Employer of Record in Malaysia: A Comprehensive Guide for 2026

Introduction

Hiring in Malaysia gives you access to a skilled, multilingual workforce and a growing base of technology and business talent across Kuala Lumpur and beyond. The harder part is setting up to employ people there. You need a local entity, registrations with the Employees Provident Fund (EPF) and Social Security Organisation (SOCSO), payroll that handles statutory deductions, and contracts that hold up under the Employment Act 1955.

An Employer of Record (EOR) removes that setup. The EOR acts as the legal employer of your team in Malaysia, so you can hire, onboard, and pay people without registering a company of your own. It takes on the employment contract, payroll, statutory contributions, and compliance, while you direct the day-to-day work.

This guide covers what you need to employ people in Malaysia in 2026: employment law and contracts, leave and statutory benefits, payroll and taxes, work permits, termination rules, and how an EOR like Skuad supports the whole process.

Malaysia at a glance

population: 36.3 million

Currency: Ringgit (RM) (MYR)

Capital city: Kuala Lumpur

GDP: USD 422.33 billion

Languages: English, Malay

Employment in Malaysia

Employment in Malaysia is governed by the Employment Act of 1955. It lays down the minimum standards of terms and conditions of employment. The employment contract law in Malaysia has several provisions, including the Employees Provident Fund Act of 1991, which makes it mandatory for both employers and employees to make contributions toward a government-owned fund. 

The Minimum Wages Order, 2018, has set the minimum limit of wages that must be paid to everyone who works in Malaysia. It also includes provisions on pensions, retirement, and leave policies. 

A prospective employer must be thorough with the types of employment agreements in Malaysia. It is critical to know the intricacies of the letter of intent and the various benefits that must be offered to Malaysian employees. Most laws have a unified purpose of protecting the people from fraud or manipulation.

These laws are binding on even those employees who are not residents of Malaysia but are employed in the country. Details such as employee health benefits should be kept in mind while expanding your business in Malaysia. Undertaking the hiring process can be tedious. 

The following table contains some of the elements of a typical employment contract in Malaysia.

Employee entitlement‍

Public holidays

Employees in Malaysia are entitled to a minimum of 11 gazetted paid public holidays under Section 60D(1) of the Employment Act 1955. Five of these leaves are compulsory. The employer selects the remaining six. The number observed varies by state, since state governments declare additional holidays under the Holidays Act 1951. 

If a public holiday falls on a rest day, the following working day is treated as a paid holiday. Where an employee works on a paid public holiday, the employer pays the holiday pay plus two days' wages at the ordinary rate of pay for monthly-rated employees earning RM4,000 and below.

Below is a list of public national holidays in Malaysia -

• New Year's Day - National except Johor, Kedah, Kelantan, Perlis & Terengganu
• Chinese New Year - National
• Chinese New Year Holiday -National
• Chinese New Year Holiday -National except for Johor & Kedah
• Nuzul Al-Quran - National except Johor, Kedah, Melaka, Negeri Sembilan, Sabah & Sarawak
• Hari Raya Aidilfitri - National
• Hari Raya Aidilfitri Holiday - National
• Labour Day - National
• Wesak Day -National
• Agong's Birthday - National
• Hari Raya Haji - National
• Awal Muharram - National
• Awal Muharram Holiday - National except Johor, Kedah, Kelantan & Terengganu
• Merdeka Day -National
• Prophet Muhammad's Birthday - National
• Malaysia Day - National
• Malaysia Day Holiday - National
• Deepavali - National except Sarawak
• Christmas Day - National

