Latest Updates to Malaysia's Employment Law: What Employers and Employees Need to Know

As Malaysia's labour landscape continues to evolve, staying informed of the latest legal developments is essential for both employers and employees.

In recent years, the Employment Act 1955 has undergone several significant amendments, with one of the most notable updates being the announcement of the minimum wage increase.

1. New 24-Hour Accident Protection for Employees (Lindung 24/7)

Take note! Employees are now protected 24/7, not just at work! This marks a major step forward in worker welfare and social security in Malaysia.

Malaysia has introduced a newly amended mandatory law for employee social protection through the Lindung 24/7 scheme under Social Security Organisation (PERKESO).

What is it?

Lindung 24/7 is an expanded social protection scheme under PERKESO that provides 24-hour accident coverage for employees, even outside of working hours.

What’s new?

Previously, PERKESO only covered work-related accidents. Under the new amendment, employees are now protected for non-work accidents, including injuries that happen:

• At home
• During weekends or off-days
• While commuting
• During personal activities

What Does Lindung 24/7 Cover?

Benefit	Before (Work-Related Accidents Only)	Now (With Lindung 24/7)
Medical Treatment	Covered only for workplace injuries	✅Covered for both work & non-work accidents at government hospitals and PERKESO panel clinics
Temporary Disablement Benefits	Work-related injuries only	✅Payable for any qualifying accident, even outside work
Permanent Disablement Benefits	Limited to work accidents	✅Extended to non-work accident cases
Rehabilitation & Return-to-Work Support	Only after work injuries	✅Available for all covered accidents
Dependent Benefits	Only if death was work-related	✅Payable even if death is due to non-work accidents
Funeral Benefits	Work-related cases only	✅Extended to non-employment accident cases
Constant Attendance Allowance	Limited to work-related severe injuries	✅Available for severe non-work accident cases
Education Assistance for Dependents	Not applicable in most non-work cases	✅Support available where applicable

Source: The Star

Impact on Employers:

For employers, the new scheme brings additional compliance responsibilities. Contributions will now include coverage for non-employment injuries, on top of the existing employment-injury contributions.

Businesses should take proactive steps to:

• Ensure payroll systems are in compliance.
• Review HR policies and employee benefits.
• Ensure all eligible staff including (hybrid and flexible workers) are properly covered.
• Communicate clearly with employees about their new entitlements.

What Employees Should Do:

Employees do not need to apply separately for Lindung 24/7 once it is officially in force. Coverage is automatic for eligible contributors. However, employees are encouraged to:

• Check payslips to ensure PERKESO contributions are made.
• Understand the types of benefits available under non-work accident coverage.
• Inform HR if they hold multiple jobs, as only one employer will handle the non-employment injury contribution.

2. Minimum Wage Hike in 2025

The government announced that, starting from February 2025, the minimum wage will increase from RM1,500 to RM1,700 for businesses with five or more employees and those in specific sectors. This new wage floor will be fully implemented nationwide by August 2025 for all companies.

The adjustment is intended to offset inflation, improve the standard of living, and protect low-income workers. It also serves as a strategic move to strengthen the domestic labour market.

Beyond the minimum wage, various amendments made in the past two years reflect a broader shift toward a fairer and more modern employment system in Malaysia.

3. Employment Act's Expanded Coverage: Overtime & Core Benefits

Since January 1, 2023, the coverage of the Employment Act has expanded significantly. Most employees, regardless of wage level, are now entitled to protection under the Act.

While some provisions, such as overtime entitlements, still apply only to employees earning RM4,000 or below per month, other core entitlements, including notice periods, sick leave, maternity leave, annual leave, and termination benefits, are broadly applicable.

Another major change is the reduction of the maximum weekly working hours from 48 to 45. This shift supports better work-life balance and aligns with international labour practices. Employers are responsible for updating employment contracts and ensuring schedules comply with this new standard.

