Employer of Record in Malaysia: 2026 Cost and Compliance Guide

Malaysia's statutory employer costs are moderate. Employers pay into the Employees Provident Fund (EPF) at 13% of wages up to RM5,000 a month or 12% above, plus SOCSO and employment insurance (EIS) on wages up to RM6,000 a month, and a 1% HRD levy in covered sectors.

The Employment Act 1955 applies to all employees under a contract of service, but some protections, including overtime pay, pay for work on rest days and public holidays, and termination benefits, don't apply to employees earning more than RM4,000 a month.

This guide covers costs, that threshold, the main employment rules, provider comparison and when to set up your own company. Figures link to official sources. We do not test or use the providers listed; see our methodology.

An Employer of Record in Malaysia employs staff on behalf of foreign businesses: it signs the contract of service, registers the employee with the EPF and PERKESO (SOCSO and EIS), runs payroll and tax deductions, pays the HRD levy where it applies, and handles leave and termination under the Employment Act.

Ask each provider which statutory contributions its fee includes and how notice and any termination benefits are handled when the arrangement ends.

Since the 2022 amendments, the Employment Act 1955 applies to every employee under a contract of service, whatever their pay. But for employees whose wages exceed RM4,000 a month, some provisions don't apply: the rules on overtime pay, pay for work on rest days and public holidays, and termination and lay-off benefits (section 60J).

For most professional EOR hires, who earn more than RM4,000 a month, these entitlements depend on the contract rather than the Act. Leave, working hours, notice, maternity and paternity leave still apply.

Employees earning RM4,000 a month or less keep these protections under the Act.

What to ask an EOR

Malaysian employment cost has four layers: gross salary, the employer's EPF, SOCSO and EIS contributions, the HRD levy where it applies, and the EOR fee.

Rates below are for a Malaysian citizen or permanent resident under 60 earning more than RM5,000 a month, at an employer covered by the HRD levy.

Annual cost at example salaries

What these figures include and exclude

• EPF is 13% for monthly wages of RM5,000 or less and 12% above; the example salaries here are all above RM5,000 a month. For non-Malaysians who registered from 1 August 1998, the employer share is 2%.
• SOCSO and EIS stop at wages of RM6,000 a month, so above RM72,000 a year they are flat.
• The HRD levy applies to employers covered by the PSMB Act 2001, by sector and size.
• Employee contributions (EPF 11%, SOCSO 0.5%, EIS 0.2%) and the employee-paid LINDUNG 24 Jam contribution are deducted from pay and are not employer costs.

Estimate your own cost

Enter a salary to see the estimated annual cost, including mandatory employer contributions and an EOR fee. Change the fee to match the quotes you receive. For worked examples at four salary levels, see cost to hire an employee in Malaysia.

Malaysian employment law is set mainly by the Employment Act 1955, as amended with effect from 1 January 2023. It applies to all employees under a contract of service, with some provisions excluded for employees earning more than RM4,000 a month.

Minimum wage

RM1,700 a month from 1 February 2025 under the Minimum Wages Order 2024, with hourly and daily equivalents (RM8.72 an hour for a six-day week).[5]

Working hours

An employee may not be required to work more than 8 hours a day or 45 hours a week, more than 5 consecutive hours without a break of at least 30 minutes, or over a spread of more than 10 hours a day.[6]

Annual leave

8 days a year for less than 2 years' service, 12 days for 2 to 5 years, and 16 days for 5 years or more, pro rata in the year employment ends.[6]

Sick leave

Paid sick leave of 14 days a year for less than 2 years' service, 18 days for 2 to 5 years and 22 days for 5 years or more where no hospitalisation is needed, after examination by a doctor.[6]

Public holidays

Paid holidays on 11 gazetted public holidays a year, five of which must be National Day, the King's Birthday, the Ruler's Birthday (or Federal Territory Day), Workers' Day and Malaysia Day, plus any day declared a public holiday for that year.[6]

Maternity and paternity leave

Female employees are entitled to at least 98 consecutive days of maternity leave. Married male employees with at least 12 months' service get 7 consecutive days of paid paternity leave per confinement, for up to five confinements.[6]

Notice periods

Notice is as set in the written contract, and the same for both sides. Without a written term, it is at least 4 weeks for less than 2 years' service, 6 weeks for 2 to 5 years and 8 weeks for 5 years or more. Either side can waive it.[6]

RM4,000 threshold (EOR relevance)

For employees whose wages exceed RM4,000 a month, the Employment Act's provisions on overtime pay, pay for work on rest days and public holidays, and termination and lay-off benefits (section 60J) do not apply.[6]

• From 1 June 2027

  Malaysian minimum wage to rise to RM2,000 a month (announced)

  Check junior pay below RM2,000 a month. EOR hires are usually well above the minimum.

