector, the largest contributor, represents nearly 55% of GDP growth, encompassing finance, tourism, and ICT, with tourism alone generating RM75 billion in 2023 [6]. Oil and gas, driven by Petronas and major international companies, contribute around RM300 billion annually, highlighting the sector’s enduring significance [6].

This multi-faceted economic landscape, supported by business-friendly policies and strategic partnerships between federal and state governments, ensures Malaysia’s continued attractiveness for foreign investment and sustained development.

Labour Market Trends

The Malaysian labour market is experiencing significant shifts driven by technological advancements and the need for digital skills. According to a survey by Economist Impact, supported by Google, conducted between November 2022 and January 2023, 65% of Malaysian employees identified digital skills as crucial.

83.1% of employees prioritise basic digital competencies, with a growing emphasis on advanced skills such as AI, machine learning, cloud computing, and cybersecurity. The demand for digital talent is expected to grow 7.6% annually over the next three years, driven by the country’s digital economy blueprint, which predicts that technologies like AI could increase GDP by up to 26% in the next decade.

Furthermore, soft skills are also highly valued, with 54% of Malaysian employees considering them important, particularly in areas like interpersonal and intercultural communication. This is higher than the regional average, reflecting the diverse nature of Malaysian workplaces.

However, the country faces challenges such as an ageing population, rising youth unemployment (11.1%), and brain drain, with a 5.6% emigration rate. Over the next five years, the estimated cost to adequately upskill 10 million Malaysians is around US$68 billion.

The survey highlights the need for collaboration between employers and the government to support upskilling efforts. While employees place the responsibility of upskilling on employers, they also expect financial support from the government. Addressing barriers such as high course costs and poor internet access is essential for bridging the skills gap. Employers can foster a culture of continuous learning by providing structured and financially supported learning opportunities.

These efforts are crucial as Malaysia transitions toward a service-oriented and digitalised economy, increasing the demand for digital trade, payments, and public services, thereby requiring a workforce well-prepared for these changes.

Source: Economist Impact, Bridging the skills gap: Fuelling careers and the economy in Malaysia

Regional Distribution and Minimum Wages

With the increase in minimum wage for employees from RM1,200 to RM1,500 per month from 1 July 2023 for employers who employ less than five employees other than an employer who carries out a professional activity classified under the Malaysia Standard Classification of Occupations (MASCO) as published by the Ministry of Human Resources (‘MASCO Employer’), the minimum wage for employees throughout Malaysia has now been aligned [7].

Accordingly, as of 1 July 2023, the minimum wage rates payable to an employee throughout Malaysia are as follows [8]:

For an employee who is not paid basic wages but is paid wages based only on piece rate, tonnage, task, trip or commission, the rate of monthly wages payable to that employee shall not be less than RM1,500.

The increase in minimum wage for employees whose employer (other than a MASCO Employer) employs less than five employees had previously been deferred from 1 January 2023 to 1 July 2023 whereas the minimum monthly wage of employees whose employers employ five or more employees or are MASCO Employers (regardless of the number of employees employed) had been increased to RM1,500 from 1 May 2022.

Salary Range by Sector in Malaysia

Malaysia has undergone a significant transformation from its agricultural roots to becoming one of Asia’s dynamic economies. This shift, particularly over the last three decades, has seen the country embrace industrialisation and prepare for the digital-first Industry 4.0 era, resulting in a thriving job market. For those who are looking to hire in Malaysia, it is essential to understand the salary ranges across various sectors to make informed decisions.

The average salary in Malaysia for a full-time worker stands at RM 6,610 per month or RM 79,300 annually. This figure varies significantly across different sectors. For example, professionals in engineering enjoy an average annual salary of RM 47,580, reflecting the high demand for technical skills in Malaysia’s growing manufacturing and infrastructure projects. Marketing and sales roles also command competitive salaries, with an average annual pay of RM 45,983, driven by the need for effective market penetration strategies in a competitive business environment. Similarly, the banking, finance, and insurance sectors offer an average annual salary of RM 45,300, underscoring the importance of financial expertise in Malaysia’s robust economy.

Information technology (IT) and journalism & translation are other high-paying sectors, with average annual salaries of RM 44,746 and RM 44,700, respectively. The demand for IT professionals is fueled by the country’s digital transformation initiatives, while the steady demand for content and communication skills drives the journalism sector. These figures highlight the diverse and competitive nature of Malaysia’s job market, where salary levels are influenced by industry demand, job roles, educational qualifications, and experience. Understanding these salary trends can help employers navigate the Malaysian employment landscape effectively, ensuring they offer competitive compensation packages to attract and retain top talent.

Source: Instarem. (2024). Average salary in Malaysia in 2024 – The ultimate guide.