For entitled employees, this is how overtime pay works:

• If an employee works beyond normal hours on a regular day, they get paid 1.5 times their usual hourly rate.
• If the work is done on a rest day, the rate jumps to 2 times the normal hourly rate.
• And if an employee works on a public holiday, they earn 3x times the usual rate.
• Employers are obligated to pay overtime for any work that exceeds the 45-hour weekly limit.

Take Note: There is a monthly cap of 104 overtime hours.

4. Flexible Work is Now a Legal Right

Flexible Working Arrangements (FWA) have also been legally recognised. Employees can formally request to work remotely, adopt flexible hours, or arrange hybrid schedules.

Employers must respond in writing within 60 days. This change empowers employees and enables businesses to modernise workforce policies.

Parental leave entitlements have also improved. Maternity leave has increased from 60 to 98 days, and married male employees are now entitled to 7 days of paid paternity leave, applicable up to five times (for surviving children only). These enhancements promote a more family-friendly and inclusive work environment.

6. New EPF Implementation for Foreign Workers

Foreign employees holding the following passes are required to contribute EPF:

• Visitor’s Pass
• Employment Pass
• Professional Visitor Pass
• Student Pass
• Residence Pass
• Long-Term Social Visitor Pass

EPF contribution rate for non-Malaysian citizen employees

Non-Malaysian citizen employees category	Contribution Rate starting from October 2025
	Less than 60 years old	Has attained 60 years old
Non-Malaysian citizen employees who are permanent residents in Malaysia	No Changes Employer Share: 13% or 12% Employee Share: 11%	No Changes Employer Share: 6.5% or 6% Employee Share: 5.5%
Non-Malaysian citizen employees who became EPF members before 1 August 1998	No Changes Employer Share: 13% or 12% Employee Share: 11%	No Changes Employer Share: 6.5% or 6% Employee Share: 5.5%
Non-Malaysian citizen employees who became EPF members after 1 August 1998	NEW! Employer Share: 2% Employee Share: 2%	NEW! Employer Share: 2% Employee Share: 2%

Source: KWSP

How To Register EPF for Foreign Employees?

Automatic registration:

Employers are only required to register and contribute for their foreign employees on the EPF system starting 1st October 2025, employers do not need to go to the EPF office to register.

(Further details will be announced by KWSP)

Domestic servants (Maids, Cooks, Gardeners, Cleaners, Babysitters, Drivers and others):

• Contribution is optional for employers and employees
• Registration is required at the nearest EPF office for domestic servants

*EPF will soon introduce: Auto-Registration and Status Notifications

When to stop contributing to EPF for foreign employees?

The obligation to contribute for non-Malaysian citizen employees ceases during the final two (2) months before the expiry of the employee's pass.

New Termination Rules For Managing Foreign Workers

Foreign worker management has also become more regulated. Employers intending to terminate a foreign employee must submit a written notification to the Labour Department at least 30 days in advance. This measure aims to improve transparency and ensure responsible handling of foreign labour. Employers must also now pay EPF to foreign workers.

7. Legal Protections & Penalties for Employees

The Act also strengthens provisions against discrimination and forced labour. Employers are prohibited from gender-based discrimination and discrimination against the disabled in hiring or employment practices. Any act of coercion or exploitation is now subject to heavier penalties under the revised law.

Although gig workers and contract-for-service individuals are not yet fully covered under the Employment Act, the government is actively exploring legal frameworks to regulate these non-traditional employment models. Employers using freelance or outsourced labour should stay informed of potential legal developments.

Know the Law, Protect Your Future

In summary, the recent updates to Malaysia's employment law represent a major step forward in protecting labour rights and enhancing business compliance. For employers, compliance is not optional but a cornerstone of operational stability and brand reputation.

For employees, understanding your rights is the first step toward self-empowerment in the workplace. Regular contract reviews, policy updates, and professional consultation are highly recommended.

Let us work together to build a fair, transparent, and future-ready workplace ecosystem.

📌 Compliance is a responsibility; awareness is power. Don't let outdated knowledge become a hidden risk in your business operations.