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Hiring employees in Malaysia (2026)

Here's what you need to know before you hire in Malaysia: what it really costs an employer, the employment laws that shape the contract, and how an employer of record in Malaysia lets you hire compliantly without opening a local entity. Every figure below is sourced and dated.

16%Employer cost on top
MYR 1,700Minimum wage / mo
8 daysMinimum paid annual leave
Days, not monthsTime to hire via EOR
Robbin Schuchmann
Written by:
Robbin Schuchmann
Co-Founder at EOR Overview
Last updated: November 9, 2026

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Plan on employer social contributions of 15.95% of gross pay in Malaysia, and what you get for that is a fairly light statutory package: no 13th-month salary, a 45-hour weekly ceiling and a minimum wage of RM1,700 a month. Most of that 15.95% is the Employees Provident Fund (EPF), the retirement scheme, where you pay 13 percent on monthly wages up to RM5,000 and 12 percent above it. Workplace injury cover (SOCSO) and a small employment insurance contribution (EIS) make up the rest.

With an Employer of Record (EOR), the EOR is the legal employer on paper. It registers with these schemes, runs payroll, and has to pay wages no later than the seventh day after each pay period ends. You direct the day-to-day work. Check where the person will work too: the Employment Act 1955 covers Peninsular Malaysia and Labuan, while Sabah and Sarawak have their own Labour Ordinances.

Malaysia employment facts

The statutory facts that drive a hire in Malaysia. Each row shows where the figure comes from and how current it is, so you can trust the number and check it yourself.

Pay & working time

Minimum wageper monthMYR 1,700CurrentManual / editor · 2026
Legal weekly hoursthe normal full-time week set by law, not hours actually worked45 hours/weekCurrentNational government · 2026
13th-month salarynoneCurrentNational government · 2026

Employer cost & tax

Employer social securityemployer rate, before any earnings caps16%AgingNational government · 2024
Employee social securitywithheld from pay11.7%AgingNational government · 2024
Corporate tax rate24%CurrentNational government · 2026

Termination

Notice period (average over 1, 5 and 10 years)employer notice for an economic dismissal6.7 weeksCurrentNational government · 2026
Severance pay (average over 1, 5 and 10 years)unconditional severance for an economic dismissal17.2 weeksCurrentNational government · 2026

Leave & time off

Paid annual leave (minimum, once eligible)8 daysCurrentNational government · 2026
Public holidays11 daysCurrentNational government · 2026
Maternity leave14 weeksCurrentNational government · 2026
Paternity leavepaid leave reserved for the father or partner, including reserved parental-leave quotas1 weekCurrentNational government · 2026

Labour market

State pension agenormal statutory pensionable age60CurrentNational government · 2026
Unemployment rate2.9%CurrentNational government · 2026
GDP per capita$13,965CurrentIMF World Economic Outlook · 2025
Union density8.7%DatedILOSTAT · 2018
Collective bargaining coverage0.4%DatedILOSTAT · 2018

Each row shows the year of the most recent citable source for that figure. Where a year looks old, that is the newest comprehensive source available, and we keep the sourced figure rather than substitute an unsourced newer one. Statutes may have changed since.

What it costs to hire in Malaysia

Salary is only part of the bill. On top of gross pay you owe employer social security and statutory contributions. Here's what an example salary of $14,000 a year actually costs you as the employer.

Gross annual salary$14,000
Employer contributions≈ 16% of gross+ $2,233
Total employment cost$16,233
Your EOR handles the filings

Illustrative, based on the employer social-security rate above. An EOR adds its own service fee on top of this total and runs the income-tax withholding and statutory filings, which are withheld from the employee's pay, not paid by you.

The employer cost on top of gross pay is mostly EPF, where you pay 13 percent on wages up to RM5,000 and 12 percent above that, while the employee adds 11 percent from their own pay. SOCSO adds 1.75 percent from you for employees under 60, and EIS adds 0.2 percent. Together these bring employer contributions to 15.95% of gross, and the employee side comes to 11.7%.

Income tax in Malaysia

Income taxPaid by employee · progressive
MYR 0 to MYR 5,0000%
MYR 5,000 to MYR 20,0001%
MYR 20,000 to MYR 35,0003%
MYR 35,000 to MYR 50,0006%
MYR 50,000 to MYR 70,00011%
MYR 70,000 to MYR 100,00019%
MYR 100,000 to MYR 400,00025%
MYR 400,000 to MYR 600,00026%
MYR 600,000 to MYR 2,000,00028%
MYR 2,000,000 +30%
Employer contributions
Social security16%
Employee contributions
Social security11.7%

Employment-law essentials

The rules an EOR enforces in your contracts, and the ones most likely to trip you up if you tried to hire in Malaysia on your own.

