When drafting employment contracts, businesses in Malaysia should carefully consider what goes under “employee benefits”.
Beyond mandatory inclusions under the Employment Act 1955 (as amended) that determine legal compliance, employers may, at their discretion, offer a variety of additional perks to attract and retain the best possible employees.
With the latest updates extending the Employment Act to almost all employees, our guide provides a brief but complete overview of which benefits are mandatory and which are not.
Mandatory benefits
Under the Employment Act, every employee is entitled to a legal baseline of set benefits, regardless of position or salary grade. Employers who fail to provide them may face penalties of up to RM50,000, or be ordered by the court to pay the equivalent of the unpaid wages or benefits to affected employees!
In addition, many employers go beyond them to stay competitive, and we have included common additional incentives for your consideration.
Paid annual leave
Legal entitlement: Paid annual leave based on years of service from 8 to 16 days a year
Some companies design their annual leave policy based on job grade or seniority. For example, management or long-serving staff often enjoy additional leave days.
Some employers introduce leave encashment to give employees flexibility and reduce year-end leave congestion.
Paid sick leave and hospitalisation leave
Legal entitlement: paid sick leave between 14 to 22 days a year depending on their years of service plus up to 60 days of paid hospitalisation leave
Some employers go beyond the statutory sick leave entitlement by offering additional medical benefits such as group medical insurance.
Some also include dental and optical allowances as part of their wellness benefits.
Paid maternity and paternity leave
Legal entitlement: Female employees entitled to 98 consecutive days of paid maternity leave; male married employees entitled to 7 consecutive days of paid paternity leave, provided they meet the eligibility criteria under the Employment Act.
Some employers go further by offering flexible return-to-work arrangements or work-from-home options for new parents to show that the company supports work–life balance and family well-being.
Paid public holidays
Legal entitlement: At least 11 paid public holidays each year under Employment Act, including five compulsory ones:
- National Day
- Birthday of the Yang di-Pertuan Agong
- Labour Day
- Birthday of the Yang di-Pertua Negeri of the state where the employee works, and
- Malaysia Day
Some employers adopt the “follow all” approach, granting holidays for all gazetted national and state holidays. Others take a more tailored approach, adding additional holidays that reflect their workforce composition.
Some provide half-day leave for festive celebrations and allow employees to leave early during pre-festive seasons.
Non-mandatory benefits
Beyond the minimum benefits required in the previous section, many employers offer additional benefits to attract and retain good talent. These benefits are not mandated under the Employment Act, but they play an important role in attracting and retaining talent.
Here are some common examples seen across Malaysian companies:
Performance and retention bonuses
While not mandatory, bonuses are commonly offered, ranging from annual or performance-based bonuses to fixed “13th-month” contractual bonuses.
Many employers will tie bonus payments to performance reviews, KPIs, or appraisal outcomes to ensure fairness and stronger motivation across the team.
Profit-sharing or incentive-based schemes
Some employers introduce profit-sharing or incentive-based schemes to align employee performance with company growth.
For example, employee may receive a share of company profits or milestone-based incentives tied to revenue or sales targets.
Flexible work arrangements
Some companies have continued adopting hybrid work or flexible hour policies as part of their long-term work culture since the pandemic. For example, employees may be allowed to work remotely on certain days (e.g., Fridays) or adjust their start and end times (e.g., 8am–5pm or 10am–7pm).
Training and career development
Employees value workplaces that invest in their growth, and providing access to workshops, certification courses, or structured career development programs helps employees build new skills and feel supported in their long-term career goals.
For employers, this translates into a more capable and loyal workforce, a win–win for both sides.
Allowances
In addition to regular salary, many employers offer allowances to help employees cover work-related expenses. Common examples include parking, travel, and mobile phone allowances. Some companies also customise their allowances based on operational needs.
For instance, employees who frequently attend business trips or corporate events may receive meal or entertainment allowances as part of their package.
Additional leave or days-off
Some employers offer extra leave entitlements to support employees’ personal and family needs. Common examples include:
- compassionate leave – time off to attend funerals or handle family emergencies.
- study leave – for employees pursuing professional or academic qualifications.
- marriage leave – usually granted for a few days around the wedding period.
- disaster or emergency leave – for situations like floods or natural disasters.
- birthday leave – an extra day off as a small gesture of appreciation.
Document your benefits clearly!
Whatever benefits policy your company observes, a well-structured system ensures compliance and sets a reputation as an employer of choice.
To achieve that, it’s important your employment contracts and employment handbook clearly set out both statutory entitlements and company-specific benefits, and our team can help you structure or refresh both to ensure they remain compliant, practical, and aligned with your business goals.
