Hire Employees in Malaysia Without Setting Up a Sdn Bhd
Employ full-time staff in Malaysia in as fast as 5 business days. RecruitGo becomes the legal employer, handles contracts, EPF, SOCSO, EIS, tax withholding, and every compliance obligation under the Employment Act 1955.
What Is an Employer of Record in Malaysia?
An Employer of Record (EOR) is a locally registered company that legally employs workers in Malaysia on your behalf. RecruitGo's Malaysian entity (Sdn Bhd) becomes the legal employer — we sign the employment contract, register employees with EPF (KWSP), SOCSO (PERKESO), and EIS (SIP), withhold and file income tax via PCB (Potongan Cukai Bulanan), and manage all reporting required under the Employment Act 1955.
You retain full control over the employee's work, schedule, and responsibilities. They report to you, work on your projects, and function as part of your team. We handle everything that Malaysian employment law requires of an employer.
Without EOR: Incorporating a Sdn Bhd (Sendirian Berhad) requires SSM registration, tax registration with LHDN, employer registration with EPF/SOCSO/EIS, and typically takes 2 to 4 months with setup costs of RM 5,000 to 20,000+. See full EOR vs Sdn Bhd comparison →
Who Should Use EOR in Malaysia?
What It Costs to Hire Through EOR
Your total cost has three components: the employee's gross salary, mandatory statutory contributions, and the EOR management fee. Malaysia's employer contributions are moderate compared to the region.
| Component | Monthly (RM) | Rate |
|---|---|---|
| Gross salary | 6,000 | — |
| EPF employer (13%) | 780 | 13% |
| SOCSO (Employment Injury) | ~18 | ~0.3% |
| SOCSO (Invalidity) | ~18 | ~0.3% |
| EIS (Employment Insurance) | ~12 | 0.2% |
| HRDF (if applicable) | ~60 | 1% |
| Annual leave provision | ~230 | ~3.8% |
| Public holiday provision | ~275 | ~4.6% |
| Total loaded cost | ~7,393 | ~123% |
* EPF rate is 13% for employers with 20+ employees, 12% for smaller firms. SOCSO/EIS rates are capped. HRDF applies to employers with 10+ employees. EOR management fee not included above.
How this compares: Total employer cost in Malaysia is roughly 15 to 18% above gross salary. This is lower than Indonesia (30\u201340%), similar to the Philippines (18\u201322%), and significantly lower than Colombia (35\u201345%).
How Hiring Works Through EOR
You tell us the role, salary, location (KL, Penang, Johor, etc.), and start date. We confirm compliance requirements and return a full cost breakdown within 24 hours.
We draft a compliant employment contract under the Employment Act 1955 (as amended 2022), register the employee with EPF, SOCSO, and EIS, and set up PCB tax withholding with LHDN.
We calculate and disburse salary by the 7th of each month, process all statutory contributions, withhold and remit PCB (monthly tax deduction), and provide payslips. We handle annual EA form filing.
The 2022 amendments to the Employment Act significantly changed Malaysian labor law. We monitor regulatory changes and adjust your employees’ arrangements accordingly.
EOR vs Sdn Bhd vs Contractors
| EOR | Sdn Bhd | Contractor | |
|---|---|---|---|
| Time to first hire | 5–7 days | 2–4 months | Immediate |
| Setup cost | None | RM 5K–20K+ | None |
| Capital required | None | RM 1+ (Sdn Bhd) | None |
| Compliance risk | Handled by EOR | Your responsibility | High |
| Employee protections | Full | Full | None |
| Best for | 1–15 people, speed | 15+, permanent ops | Short-term only |
Contractor warning: Malaysia's Employment Act and case law distinguish between a “contract of service” (employment) and a “contract for service” (independent contractor). Courts look at the degree of control, integration into the business, and economic reality. Misclassification can result in backdated EPF, SOCSO, and EIS contributions plus penalties.
Contract Types in Malaysia
The Employment Act 1955 (as amended in 2022) now covers all employees regardless of salary level for core protections. Understanding which contract type applies determines notice periods, termination rules, and overtime eligibility.
Permanent Employment
Open-ended contract of service
Fixed-Term Contract
Contract with a defined end date
2022 amendments impact: The Employment Act now provides core protections (working hours, overtime, maternity leave, termination benefits) to all employees regardless of salary. Previously, only employees earning RM 2,000 or less were fully covered. This significantly expanded compliance obligations for employers.
Income Tax (PCB / MTD)
Employers withhold income tax monthly through the PCB (Potongan Cukai Bulanan / Monthly Tax Deduction) system administered by LHDN (Inland Revenue Board). Malaysia uses a progressive tax system for residents. Non-residents are taxed at a flat 30%.
| Chargeable income (RM/year) | Rate |
|---|---|
| Up to RM 5,000 | 0% |
| 5,001 – 20,000 | 1% |
| 20,001 – 35,000 | 3% |
| 35,001 – 50,000 | 6% |
| 50,001 – 70,000 | 11% |
| 70,001 – 100,000 | 19% |
| 100,001 – 400,000 | 25% |
| 400,001 – 600,000 | 26% |
| 600,001 – 2,000,000 | 28% |
| Over 2,000,000 | 30% |
Malaysia offers various tax reliefs including personal relief (RM 9,000), EPF contributions (up to RM 4,000), medical insurance (up to RM 3,000), and lifestyle relief (RM 2,500). Your EOR calculates PCB correctly each month, files with LHDN, and issues EA forms for annual tax filing.