Below is a list of public state holidays in Malaysia -

• YDPB Negeri Sembilan Birthday - Negeri Sembilan
• YDPB Negeri Sembilan Birthday Holiday -Negeri Sembilan
• Thaipusam - Johor, Kuala Lumpur, Negeri Sembilan, Penang, Perak, Putrajaya & Selangor
• Federal Territory Day - Kuala Lumpur, Labuan & Putrajaya
• Israk and Mikraj - Kedah, Negeri Sembilan, Perlis & Terengganu
• Independence Declaration Day - Melaka
• Installation of Sultan Terengganu - Terengganu
• Awal Ramadan - Johor, Kedah & Melaka
• Sultan of Johor's Birthday - Johor
• Good Friday - Sabah & Sarawak
• Sultan of Terengganu's Birthday -Terengganu
• Raja Perlis' Birthday - Perlis
• Hari Hol Pahang - Pahang
• Hari Hol Pahang Holiday -Pahang
• Harvest Festival - Labuan & Sabah
• Harvest Festival Holiday - Labuan & Sabah
• Hari Gawai - Sarawak
• Hari Gawai Holiday - Sarawak
• Hari Gawai Holiday - Sarawak
• Arafat Day -Kelantan & Terengganu
• Hari Raya Haji Holiday - Kedah, Kelantan, Perlis & Terengganu
• Sultan of Kedah's Birthday - Kedah
• Georgetown World Heritage City Day - Penang
• Georgetown World Heritage City Holiday - Penang
• Penang Governor's Birthday - Penang
• Sarawak Day - Sarawak
• Sultan of Pahang's Birthday - Pahang
• Melaka Governor's Birthday - Melaka
• Merdeka Day Holiday -Kelantan & Terengganu
• Sultan of Kelantan's Birthday -Kelantan
• Sultan of Kelantan's Birthday Holiday - Kelantan
• Sabah Governor's Birthday - Sabah
• Sarawak Governor's Birthday - Sarawak
• Sultan of Perak's Birthday - Perak
• Sultan of Selangor's Birthday - Selangor
• Christmas Eve - Sabah

Dates of these holidays and observances may change based on religious calendars.

Contractors vs. full-time employees

Like any other country, Malaysia has contractual as well as full-time employees. However, with the emergence of the gig economy and remote jobs, the distinction between full-time and contractual employees is blurring. Companies are also becoming more flexible with working hours and other benefits.

In Malaysia, the right to claim unfair dismissal under Section 20(1) of the Industrial Relations Act 1967 depends on whether someone works under a contract of service or a contract for service. An employee under a contract of service can claim unfair dismissal, whether they are full-time or on a fixed-term contract. A genuine independent contractor, who works under a contract for service, does not have that right.

The country has seen a rise in the number of contractual employees due to widespread internet access. A lot of graduates lean toward opportunities that let them earn money from the convenience of their homes. People in the creative or information technology (IT) sectors tend to engage in contract-based work commitments to increase their earnings.

Malaysia has experienced a multiple-fold increase in the number of remote workers in recent years. Also, the pandemic has given a significant push to remote working and remote jobs. 

With the rise in the number of employees opting for remote and contractual employment, more clarity is needed in terms of the clauses stated in the contractual work agreement. The primary purpose of this is to safeguard the interests of all kinds of employees, whether contractual or full-time. 

Choosing between contractors and full-time employees in Malaysia changes your obligations. Full-time staff fall under the Employment Act 1955 with Employees Provident Fund (EPF), Social Security Organisation (SOCSO), and Employment Insurance System (EIS) contributions, while contractors carry misclassification risk when the working relationship resembles employment.

Skuad supports both hiring models from a single platform:

EOR for full-time employees

• Acts as the legal employer across 160+ countries, so you can hire without setting up a local entity
• Supports employment contract generation aligned with local labor laws across supported markets
• Facilitates statutory contribution workflows covering applicable social insurance and pension obligations
• Supports payroll processing in 70+ currencies with automated tax withholding and year-end reconciliation
• Helps administer statutory benefits, paid leave, and parental entitlements in line with local requirements
• Assists with termination and offboarding, including notice periods and severance calculations as required locally

Contractor management

• Helps onboard contractors with locally compliant agreements that reduce misclassification exposure
• Supports invoice generation, approval workflows, and payment processing across 70+ currencies
• Helps flag classification risk early with built-in worker classification checks
• Facilitates multi-currency payouts with no manual reconciliation
• Helps manage contractor records, contracts, and payment history from one dashboard alongside full-time employees

Full-time or contractor, Skuad supports both. See pricing

Hiring in Malaysia

The hiring process in Malaysia is quite straightforward. Companies look for resources mostly via online channels to find a perfect fit for their roles. Several hiring companies in Malaysia help employers find the best talent for the job.

Some companies look for potential employees on professional networking sites such as LinkedIn, while others use job portals such as Jobstreet, foundit (formerly Monster), and Maukerja.

Recruiters reach out to job seekers from these portals and conduct several rounds of interviews to verify if they are the right fit for the job. After multiple rounds of evaluation, the most suitable candidates are selected.

Hiring employees via these employment sites gives companies access to a pool of candidates. However, the process can become tedious and time-consuming, and it requires thorough knowledge of the local laws. 

