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 in Malaysia
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 (12%) | 720 | 12% |
| SOCSO (Employment Injury) | 74.40 | 1.25% |
| SOCSO (Invalidity) | 29.75 | 0.5% |
| EIS (Employment Insurance) | 11.90 | 0.2% |
| HRDF (if applicable) | ~60 | 1% |
| Annual leave provision | ~230 | ~3.8% |
| Public holiday provision | ~275 | ~4.6% |
| Total loaded cost | ~7,401 | ~123% |
* The EPF employer rate depends on the employee’s monthly wage: 13% up to RM 5,000, 12% above. SOCSO and EIS amounts come from the PERKESO tables, capped at RM 6,000 of wages. HRDF applies to employers with 10+ employees. EOR management fee not included above.
How this compares: Statutory employer contributions in Malaysia add roughly 13 to 16% to gross salary (EPF 12–13%, SOCSO and EIS about 2%, plus the 1% HRDF levy where it applies). This is lower than Indonesia (30–40%), similar to the Philippines (18–22%), and significantly lower than Colombia (35–45%).
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 | Speed, remote teams, compliance | Permanent ops, local revenue | 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
Since 1 January 2023, the Employment Act 1955 (as amended in 2022) covers all employees regardless of salary, with a few pay provisions limited to employees earning up to RM 4,000 a month. 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: From 1 January 2023, the Employment Act covers every employee regardless of salary, so working hours, leave and maternity protection apply to all. Employees earning more than RM 4,000 a month are still excluded from overtime, rest-day and public-holiday pay, shift allowance, and statutory termination, lay-off and retirement benefits, unless they are manual workers or in another group the First Schedule covers at any wage. Previously, the Act covered only employees earning up to RM 2,000 a month, plus manual workers. 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 | 0.5% | 0.5% |
| EIS (SIP) | Unemployment insurance (Malaysians and PRs only) | 0.2% | 0.2% |
| HRDF (if >10 employees) | Training fund | 1% | — |
EPF is the largest contribution. The employer rate depends on the employee’s monthly wage: 13% for wages up to RM 5,000 and 12% above that. The employee contributes 11%. EPF has no salary ceiling: up to RM 20,000 a month, contributions follow the wage bands in the KWSP Third Schedule, and above RM 20,000 the exact percentage applies. SOCSO and EIS are capped at RM 6,000 of monthly wages.
Foreign employee note: Since October 2025 wages, EPF is mandatory for foreign employees who hold a valid work pass (domestic workers excluded), at 2% from the employer and 2% from the employee. SOCSO applies to foreign workers at the same rates as Malaysians: the Employment Injury Scheme since 2019 and the Invalidity Scheme since 1 July 2024. Foreign workers also pay the 0.75% LINDUNG 24 Jam (SKBBK) deduction, mandatory for them since 1 June 2026. EIS covers only Malaysian citizens and permanent residents, so it does not apply to foreign staff.
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 up to 60 days a year when a doctor certifies it is needed, on top of the 14–22 days of ordinary sick leave: the 2022 amendments removed the old rule that capped both together at 60 days. Maternity leave is 98 days (increased from 60 on 1 January 2023). Paternity leave of 7 consecutive days was introduced in the 2022 amendments. Malaysia has 11 gazetted public holidays plus additional state holidays (typically 5–7 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
Statutory for employees earning up to RM 4,000 a month and for manual workers at any wage.
| 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 is 15% of total monthly payroll or USD 99, whichever is higher, per employee per month. On top of that, you pay the employee’s gross salary plus statutory contributions (EPF at 12% or 13% depending on salary, plus SOCSO and EIS, totaling roughly 13–15% 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.
The Employment (Amendment) Act 2022 took effect on 1 January 2023. Major changes include: the Act now covers all employees regardless of salary (previously only those earning up to RM 2,000 a month, plus manual workers), although overtime, rest-day and public-holiday pay, shift allowance and termination benefits still apply only to employees earning up to RM 4,000 a month and to manual workers at any wage; maximum working hours reduced from 48 to 45 per week; employees can apply for flexible working arrangements; maternity leave increased from 60 to 98 days; paternity leave of 7 days was introduced; and anti-discrimination provisions were strengthened.
Yes, since October 2025 wages. Foreign employees with a valid work pass (domestic workers excluded) contribute 2% of monthly wages and the employer contributes another 2%. Malaysian citizens and permanent residents contribute 11%, with 13% or 12% from the employer depending on salary. SOCSO also applies to foreign workers, but EIS covers only Malaysian citizens and permanent residents.
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) to employees earning up to RM 4,000 a month and manual workers. Employees can challenge unfair dismissal at the Industrial Court within 60 days.
Employees earning up to RM 4,000 a month, and manual workers at any wage, 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.
