Part Time vs Independent Contractor: Whats the Difference?

In Malaysia’s flexible work landscape, companies often hire both part-time employees and independent contractors (freelancers). While both arrangements reduce fixed costs, they carry very different legal responsibilities and tax implications.

What is a Part-Time Employee?

A part-time employee works fewer hours than a full-time worker but maintains a regular ongoing employment relationship with the company.

Key Characteristics

Works 30 % to 70 % of a full-time employee’s 48-hour week (under the Employment Act 1955 and Employment (Part-Time Employees) Regulations 2010).
Paid hourly, weekly, or monthly, depending on contract.
Works under direct supervision and must follow company rules and schedules.
Entitled to pro-rated statutory benefits such as EPF, SOCSO, EIS, annual leave, and sick leave.
Often engaged in recurring roles like retail assistants, café crew, administrative staff, or call-centre agents.

What is an Independent Contractor (Freelancer)?

An independent contractor is a self-employed professional who provides services to clients on a project or deliverable basis under a contract for service, not a contract of service.

Key Characteristics

Works independently with freedom to decide how, when, and where to complete tasks.
Paid per project, milestone, or deliverable, typically through invoicing.
Not entitled to EPF, SOCSO, EIS, paid leave, or overtime (unless written in the contract).
Manages own taxes, expenses, and tools/equipment.
Common examples: graphic designers, writers, consultants, web developers, photographers.

Key Differences Between Part-Time Employees and Independent Contractors

Although both part-time employees and independent contractors offer flexibility, their legal status and employer obligations are completely different.

Aspect	Part-Time Employee	Independent Contractor (Freelancer)
Legal Relationship	Covered under the Employment Act 1955 and Employment (Part-Time Employees) Regulations 2010.	Governed by civil or commercial contract law, not the Employment Act.
Nature of Contract	Works under a contract of service (employment contract).	Works under a contract for service (service agreement).
Supervision & Control	Works under direct supervision and follows company rules, policies, and schedules.	Has full control over how, when, and where to complete work.
Work Schedule	Follows fixed or recurring shifts as agreed with employer.	Manages own working hours and deadlines independently.
Payment & Tax	Paid wages or salary through payroll with EPF, SOCSO, and EIS deductions.	Issues invoices for completed work and pays own taxes (self-employed).
Benefits & Entitlements	Entitled to pro-rated benefits such as EPF, SOCSO, EIS, annual leave, and sick leave.	Not entitled to statutory benefits unless stated in the contract.
Tools & Equipment	Uses tools, workspace, and materials provided by the company.	Provides and maintains own tools, software, or workspace.
Duration of Work	Ongoing or recurring employment with consistent hours.	Temporary or project-based. Ends once the deliverables are completed.
Termination	Requires written notice or compliance with the Employment Act.	Governed by termination clauses in the service agreement.
Examples	Retail assistant, café crew, tutor, admin staff.	Graphic designer, writer, web developer, consultant, photographer.

10 Common Independent Contractor Positions in Malaysia

The rise of digital platforms and remote work has made freelance contracting a mainstream option in Malaysia’s creative and tech sectors. Below are some common examples of independent contractor positions in Malaysia:

Graphic designer
Copywriter or content writer
Web developer or programmer
Photographer or videographer
Marketing consultant
Translator or interpreter
Social-media manager
Business or HR consultant
Virtual assistant or remote admin
Voice-over talent or editor

Risks of Misclassification for Employers

Labeling someone a “freelancer” does not automatically exempt employers from labour law. If the worker operates like an employee (fixed hours, company equipment, continuous supervision), authorities may classify them as an employee instead.

Below are some potential consequences that you might face:

Back payments for EPF, SOCSO, and EIS contributions.
Claims for unpaid wages, overtime, or statutory leave.
Fines and penalties from MOHR, PERKESO, or LHDN.
Reputational damage or legal disputes from misclassified workers.

How Employers Can Avoid Misclassification

To avoid fines or back payments, employers must correctly define whether a worker is an employee or a contractor. Follow these best practices to reduce misclassification risks.

Define the relationship clearly. Use precise terms like service provider or consultant for contractors.
Specify scope and deliverables. Outline project goals, deadlines, and payment terms in the contract.
Avoid employee-like controls. Don’t impose fixed working hours or daily supervision.
Review arrangements regularly, especially if a contractor’s role becomes ongoing.
Seek HR or legal advice before renewing or converting contractor roles.

FAQs

Are independent contractors in Malaysia entitled to EPF or SOCSO?

No. They are self-employed and responsible for their own contributions unless both parties agree otherwise in writing.

Can an employer convert a freelancer into a part-time employee?

Yes. If the role becomes recurring with set hours and supervision, issue a new employment contract and register the worker under EPF/SOCSO.

How can employers ensure a freelancer is not considered an employee?

Avoid controlling their working hours, provide flexibility, and focus on results, not daily processes.

Do part-time employees qualify for bonuses or annual leave?

Yes, proportionally, based on working hours and company policy.

What happens if a freelancer files a complaint claiming employee rights?

Authorities will investigate based on actual work conditions, not job title. If the person worked like an employee, the company may owe back pay and contributions.

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