Malaysia’s Gig Economy Enters a New Era: Implications and Next Steps

 

Fuelled by e-hailing, food delivery, freelance work and a rapidly expanding digital marketplace, Malaysia’s gig economy has evolved into an indispensable part of the Malaysian workforce. Gig workers have long operated in an ambiguous labour ecosystem – essential to the Malaysian economy yet excluded from many rights and protections typically enjoyed by employees.

With the Gig Workers Act 2025 (“the Act”) gazetted on 31 December 2025, there is now address of long-standing vulnerabilities within this space with statutory recognition of gig workers. While the Act is hailed as a progressive step toward labour reform, it also sparks debate on its practicability and scope.

Below is a bird’s eye view of key provisions within the Act, and what they may mean for the Malaysian gig economy.

A Step Forward In Gig Economy Regulation

 

1. Who is a “Gig Worker”? 

Gig workers are now defined under the Act (Section 2) as individuals who :-

• are Malaysian citizens or a permanent resident;
• enter into a service agreement with a contracting entity to perform :-
  (i) services for a platform provider; or
  (ii) services listed in the Schedule of the Act* for a non-platform provider; and
• receive earnings for the services provided.

*Listed services within the Schedule include acting, filming activities, music-related activities, aesthetic, translation, journalism, prenatal and postnatal care or treatment, palliative, elderly and rehabilitation care, photography and videography.

 

2. Rights and Protections for Gig Workers

Gig workers are now afforded various protections such as :-

• right to fair service agreements (Section 3);
• right to be informed of the agreed terms of the gig worker’s service agreement and services to be performed, rate and details of earnings, method of payment, be consulted and informed on any variations to terms of his service agreement, not to be terminated without just cause or excuse and afforded a dispute resolution mechanism where any terms in a service agreement which purport to contract out or waives a gig worker’s rights shall be null and void. (Section 8);
• prohibitions against discriminatory practices by a contracting entity (Section 9);
• right to join, participate or establish a gig workers’ association (Section 10);
• right to timely earnings in their payments within seven (7) days of completion of service, if timing of payment is unspecified in a service agreement (Section 11); and
• regulating a platform provider’s decision on the deactivation of a gig worker from access to their digital intermediary system (Section 14).

 

3. Service Agreement to Contain Specific Terms 

A service agreement entered into between a contracting entity and a gig worker shall specify the following terms :-

• Parties to the agreement;
• Period of the agreement;
• Services to be provided by the gig worker;
• Obligations of the parties;
• Rate and details of earnings of the gig worker;
• Method of payment of earnings; and
• Any gig worker’s benefits or tip and gratuities, if any.

Any service agreement between gig workers and contracting entities must include mandatory terms as specified in the Act.

 

4. Dispute Resolution Mechanism 

The requirement of providing a gig worker a dispute resolution mechanism (Section 8(h)) brings with it the introduction of various avenues in place for gig workers to lodge a complaint, namely :-

• An internal grievance mechanism (Section 17) – Gig workers may now lodge a complaint / dispute in writing to a contracting entity (other than an individual / sole proprietor). Upon such receipt of the complaint lodged, the contracting entity is to initiate and resolve the dispute within 30 days from the date the complaint is lodged.
• Conciliation (Sections 18 to 23) –  If the dispute cannot be solved internally (or if the internal grievance mechanism is not a suitable avenue as the contracting entity is, for example, an individual / sole proprietor, or the gig worker is unhappy with the outcome of the internal grievance mechanism), the gig worker may proceed to raise grievances by way of conciliation, which is handled by the Director General for Industrial Relations, Deputy Director General for Industrial Relations or appointed officers.
• Gig Workers Tribunal (Part V, Section 24 to 45) – Should the conciliation process be unsuccessful, the Gig Workers Tribunal is a recourse available to manage such grievances. The Tribunal may, among other thing, order compensation to be given to the relevant party, and compel a party to comply with a particular term within the service agreement.

 

5. Social Security Safety Net 

With the introduction of this Act, platform providers are required to deduct and contribute to the gig worker’s social security under the Self-Employment Social Security Act 2017. Failure to pay the mandatory social protection contribution for gig workers attract strict penalties, including fines of up to RM50,000 or a maximum prison sentence of two (2) years, or both (general penalty under Section 108).