Competitive Labour Market

Malaysia’s labour market is highly competitive, driven by a growing demand for skilled professionals across various industries. Key sectors such as information technology (IT), finance, and engineering particularly need talent due to the rapid technological advancements and economic growth in these areas. According to a Gartner survey, workers increasingly prioritise skill enhancement beyond their immediate job responsibilities [3]. This trend is evident as many employees seek opportunities for professional development and higher compensation, often leaving their current positions for roles that offer better career prospects.

To remain competitive, companies in Malaysia must adopt strategic approaches to attract and retain top talent. Offering attractive salaries is fundamental, but it is equally important to provide clear pathways for career advancement. Professional development programs are essential, including continuous learning opportunities, certifications, and skill-building workshops. By investing in employee growth and creating a supportive work environment, businesses can retain their best employees and enhance their overall productivity and innovation capacity. Furthermore, fostering a culture that values and encourages lifelong learning can help companies adapt to the ever-evolving market demands and technological changes.

Workforce Distribution by Sector

The services sector is the largest contributor to Malaysia’s GDP, accounting for nearly 55% of growth, with significant contributions from finance, tourism, and ICT. Manufacturing follows, contributing RM1.2 trillion, with sub-sectors like chemicals, automotive, and E&E playing vital roles. The oil and gas sector, driven by Petronas, contributes around RM300 billion annually. Understanding the workforce distribution helps businesses identify key areas for recruitment and expansion.

Source: New Straits Times. (2024). 4 sectors driving the Malaysian economy.

Attracting and Retaining Top Talent

To attract and retain top talent in Malaysia, companies should focus on several key strategies:

• Competitive Compensation: Offering salaries that meet or exceed industry standards is essential. Regular salary reviews and adjustments for inflation can help retain employees.
• Professional Development: Providing opportunities for skill enhancement and career growth is crucial. Training programs, workshops, and certifications can attract ambitious professionals.
• Work-Life Balance: Promoting a healthy work-life balance through flexible working hours, remote work options, and wellness programs can enhance job satisfaction.
• Employee Benefits: Offering comprehensive benefits packages, including health insurance, retirement plans, and performance bonuses, can make a company more attractive to top talent.
• Positive Workplace Culture: Fostering an inclusive and collaborative work environment can boost employee morale and reduce turnover.

Regulatory Environment

When expanding your business operations into Malaysia, understanding and navigating the regulatory environment is crucial for success. Malaysia has specific labour laws and regulations that govern employment relationships, ensuring that both employers and employees are protected. Compliance with these regulations helps avoid legal penalties and fosters a fair and transparent workplace. This section delves into the key aspects of Malaysia’s regulatory environment for employment, including employment contracts, types of contracts, legal compliance, special considerations for foreign workers, best practices for drafting contracts, and the termination process.

Employment Contracts

In Malaysia, employment contracts must comply with the Employment Act 1955. This foundational law sets the framework for employment terms and conditions. Employment contracts should clearly outline job responsibilities, compensation, benefits, and termination conditions. These contracts are a mutual agreement between the employer and the employee, detailing expectations and obligations. A well-drafted contract prevents disputes and ensures a smooth working relationship.

Types of Employment Contracts

Employers in Malaysia can choose from various types of employment contracts, each catering to different employment scenarios and requirements. The main types include:

• Permanent Contracts: These are long-term contracts with no predetermined end date, providing job security and continuous employment benefits.
• Fixed-Term Contracts: These contracts are for a specific duration or project. They end when the term expires, or the project is completed. Renewal or extension is possible but must be clearly stated.
• Part-Time Contracts: These are for employees who work fewer hours than full-time staff. Part-time contracts must comply with the Employment (Part-Time Employees) Regulations 2010, ensuring proportionate benefits based on hours worked.

Each type of contract has specific legal requirements and implications for employee rights and benefits, and it is important for employers to choose the appropriate contract type to suit their operational needs and ensure compliance.

Ensuring Legal Compliance

Compliance with Malaysian labour laws is crucial for all employers. This includes adhering to regulations regarding minimum wages, working hours, overtime pay, and employee benefits.

The minimum wage in Malaysia is RM1,500 per month as of 2023, and employers must ensure that all employees are paid at least this amount. Working hours should not exceed the legal limits, and employees are entitled to adequate rest days and leave.

According to the Malaysian Employment Act 1955, the standard working hours for full-time workers are governed to maintain a healthy balance between work and personal life. According to the law, it is specified that an employee must not exceed 45 hours of work in a week.

Non-compliance can result in severe legal penalties, damage to a company’s reputation, and potential labour disputes. Employers should stay informed about updates to labour laws and regulations to ensure ongoing compliance.

