Informal employment in Malaysia fell to 3.28mn in 2025

While the overall share has fallen since 2023, the sector remains a major source of income and opportunity, particularly for self-employed workers, micro-entrepreneurs and those in services.

Malaysia recorded 3.28mn people in informal employment in 2025, representing 19.8% of total employment, according to the Informal Sector and Informal Employment Survey Report, Malaysia, 2025 published by the Department of Statistics Malaysia (DOSM).

The figure marks a decline from 3.45mn people (-21.8%) of total employment, in 2023. The results indicate that Malaysia’s labour market remained stable in 2025, while informal work continued to play a substantial role in supporting employment and household incomes.

Men accounted for the majority of workers

Men made up the majority of informal workers, accounting for 61.8% (2.03mn people), compared with 38.2% (1.25mn people) for women. A similar pattern was observed within the informal sector itself, where men represented 62.2% of workers (1.18mn people), while women accounted for 37.8% (717,100 people).

Employment status

By employment status, employees formed the largest group among all informal workers, with 1.47mn people, or 44.9% (1.47mn people) of the total. Self-employed workers followed closely at 1.42mn people, representing 43.2%, while unpaid family workers accounted for 10.5% (343,800 people).

Within the informal sector specifically, self-employment was by far the most common form of work. Self-employed individuals accounted for 74.6% (1.42mn people) of employment in the informal sector. Employees represented 17.1% (322,400 people).

Food vendors, online sellers and rubber tappers were among the occupations recording the highest employment in the informal sector in 2025.

Services sector led the way

The services sector remained the main driver of informal employment, contributing 56.2% of all informal jobs. Wholesale and retail trade, including the repair of motor vehicles and motorcycles, accounted for 22.5% of informal employment, while accommodation and food and beverage service activities contributed 18.7%.

In terms of occupation, service and sales workers formed the largest group, accounting for 38% (1.25mn people). Elementary occupations followed at 20% (655,100 people), while other occupations made up 17.8% (582,700 people).

Selangor recorded the highest number of workers

Selangor recorded the highest number of people in informal employment, accounting for 18.8% (617,000 people) of the national total. Sabah followed at 14.8% (484,000 people), while Johor recorded 9.8% (319,800 people).

The same states also led in employment within the informal sector. Selangor accounted for 17.8% (337,100 people), followed by Sabah at 15.2% (287,900 people) and Johor at 10.7% (203,600 people).

However, the highest rates of informal employment were recorded in Kelantan, at 39.2%, Terengganu, at 29.5%, and Kedah, at 29.2%. These figures underline the continued importance of informal work in several states, particularly as a source of livelihood where formal employment opportunities may be more limited.

Formalisation and social protection

The informal sector is expected to remain an important contributor to employment creation and income generation, especially for micro-entrepreneurs and self-employed individuals. At the same time, the government is pursuing measures to bring informal economic activities into the formal economy.

Among these initiatives is the Informal Entrepreneur Formalisation Plan, which aims to increase business registrations, strengthen productivity and improve access to financing, training and social protection. The Social Security Organisation is also providing contribution incentive schemes to encourage workers and self-employed individuals to obtain social protection coverage.

A more formalised economy could help improve job quality, strengthen economic resilience and support more inclusive growth, while ensuring that workers currently operating outside conventional employment arrangements have greater access to protection and opportunity.

READ MORE: Malaysia GDP grows 6% in Q2 2026 as economic momentum strengthens 

Infographics & lead image / DOSM