Publications

General

Malaysia, a country of 28 million, is made up of two sections, the peninsula at the southeast tip of Asia and part of the island of Borneo. Most of its people live in the peninsular area.

Malaysia has seen steady economic growth from 2002 onward. Gross domestic product rose by 7.2% in 2010 and is expected to increase by 5.3% in 2011.  The current unemployment rate has dropped to 3.6% in 2011.  Much of the country’s manufacturing is in sophisticated industries like computer components, electronics, and rubber products.  Also, services now make up about half of the country’s 12.2 million jobs, including high-value industries like information technology, business process outsourcing, and healthcare.

Malaysia has seen an increase of foreign direct investment from $1.4 billion in 2009 to $7 billion in 2010.  As a former British colony, Malaysia has relatively strong intellectual property laws that attract technological companies.

Malaysia’s labor market continues to need more workers.  The number of unfilled job positions, as collected by the government, rose sharply over 2008 and 2009.  In 2010 it was at over 1.7 million – significantly more than the number who enter the workforce annually.  This means there are more vacancies currently than there are employees to fill them.  The manufacturing, agriculture and construction industries make up the majority of this demand.



Source: Ministry of Human Resources.

Wages and Compensation

The government of Malaysia has a longstanding policy of opposition to a minimum wage.  In some cases, wage councils exist to establish wage standards for a particular industry.  Only about 1 in 10 workers are covered by these wage councils.  Despite former opposition to a minimum wage, a National Wages Consultative Council bill was passed in June 2011 to create a council that will review and set minimum wages in the near future.          

Many domestic Malaysian companies have traditionally given annual raises to employees on a seniority basis, regardless of performance.  To replace this, the Malaysian government has encouraged Productivity Linked Wage Systems (PLWSs) to gradually replace seniority.  In these systems, employers give out variable extra bonuses to employees linked to productivity, profits, or both.  Government employers have adopted this system, and some private companies have done the same.  However, the system is still unpopular, with number of users only increasing 10.6% by 2010 from 1996.  Currently, the government is trying to extend use of the PLWS to more of the private sector by educating employers and employees of the benefits of PLWSs.  

Other Benefits

Malaysia’s Employees Provident Fund (EPF) came into effect in 1991 and is mandatory for working Malaysian citizens and non-Malaysian permanent residents.  Of this fund, 30% can be used for housing costs, 30% for medical costs and the balance remaining for retirement.  Employers contribute 12% of the employee’s wages while employees contribute 11%.  Expatriates do not have to contribute to the EPF, but have the option to do so.  A 2008 revision lowered contribution rates for employees over 55 to 6% and for their employers to 5.5%.

The Social Security Organization (SOCSO) is a mandatory fund for workers who earn less than RM $2,000.  This fund provides medical and financial benefits to these workers if they are injured due to their work.  Membership continues even after a member’s salary increases past RM $2,000.

The Foreign Worker Hospitalization and Surgical Insurance Scheme was implemented in January 2011.  The Scheme requires employers to provide health insurance coverage to all foreign workers and expatriates in Malaysia.

As for maternity leave, employers must grant female employees 60 consecutive days of leave.  Maternity leave pay is based on her monthly wages if she has fewer than 5 children and has been employed for 90 days before her maternity leave.

Foreign workers

The rising labor demand in Malaysia has led to greater use of labor from abroad.  Most of the country’s 1.9 million foreign workers are unskilled laborers from places like Indonesia and Bangladesh.  But Malaysia’s industries also have a need for skilled workers from around the globe. Less than 2% of the foreign population is composed of skilled expatriates, and the Malaysian government is actively working to attract and retain them.

Still, high-tech companies have complained of trouble attracting skilled foreign workers because of bureaucratic red tape.  To combat Malaysia’s brain drain, the Department of Immigration began offering a new, more flexible residence pass in 2011.  The pass allows holders to stay in Malaysia for 5 to 10 years.  Unlike the Employment Pass, which most expatriates hold, the Residence Pass is not tied to a specific employer, which allows workers to change employers without restrictions.  The pass also covers their spouse and children.  Preference is given to applicants who are experienced in sectors that have been identified as critical, such as oil services, tourism, electronics and financial services.  

Future developments

Malaysia’s Human Resources Minister, Datuk Dr. S. Subramaniam, has publicized a number of HR issues the ministry is working on addressing.  In July 2011, he announced that Malaysia is aiming to increase its percentage of highly skilled workers from 28% to 50% by 2020.  The Ministry is currently spending about RM $1.7 billion, or $577 million, annually to produce these skilled workers.

An Employment (Amendment) Bill 2011 has been introduced to Parliament to amend the Employment Act of 1955.  Some of the proposed changes are as follows: The definition of “contractors” in Malaysia would be changed to include “contractors for labor,” a change that some unions say will encourage employers to hire for contract jobs rather than regular jobs.  The amended Bill allows employers to delay payments of overtime work for over a month.  Sexual harassment would also be punished if the employee made less than RM $2,000 ($662).

The government has committed to a “retrenchment fund” that would take small mandatory contributions from employers and use this money to assist workers whose jobs have become redundant.  However, employers and employees have not been able to reach a compromise on the amount of contribution.  Negotiations are continuing, but Malaysia has yet to establish this system.