Key Clauses for Compliance

Employment contracts should include specific clauses to ensure compliance with Malaysian labour laws and protect the company’s interests. These clauses typically cover:

• Probation Periods: Clearly defined periods during which the employee’s performance is evaluated.
• Notice Periods: The required notice time that either party must give before terminating the contract.
• Confidentiality: Provisions to protect sensitive company information.
• Non-Compete Agreements: Clauses that restrict the employee from engaging in competing businesses during and after employment.

These clauses help establish clear expectations and protect both the employer and the employee.

Best Practices for Drafting Employment Contracts

When drafting employment contracts, employers should ensure that the terms are detailed, clear, and compliant with local laws. It is advisable to consult with legal experts to ensure that the contract covers all necessary aspects and protects the company’s interests. Regular reviews and updates of employment contracts are necessary to reflect changes in legislation, company policies, and market conditions. Clear communication of contract terms to employees is also crucial to prevent misunderstandings and foster a positive working relationship.

Termination Process and Compensation

The termination process in Malaysia is governed by the Employment Act 1955, which sets out the legal requirements for terminating an employment contract. Employers must provide adequate notice, which varies depending on the length of service. For example, a minimum of four weeks’ notice is required for employees who have been employed for less than two years. Employees who have worked for two to five years require six weeks’ notice, and those employed for more than five years need eight weeks’ notice.

Additionally, severance pay is mandatory and based on the service length. For example, employees with less than two years of service are entitled to ten days’ wages for each year of service. Those with two to five years of service receive fifteen days’ wages for each year, and those with more than five years receive twenty days’ wages for each year of service [9]. Fair and transparent termination practices are essential to maintain a positive employer reputation and to avoid potential legal disputes. Employers should ensure that the termination process is handled with sensitivity and compliance with legal requirements to uphold the rights and dignity of the employee.

Employment Benefits & Statutory Requirements

1. Employees’ Provident Fund (EPF) for Malaysian citizens and permanent residents:

2. Employees’ Provident Fund (EPF) for expatriates and foreign workers:

For expatriates and foreign workers without permanent resident status, contributing to the EPF is voluntary, not mandatory. Employers can choose to contribute as little as RM 5 per person for employees below 60 years old, who can contribute 11.0% of their wages. For employees above 60 years old, the minimum contribution is 5.5%.

3. Social Security Organisation (SOCSO)

SOCSO administers the Employment Injury Scheme (EIS) and the Invalidity Scheme (IS). Contributions are as follows:

• Both employer and employee contribute monthly, with a maximum of MYR 86.65 for the employer and MYR 24.75 for the employee.
• For employees not eligible for IS, the employer’s contribution to EIS is capped at MYR 61.90 monthly.

4. Employment Insurance System (EIS)

EIS provides benefits and re-employment programs for insured persons in case of job loss. Contributions are:

• Both employer and employee each contribute 0.2% of the employee’s wages, up to a maximum of MYR 9.90 monthly.

Source: PwC. (2024). Individual – Other taxes. Social security contributions

5. Non-Mandatory Employee Compensation Benefits

Companies may offer additional benefits such as dental care, vision care, and fitness memberships to attract and retain employees.

Work Permits and Visas

Malaysia is an attractive destination for expatriates due to its vibrant economy and diverse job opportunities. Understanding the work permits and visa options is essential for businesses looking to hire foreign talent. This section provides a comprehensive overview of the types of work permits and visas available in Malaysia, the application process, required documents, visa validity, and provisions for bringing family members.

Types of Work Permits and Visas

Malaysia offers various work permits and visas tailored to different categories of workers and employment durations:

• Employment Pass (EP): Suitable for foreign professionals in key positions, such as managerial roles or technical experts. This pass is typically valid for up to five years and is renewable.
• Professional Visit Pass (PVP): Ideal for foreign professionals visiting Malaysia on short-term assignments, usually up to 12 months. This pass is non-renewable.
• Residence Pass-Talent (RP-T): Designed for highly skilled expatriates, the RP-T provides a longer-term stay of up to 10 years and allows for more flexibility in employment options.
• Malaysia My Second Home (MM2H) Visa: This long-term visa is aimed at attracting retirees and those who wish to make Malaysia their second home. It offers a renewable 10-year visa and benefits such as multiple-entry privileges, property purchase rights, and more.

How to Apply for a Malaysian Work Visa

Employers are responsible for applying for work visas on behalf of their foreign employees through the Expatriate Services Division (ESD) portal. The application process involves:

1. Registration: Employers must register with the ESD portal and obtain approval to hire foreign workers.
2. Submission of Documents: Necessary documents, such as the employment contract, company registration, and employee qualifications, must be submitted.
3. Approval and Issuance: Upon approval, the work visa is issued, allowing the foreign employee to enter and work in Malaysia.

