HR policies in Malaysia

Malaysia, over the years, has seen a steady rise in economic growth. The GDP growth rate has been 5.9% in the year 2006, which is slightly higher than that in 2005 (5.2%). HR policies in Malaysia, to a large extent are responsible for this rising growth rate. The labor force in Malaysia ranges around 10 million people. Among all the sectors, Hospitality and Tourism are the largest employers, employing a major chunk of the total labor force.

They are followed by manufacturing, agriculture and services. Employment rates are very low in Malaysia. However, in the services sector, particularly in IT, and other hi tech jobs, there is a shortage of skilled native workers, because of which foreign workers are usually hired by IT industries in Malaysia. Apart from the services, work force in the other sectors continues to be talented and native. HR policies in Malaysia are charting out new policies to replace foreign workers with local or native workers from abroad.

Recruitment Policies


As per Labor Laws of Malaysia, employers can only hire local Malay citizens for a particular post. A contract of services has to be signed between the employer and employees. Foreign workers recruited should contain all the legal papers and work permit required for working in Malaysia. Foreign companies are allowed to hire expatriates only if there are no skilled persons available locally.

Termination Policies


As per Labor Laws of Malaysia, an employee’s service can be terminated only in the occasion of breach of the contract of services and in the occasion of negligence or misconduct. An employee on the other hand can terminate his/her services upon the non payment of salary after seven days from the last date of salary payment. Termination can also take place at the end of contract of services.

Pension and other Benefits


The pension system in Malaysia is carried through the Employee’s Provident Fund, which is entitled to monthly contributions by both employer and employee during the service period. After attaining retirement, the employee is eligible to receive he pension funds. Also, the employee can only receive his/her pension only if he or she has contributed to the Provident Fund for a minimum period of five years.

For foreign workers, the Human Resources Ministry has also chalked out a benefit plan. According to this plan all the employees are required to provide insurance to their foreign employees through one of the four insurance companies operational in Malaysia.

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