See every country in the employment law changes tracker.

These EOR providers publish Malaysia pages and starting prices that apply across their country coverage. Prices are their own published starting rates in USD, from our pricing tracker.

In Malaysia, ask which statutory contributions the fee includes, whether the HRD levy applies, and whether the provider can sponsor work passes for foreign hires.

Compare providers for Malaysia

• RemoFirst vs PlayrollIn Malaysia: US$199 vs US$399 a month (published starting prices).
• Oyster vs Globalization PartnersIn Malaysia: US$699 vs US$599 a month (published starting prices).
• Remote vs Atlas HXMIn Malaysia: US$599 vs US$599 a month (published starting prices).
• RemoFirst vs Atlas HXMIn Malaysia: US$199 vs US$599 a month (published starting prices).

For each provider's products, pricing model and fit signals, see the EOR provider directory.

The usual alternatives are a private limited company (Sdn Bhd) or a registered branch of your foreign company. Employing directly makes your entity responsible for EPF, SOCSO, EIS, the HRD levy and Employment Act compliance.

Running costs include accounting, tax filings and payroll.

For a step-by-step version of this calculation, see EOR vs local entity: a break-even framework.

1. 1

   Define the role and salaryDay 0

   Agree the gross monthly salary, working hours and whether the hire needs a work pass.

2. 2

   Compare itemised quotes1–3 days

   Request Malaysian quotes covering the fee, EPF, SOCSO, EIS, the HRD levy and offboarding. Use the estimator to sanity-check totals.

3. 3

   Sign the commercial agreement

   Review notice and termination terms, contract terms above RM4,000, IP assignment and personal data protection.

4. 4

   Contract and registration1–2 weeks

   The provider issues the contract of service and registers the employee with the EPF and PERKESO.

5. 5

   Ongoing administrationMonthly

   Monthly payroll, EPF, SOCSO and EIS contributions, the HRD levy and tax deductions.

Rates and rules on this page are based on the following official sources. Numbers in brackets in the tables above link to these entries.

1. 1
   Speech: The Fifth MADANI Budget 2027

   Ministry of Finance Malaysia

   The minimum wage will rise from RM1,700 to RM2,000 from June 2027, with MSMEs with annual sales below RM50 million exempted.

2. 2
   Employer Mandatory Contribution; Third Schedule, EPF Act 1991

   KWSP (Employees Provident Fund)

   Rates effective from October 2025 wages: Malaysians, PRs and pre-1998 non-Malaysian members below 60 — employer 13% (wages RM5,000 and below) or 12% (above), employee 11%; non-Malaysians registered from 1 August 1998 — 2% each. Part A rates also checked against the Third Schedule wage table (KWSP, 2022 edition): RM640 on RM4,920 and RM612 on RM5,100, with 12% and 11% of wages above RM20,000.

3. 3
   Contributions; Employed Worker

   PERKESO (Social Security Organisation)

   First category (under 60): employer 1.75%, employee 0.5%; EIS 0.2% each; contributions capped at an assumed monthly salary of RM6,000.

4. 4
   Akta Pembangunan Sumber Manusia Berhad 2001 (Act 612) ss 14–15

   Jabatan Tenaga Kerja Semenanjung Malaysia

   HRD levy of 1% of each employee's monthly wages for covered employers; 0.5% for employers who register voluntarily.

5. 5
   Minimum Wages Order 2024 (P.U.(A) 376)

   Ministry of Human Resources

   Minimum wage of RM1,700 a month from 1 February 2025, with hourly and daily equivalents.

6. 6
   Employment Act 1955 (Act 265), reprint as at 1 August 2023

   Attorney General's Chambers (Laws of Malaysia)

   Notice (s 12), maternity (s 37), hours (s 60A), holidays (s 60D), annual leave (s 60E), sick leave (s 60F), paternity (s 60FA), and the RM4,000 exclusions in First Schedule para 1A.

Malaysia's statutory employer costs are moderate: about 15% on top of salary for a Malaysian employee above RM5,000 a month, mostly EPF, with SOCSO and EIS capped at RM6,000 a month.

The point to plan for is the RM4,000 threshold: above it, overtime, holiday work pay and termination benefits depend on the contract, so check how your EOR's contract treats them.

Compare an EOR against your own company with our EOR vs local entity guide. For other Asia-Pacific markets, see Singapore and the Philippines.