Documents Needed for Different Types of Work Visas

The required documents vary depending on the type of work visa but generally include:

• Valid passport with a minimum of six months’ validity
• Employment contract detailing job role and salary
• Company registration documents
• Proof of relevant qualifications and work experience
• Medical examination reports (for certain visa types)

Additional documents may be required based on specific visa requirements.

Validity and Extension of Work Visas

Work visas in Malaysia are typically valid for one to five years, depending on the type of visa and the terms of employment. Extensions are possible but must comply with immigration regulations and require continued employment:

• Employment Pass: Renewable for the duration of employment, subject to approval.
• Professional Visit Pass: Non-renewable, limited to the initial validity period.
• Residence Pass-Talent: Renewable, with a maximum duration of up to 10 years.
• Malaysia My Second Home (MM2H) Visa: Renewable for 10-year periods, subject to meeting the program’s financial and residency requirements.

Bringing Family Members

Foreign employees can bring their dependents to Malaysia under Dependent Passes, subject to meeting specific criteria. The process includes:

• Application: Submitted along with the primary work visa application.
• Criteria: Dependents must be immediate family members (spouse and children).
• Approval: Issued by immigration authorities, allowing dependents to reside in Malaysia during the employee’s tenure.

Understanding the intricacies of Malaysia’s work permit and visa system is crucial for businesses seeking to hire foreign talent. By following the appropriate procedures and ensuring compliance with immigration regulations, employers can successfully navigate the process, facilitating a smooth transition for their international employees.

Source: Expatriate Services Division, Malaysia Immigration Department, Malaysia My Second Home (MM2H) Visa\

10.0 Cultural Nuances

Malaysia is renowned for its rich cultural diversity, encompassing a vast array of ethnic groups, languages, and religions. The primary ethnic groups are Malays, Chinese, and Indians, each bringing unique cultural traditions and practices. Understanding these cultural nuances is crucial for effective talent management and fostering a harmonious workplace.

Respect for Local Customs and Religious Practices

Respecting local customs and religious practices is fundamental in managing Malaysian employees. Key religious and cultural festivals, such as Ramadan for Muslims, Chinese New Year for the Chinese community, and Deepavali for the Indian community, play significant roles in the lives of employees. Employers should show sensitivity during these periods, such as accommodating flexible working hours during Ramadan or granting leave for major festivals. Recognising these events can enhance employee morale and loyalty.

Communication Styles

Communication in Malaysia often reflects the cultural diversity and social hierarchy. Malaysians generally value politeness, indirect communication, and respect for authority. Understanding these communication styles can help in delivering feedback effectively and maintaining positive employee relationships. For instance, providing constructive criticism should be done tactfully to avoid causing loss of face.

Managing Diverse Teams

Managing a culturally diverse team in Malaysia involves recognising and appreciating the different values and work styles that employees bring. For example, Malaysian employees may prefer collaborative and community-oriented work environments. Encouraging teamwork and recognising collective achievements can be more motivating than individual rewards. Additionally, being aware of cultural holidays and respecting religious practices by providing appropriate accommodations can significantly enhance employee satisfaction and retention.

Effective Leadership Practices

Effective leadership in Malaysia involves blending respect for cultural traditions with modern management practices. Leaders should strive to create an inclusive environment where all cultural backgrounds are valued. This can be achieved by celebrating cultural diversity through events, promoting cross-cultural understanding, and providing diversity training.

Source: Cultural Dimensions Among Malaysian Employees

Conclusion

Malaysia presents a vibrant and competitive labour market with significant opportunities for businesses. By understanding the local labour market, offering competitive compensation, ensuring legal compliance, and fostering a positive workplace culture, companies can attract and retain top talent.

Engaging an Employer of Record (EOR) like Eos Global Expansion can simplify the process of hiring in Malaysia. EOR services provide comprehensive support, from compliance with local laws to managing payroll and benefits, allowing businesses to focus on their core operations while ensuring a smooth and efficient expansion into the Malaysian market. Contact us today.

Reference

1. The Edge. (2023). Robert Walters: 60% of Malaysian employers may struggle to meet top talents’ salary expectations
2. Michael Page. (n.d.). How to attract talent in a candidate-short market.
3. Gartner. (2022). Gartner HR Research Finds Just 25% of Employees Are Confident About Their Career at Their Current Organization.
4. StaffAny. (2023). 10 Hiring Strategies to Attract Top Talents 2023.
5. World Economics. (n.d.). Malaysia’s Gross Domestic Product (GDP).
6. New Straits Times. (2024). 4 sectors driving the Malaysian economy.
7. KPMG (n.d.). The minimum wage conundrum.
8. Warta Kerajaan Persekutuan. (2022). Minimum Wages Order 2022.
9. JobStreet. (2024). A comprehensive guide to severance pay

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