Working time
Legal weekly hours45 hours/week
Pay & 13th salary
Minimum wageMYR 1,700
13th-month salarynone
Leave
Paid annual leave (minimum, once eligible)8 days
Public holidays11 days
Maternity leave14 weeks
Paternity leave1 week
Termination
Notice period (average over 1, 5 and 10 years)6.7 weeks
Severance pay (average over 1, 5 and 10 years)17.2 weeks

Figures from the cited sources. Notice and severance are averages over 1, 5 and 10 years of service, not the amount for any one employee. Collective agreements or contracts can be more generous; an EOR applies whichever is correct for the role.

Things to watch in Malaysia

Malaysia is generous on some rules and quiet on others, so these are the points worth checking before you make an offer.

  • Pay level changes the rules. Non-manual staff earning more than RM4,000 a month have no statutory right to overtime pay or termination benefits. Their contract decides those terms, so write them out clearly rather than relying on defaults.
  • Notice and termination benefits grow with service. Notice is at least four weeks under two years of service and rises to eight weeks from five years. Termination benefits start at 10 days' wages per year of service. Paying wages instead of working the notice is allowed, so budget for it if a hire does not work out.
  • Redundancy has a reporting duty. Ending a role for redundancy or closure must be reported to the Labour Department on Form PK. Failing to report can mean a fine of up to RM50,000.
  • Leave scales with tenure. Annual leave starts at 8 days and reaches 16 from five years. Sick leave goes from 14 to 22 days, with hospitalisation leave of up to 60 days counted separately. Maternity leave is 98 consecutive days, and married fathers with 12 months of service get seven days of paternity leave.

What changed in Malaysia

Checked against official sources on .

No rule changes recorded since we began logging them.

Corrections to this guide

  • Corrected 11 October 2026Severance pay: 14.8 weeks → 17.2 weeks · sourceEmployment (Termination and Lay-Off Benefits) Regulations 1980 reg. 6: 10 days' wages per year if <2 yrs; 15 days if 2-<5 yrs; 20 days if 5+ yrs. 1y 10 days, 5y 100, 10y 200 = avg 103.3 days. A day's wage for a monthly-rated employee = monthly/26 (EA s.60I), i.e. 1/6 of a week: 103.3/6 = 17.2 wk.

EOR vs. opening your own entity in Malaysia

Use an EOR when…
You're hiring one to a handful of people in Malaysia.
You want someone working in weeks, not months.
You'd rather not own local payroll, tax and compliance.
You're testing the market before committing.
Open your own entity when…
You're scaling to a large local team long-term.
Per-employee EOR fees outweigh the cost of an entity.
You need full control of local employment and IP.

Choosing an EOR for Malaysia

Providers with strong Malaysia coverage onboard faster and carry less risk. A shortlist to start from:

Compare all EOR providers in Malaysia

Best employer of record in Malaysia: ranked providers

Common questions about hiring in Malaysia

Common questions about hiring in Malaysia through an EOR.

Do I need a legal entity to hire someone in Malaysia? +
No. An Employer of Record (EOR) already has a legal entity in Malaysia and employs the person on your behalf, so you can hire compliantly without opening your own entity. You manage the day-to-day work; the EOR handles the local contract, payroll, taxes and statutory benefits.
How much does it cost to employ someone in Malaysia? +
On top of gross salary, employers in Malaysia contribute roughly 16% in social security and statutory costs. An EOR adds its own service fee on top of that total employment cost.
What is the minimum wage in Malaysia? +
The statutory minimum wage in Malaysia is MYR 1,700. Pay below this is not permitted, and an EOR will hold contracts to at least this floor.
How hard is it to terminate an employee in Malaysia? +
Averaged across 1, 5 and 10 years of service, an economic dismissal in Malaysia comes with notice of 6.7 weeks and severance of 17.2 weeks. The amount owed depends on the reason for termination and the employee's tenure. An EOR runs the offboarding in line with local law to limit your risk.
How much paid leave do employees get in Malaysia? +
Employees in Malaysia are entitled to 8 days of paid annual leave. Statutory leave is one of the entitlements your EOR administers automatically.
About the author
Robbin Schuchmann
Robbin Schuchmann
Co-Founder at EOR Overview
Robbin is the co-founder of EOR Overview, an independent research site for Employer of Record services. He has been in the international hiring space for over a decade.
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