Do Employment Agreements Need To Be Stamped?

Apr 20, 2025

In Malaysia, employment agreements are generally required to be stamped under the Stamp Act 1949. Specifically, Item 22(1) of the First Schedule of the Act applies to service agreements, including employment contracts, that are for a definite period or for life or an indefinite period. The stamp duty rate is typically RM1.00 for every RM100 or any fractional part of RM100 of the sum periodically payable under the agreement.​

Item 22(1) of the First Schedule

Monetary Penalties

The employment agreements must be stamped within 30 days from the date it is executed in Malaysia or within 30 days after it is received in Malaysia if it is executed outside Malaysia. If an employment agreement is not stamped within the prescribed time:

📌 Section 47A – Late Stamping Penalty (Effective 1 January 2025)

The employment agreements can still be stamped later, but with a penalty:

👉 If stamped within three months after the prescribed time for stamping, the penalty is RM50 or 10% of the amount of duty unpaid, whichever is greater;

👉 If any other case, the penalty is RM100 or 20% of the amount of duty unpaid, whichever is greater.

Legal Complications

1. Unstamped Documents Cannot Be Admitted in Court

  • Section 52(1) of Stamp Act 1949: An unstamped or insufficiently stamped agreement is inadmissible as evidence in court or before a public officer.
    • This means that in the event of a dispute (e.g., wrongful dismissal), the employer might not be able to rely on the employment contract unless it is properly stamped.
    • However, it can be admitted after payment of the proper duty and penalty.

2. Voidability in Related Contracts

  • Although the contract is still binding between parties (as seen in Tang Vee Luen @ Philip v Titan Energy Sdn Bhd), non-stamping can cause delays in legal proceedings and be used tactically in litigation.

3. Audit and Enforcement by the Inland Revenue Board (IRB)

  • The IRB has the power to audit companies to ensure compliance.
  • If they find widespread non-compliance (especially in large corporations), the IRB may impose backdated duties and penalties, which can be substantial.
  • Repeated or intentional non-compliance could also trigger criminal sanctions, including fines.

In summary, employment agreements in Malaysia are required to be stamped. Employers should ensure compliance to avoid potential penalties and legal complications.