 

6. Enforcement

The Director General of Labour shall be responsible over, among others, supervising the compliance of duties by a contracting entity in relation to the rights of a gig worker and enforcing awards by the Gig Workers Tribunal (Section 70).

 

7. Ongoing Recalibration via Establishment of Consultative Council

The introduction of a Consultative Council (Part VI, Sections 46 to 68) establishes a mechanism for continuous review of gig workers’ rights from an economic standpoint. Based on the provisions of the Act, the Consultative Council functions as a central advisory body to advise on, among others, minimum earning rates across sectors and regions, along with formulas for determination of such rates, complementing the ever fluctuating and dynamic gig economy.

 

Challenges and Potential Concerns

The Act does raise several concerns about operational burdens and economic ripple effects towards the contracting entity, specifically smaller platform providers, as well as future concerns on the potential flexibility of the gig economy.

 

1. Increased Operational / Commercial Costs

The following obligations have been placed upon contracting entities, resulting in additional compliance obligations :-

• Contracting entities will need to review, update and standardise service agreements with gig workers to ensure they contain the mandatory terms required under the Act.
• Where platform providers are concerned, such providers are now required to be transparent with regards to their (i) monitoring systems and (ii) decision-making tools (regardless of whether it is automated / non-automated), by way of notification through electronic means to gig workers (Section 8(2)).
• Gig workers are entitled to request for earnings slips from the contracting entity other than an individual (Section 13).
• Social security protection to be afforded to gig workers (Section 82) where contracting entities are now required to contribute to the same.

 

2. Misclassification of Workers and Blurring of Lines May Still Exist

While the Act defines who gig workers are, the possibility of misclassification of these workers as either “employees” or “self-employed” still exists. Much of this will depend on the control, supervision and management of workers by the contracting entities. Further, in view that the termination of gig workers cannot be performed by contracting entities without just cause and excuse (Sections 8(1)(g) and 9(c), it is also likely that the considerations surrounding “just cause or excuse” may be drawn from circumstances of employment terminations.

 

3. Enforcement Hurdles

While the introduction of the Act sets out wide powers for the Director General of Labour in terms of supervising compliance of contracting parties’ duties, the reality of the gig economy operating over diverse economic landscapes with large numbers of gig workers may mean that, depending on the nature of complaint received, a market practice understanding of the relevant service industry in question would be required. It remains unclear at this juncture how effectively these powers can be exercised in practice and how regulators will monitor ongoing compliance across a diverse gig landscape.

 

4. Recommendations by Consultative Council Does Not Mean Guaranteed Implementation

While the introduction of a Consultative Council is a forward-looking initiative to ensure ongoing recalibration in a constantly shifting space, current provisions within the Act sets out expressly that the functions of the Council is to “advise” and “make recommendations” to the Government when the Minister may determine on such matters prescribed by the Act. Ultimately, this reflects a consultative, rather than an authoritative body, where the effectiveness of shaping potential long-term equitable earning standards for gig workers is not currently transparent and are subject to further observation and recommendations.

 

5. Potential Market Shifts & Economic Impact

With multiple new obligations on contracting entities, there is potential for contracting entities to respond by recalibrating their commercial models, including considerations such as implementing an increase in service fees, shifting costs to consumers, reduction of fees to be paid to gig workers or perhaps even reducing gig jobs or their flexibility in engaging in the same.

 

Practical Considerations & Conclusion

As a first step, contracting entities should consider the following :-

 

• Review and update all service agreements to ensure compliance with the requirements of the Act before it comes into force. Special care is to be given to the introduction of Section 5 within the Act, where any prevailing terms and conditions within a service agreement that is less favourable to a gig worker as compared to the provisions of the Act are now void, and shall instead be substituted with the terms provided under this Act;
• Consider establishing or strengthening the company’s independent internal grievance process to help address and resolve potential complaints / disputes with gig workers early, reducing the likelihood of escalation to regulators; and
• Conduct internal compliance checks and roll out necessary operational updates to meet compliance obligations as required within the Act before it comes into force.

 

The Act is indeed a significant milestone in Malaysia’s workforce landscape, bringing much needed protections and clarity to a sector that has operated for years without clear regulation. That said, given its novelty and new compliance obligations imposed on contracting entities, its real-world impact remains to be seen as stakeholders adapt and mature under this new framework.