Secondment Agreement (Malaysia)

A Secondment Agreement in Malaysia fixes the respective duties and entitlements of the parties to the arrangement.

During a secondment, the employee's contract of service with the home employer remains in force. The home employer continues to fulfil its obligations under the Employment Act 1955 (Act 265) — including EPF contributions under the EPF Act 1991, SOCSO under the Employees' Social Security Act 1969, and EIS under the Employment Insurance System Act 2017 — unless the parties agree that the host employer will assume these obligations during the secondment period. Any change to the employee's statutory contributions arrangement must comply with the relevant Acts.

A key distinction in Malaysian employment law is between a secondment — where the employee retains the right to return to the home employer at the end of the secondment period — and a transfer of employment, where the employee's contract is novated or assigned to the new employer. The Industrial Court of Malaysia has considered cases where a purported secondment was in fact a dismissal by the home employer if the employee was offered no genuine right of return. Employers should confirm that the Secondment Agreement clearly preserves the employee's right to return to the home employer and their original or equivalent role.

For cross-border secondments involving non-Malaysian employers or secondment of foreign employees to Malaysian operations, immigration compliance under the Immigration Act 1959/63 and the Expatriate Services Division (ESD) requirements of the Immigration Department of Malaysia must be addressed.

The legal framework governing the Secondment Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Secondment Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Employment Act 1955 (Act 265) sets the foundational requirements.

A Malaysia Secondment Agreement is required whenever an employee is temporarily transferred between employers within a corporate group or between independent organisations.

A Secondment Agreement is needed when a Malaysian holding company seconds a senior manager from its headquarters to a subsidiary — whether within Malaysia or in another ASEAN country — to provide management expertise, lead a project, or implement group-wide systems, documenting the salary reimbursement arrangement between the home and host employer in Malaysian Ringgit (RM).

A Secondment Agreement is required when a government-linked company (GLC) is asked by a government ministry or agency to provide technical expertise by seconding a specialist employee for a defined period, where the GLC remains the employer but the secondee reports to and takes direction from the host government body.

A Secondment Agreement is needed when a Malaysian bank, insurance company, or financial institution regulated by Bank Negara Malaysia seconds an employee to a joint venture partner, fintech subsidiary, or overseas affiliate, to document the supervision arrangements, compliance obligations, and the continuation of the employee's EPF and SOCSO contributions under the home employer's payroll.

A Secondment Agreement is required when a secondment arrangement is being used as part of a broader business restructuring — for example, where a company is preparing to transfer a business unit to a buyer — and the parties need a formal agreement governing the interim period before the full transfer of employment is effected.

A Secondment Agreement is needed when the secondment involves a change in the employee's duties, remuneration, or place of work that would otherwise require the employee's consent under Malaysian employment law and the Industrial Relations Act 1967.

Parties in Malaysia should prepare a Secondment Agreement (Malaysia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid Malaysia Secondment Agreement must contain the following essential elements to protect all three parties — the home employer, the host employer, and the secondee.

Parties: Full legal names, SSM registration numbers, and addresses of the home employer and host employer, together with the employee's full name and MyKad number. The agreement should be signed by all three parties.

Secondment period: The start and end date of the secondment, the procedure for early termination or extension, and the minimum notice period for both the host and home employers to end the secondment before the agreed end date.

Roles and reporting: The secondee's designation at the host employer, reporting line, and key responsibilities during the secondment. The host employer's day-to-day authority over the secondee's work and the home employer's retained authority over disciplinary matters and termination should be specified.

Remuneration and reimbursement: The secondee's salary during the secondment, whether the home employer or host employer processes payroll, and the reimbursement mechanism between the two employers (including any management fee or secondment fee in MYR).

EPF, SOCSO, and EIS: Which employer is responsible for making statutory contributions during the secondment period and confirming continuity of the secondee's EPF savings under the EPF Act 1991.

Disciplinary authority: Confirmation that the home employer retains the right to conduct domestic inquiries and to dismiss the secondee for gross misconduct under the Industrial Relations Act 1967, and the protocol for the host employer to report misconduct to the home employer.

Right of return: The secondee's express right to return to the home employer in the same or an equivalent role at the end of the secondment, preserving continuity of service for purposes of statutory benefits and leave entitlements.

Governing law: Malaysian law and jurisdiction of the Malaysian courts.

Additional compliance elements for a Secondment Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.