Gig Economy Versus Salaried Workers in Malaysia — What You Need to Know

Disclaimer: This article should not be considered to be legal advice, and altHR is not liable for any actions taken based on this article.

In recent years, we’ve seen the rise of the gig economy in Malaysia, and throughout the world. The pandemic saw a huge jump in popularity for food delivery services such as GrabFood and Foodpanda, while there have also been opportunities for freelancers across multiple industries and job scopes. 

If you’re an employer or a HR professional looking to recruit more talents for your company, you might be wondering: what’s the difference between a gig economy worker versus a salaried worker? Is it simply a contractual distinction? Or is there anything else you need to know about before hiring new employees under differing agreements for your organisation? 

Here are a couple of important differences between gig workers and full-time salaried employees in Malaysia.

1. Gig workers don’t work regular hours

Gig workers, such as delivery partners for e-hailing and food delivery services, don’t usually work regular hours or even shifts. Instead, these workers work on a flexible basis, and are only paid based on the number of “jobs” completed. 

Freelancers also fall within this rough purview, despite the fact that many sign contracts for service. Do note that a contract for service is markedly different from a contract of service — which is a standard employment contract. 

The former is an agreement where a client agrees to pay a fee in exchange for the performance of services — this includes consultants, contractors, vendors, and freelancers. 

2. EPF contributions are not mandatory

Gig workers are also not required to make contributions to the Employee Provident Fund (EPF), also known as Kumpulan Wang Simpanan Pekerja (KWSP). According to KWSP’s official guidelines, individuals need to register with the EPF if they fulfill the following elements: 

• Employer
• Employee/ Contract of Service, Apprenticeship 
• Wages

At present, gig workers are considered to be “self-employed”, which means that monthly contributions to the EPF or KWSP are not mandatory. However, gig workers can still make voluntary contributions to the EPF under the i-Saraan programme, with the government announcing last year that these individuals will receive incentives of up to 15 percent of the individual’s annual contribution, up to RM250 per year. 

3. Gig workers to be affected by Employment Act amendments

Gig workers will soon be considered to be considered to be “employees” under the Employment Act 1955 — but not till January 2023 at the earliest. That’s due to recent changes to the Act, which will include updated criteria for an individual to be considered to be an employee under law — even in the absence of a written contract or agreement.

Therefore, individuals will qualify for certain protections and considerations under employment law in Malaysia if:

• Their manner  of  work  is  subject  to  the  control  or  direction  of  another  person;     
• Their hours  of  work  are  subject  to  the  control  or  direction  of  another  person
• They are  provided  with  tools,  materials  or  equipments  by  another  person  to  execute  work
• Their  work  constitutes  an  integral  part  of  another  person’s  business
• Their work is performed solely for the benefit of another  person;  or      
• Where  payment  is  made  to  them  in  return  for  work  done by them at regular intervals and such 

At the moment however, these amendments (and more) will only come into force on the 1st of January 2023, after an initial date of 1st September 2022 was delayed to give employers more time to adjust to the various changes.