EPF, SOCSO & EIS
Every employer in Malaysia must register employees with three mandatory programs (plus HRDF for larger companies). Your EOR handles registration, monthly calculation, remittance, and reporting for all.
| Program | Coverage | Employer | Employee |
|---|---|---|---|
| EPF (KWSP) | Retirement savings fund | 13% (12% if salary > RM 5K) | 11% |
| SOCSO – Employment Injury | Work-related injury/disease | 1.25% (capped) | — |
| SOCSO – Invalidity | Non-work disability, death | ~0.3% | ~0.3% |
| EIS (SIP) | Unemployment insurance | 0.2% | 0.2% |
| HRDF (if >10 employees) | Training fund | 1% | — |
EPF is the largest contribution. The employer rate is 13% for companies with 20+ employees (12% for smaller firms). The employee contributes 11%. EPF contributions are capped at a salary ceiling of RM 20,000. SOCSO and EIS contributions are also capped at defined salary ceilings.
Foreign employee note: EPF is optional for foreign workers (mandatory for Malaysian citizens and PRs). However, SOCSO and EIS are mandatory for all employees regardless of nationality. Some employers contribute to EPF voluntarily for foreign staff as a retention tool.
Employee Benefits in Malaysia
Leave entitlements by tenure
| Tenure | Annual leave | Sick leave |
|---|---|---|
| < 2 years | 8 days | 14 days |
| 2–5 years | 12 days | 18 days |
| > 5 years | 16 days | 22 days |
Hospitalization leave is 60 days per year (in addition to sick leave). Maternity leave is 98 days (increased from 60 in 2022). Paternity leave of 7 consecutive days was introduced in the 2022 amendments. Malaysia has 11 gazetted public holidays plus additional state holidays (typically 5\u20137 more depending on the state).
Termination and Retrenchment
Malaysian law requires “just cause or excuse” for termination. Employees who believe they have been unfairly dismissed can file a complaint with the Industrial Relations Department within 60 days, which may be referred to the Industrial Court.
Notice periods
| Tenure | Minimum notice |
|---|---|
| < 2 years | 4 weeks |
| 2–5 years | 6 weeks |
| > 5 years | 8 weeks |
Termination / retrenchment benefits
| Tenure | Benefit per year of service |
|---|---|
| < 2 years | 10 days per year |
| 2–5 years | 15 days per year |
| > 5 years | 20 days per year |
LIFO principle: In retrenchment situations, Malaysia follows the “Last In, First Out” principle. Foreign workers must be terminated before local employees. Your EOR manages the full termination process including proper documentation, notice, and calculation of all owed amounts.
Work Permits & Employment Pass
Malaysian nationals hired through EOR need no work permits. For foreign employees, Malaysia requires an Employment Pass (EP) for professional roles with a minimum salary of RM 5,000/month.
EP salary threshold: The minimum salary for an Employment Pass is RM 5,000/month. For certain sectors and roles, higher thresholds may apply. EP holders are tied to the sponsoring employer. A new EP application is required when switching employers.
Frequently Asked Questions
RecruitGo’s EOR management fee starts from $49.99/employee/month. On top of that, you pay the employee’s gross salary plus statutory contributions (EPF 13%, SOCSO, EIS totaling roughly 15–18% of salary). For a RM 6,000/month role in KL, total loaded cost is approximately RM 7,400.
Typically 5–7 business days from signed agreement to the employee’s first day. This compares to 2–4 months for incorporating your own Sdn Bhd.
No. RecruitGo’s Malaysian entity (Sdn Bhd) becomes the legal employer. You do not need to register your own company. You can start hiring immediately.
Major changes include: the salary threshold for EA coverage was raised to RM 4,000 (previously RM 2,000), maximum working hours reduced from 48 to 45 per week, flexible working arrangements must be considered, maternity leave increased from 60 to 98 days, paternity leave of 7 days was introduced, and anti-discrimination provisions were strengthened.
EPF is mandatory for Malaysian citizens and permanent residents. For foreign workers, EPF is optional, though SOCSO and EIS remain mandatory. Many employers still contribute to EPF for foreign staff as a retention benefit.
Yes. Foreign employees require an Employment Pass (EP) for professional roles (minimum salary RM 5,000/month). RecruitGo handles the full immigration process, including EP application, renewal, and cancellation.
Termination requires just cause or excuse. Notice periods range from 4 to 8 weeks depending on tenure. Retrenchment requires payment of termination benefits (10–20 days per year of service). Employees can challenge unfair dismissal at the Industrial Court within 60 days.
Employees covered by the Employment Act are entitled to overtime pay at 1.5x the hourly rate for work beyond normal hours. Rest day work pays 2x, and public holiday work pays 3x. Overtime is capped at 104 hours per month. The 2022 amendments reduced standard weekly hours from 48 to 45.