As a company that wants to expand its global reach and hire capable employees from Malaysia, partnering with Skuad can help you save time and effort in the hiring process. Skuad eases the recruitment process and handles various responsibilities such as onboarding, e-signing of documents, compliance, and tax filing, which leaves you to focus on the growth and expansion of your business. 

Book a demo with Skuad to get EOR services for your company

Probation & termination

Probation period

Probation and termination are two fundamental phases of any employment cycle. According to the probationary policies in Malaysia, three to six months is considered to be the standard probation period. Some companies also have only a month-long probation period. However, Malaysian laws do not distinguish between full-time employees and employees currently in their probation period.

After one month of probation, the employee is treated as a regular employee and enjoys all the benefits of the same in Malaysia. An employee who is still in their probation period is entitled to the minimum services provided in the employment agreement. 

However, there are no provisions that exclude probationers from the regular perks that a full-time employee receives. 

Termination of services

Termination of employment in Malaysia comes under the purview of several employment laws and policies. The employer must establish the grounds on which the employee can be terminated from the organization as early as possible while drafting the employment letter. 

The employees who are willing to leave the organization will have to inform the employer within the stipulated notice period and work for the minimum specified duration before leaving the organization.

The employer must notify their employee of their decision to let them go. The purpose of notifying in advance is that there is ample time for the employee to look for other work opportunities. The notice period is calculated based on the number of years for which the employee has served the company.

• If the employee has worked for less than two years, the notice period is four weeks.
• If the employee has worked for between two and five years, the notice will be issued six weeks before the date of leaving.
• If the employee has worked with the company for more than five years, the notice period increases to eight weeks.

During the notice period, the employees are entitled to full pay as they are still working with the organization. 

In cases of misconduct, the employer must hold a due inquiry (domestic inquiry) under Section 14 of the Employment Act 1955 before dismissing the employee or imposing a major penalty such as demotion or suspension. 

Terminating an employee in Malaysia carries real exposure. A full-time worker can claim unfair dismissal under the Industrial Relations Act 1967, and statutory notice periods run from four to eight weeks, depending on length of service.

Skuad helps with this through local Employer of Record infrastructure, so your team stays aligned with notice, severance, and documentation requirements without tracking every regulatory change independently.

Here is what Skuad helps with:

• Termination and offboarding support aligned with local labor requirements across supported markets
• Notice period and severance calculations as required under local law
• Documentation and final settlement workflows are handled on a single platform
• Compliance monitoring that flags regulatory changes affecting your employment obligations
• Records retention support aligned with local statutory requirements

Book a demo to see how Skuad supports compliant termination in Malaysia

EOR solution

EOR solutions in Malaysia facilitate end-to-end human resources management. Your EOR partner will act as the legal employer of your remote team in Malaysia and take complete charge of hiring, contracts, payroll management, employee benefits, etc. 

Setting up a Sendirian Berhad (Sdn Bhd) in Malaysia means registering with the Companies Commission of Malaysia, opening local bank accounts, and enrolling staff with the Employees Provident Fund (EPF) and Social Security Organisation (SOCSO) before your first employee starts. This can take months and commit your legal and finance teams to ongoing entity maintenance.

Skuad helps remove that dependency. Skuad acts as the legal employer in Malaysia, so your company can hire, onboard, and pay employees without entity setup, local counsel, or in-house payroll infrastructure.

Here is what Skuad helps with:

• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Payroll processing in 70+ currencies with accurate tax withholding and statutory deductions
• Termination and offboarding support aligned with local labor requirements across supported markets
• Work permit and visa support for foreign nationals joining your team
• Background verification covering identity, employment history, and criminal records before onboarding

Book a demo to see how Skuad gets your first Malaysia hire onboarded in weeks, not months

Outsourcing Employment

Many companies outsource human resources based on the work requirements, as it saves them valuable time spent in long-drawn processes such as hiring, payroll management, and tax management. Visas and work permits come into the picture when a company decides to outsource employees.

Types of visas in Malaysia

There are several types of visas in Malaysia. Some important types are listed below.

Work visas form a vital part of the EOR service. EOR companies can help you with all the formalities that are needed to onboard a foreign employee. They will also help you understand which work visa is applicable for your employees.

Work permits

It is essential to understand the concept of work permits in Malaysia if you plan to hire from other countries. 

With Malaysia's work permit for foreigners, an employee can live and work in the country under an Employment Pass, which is valid for up to 60 months. The duration is tied to the employment contract and salary, and is subject to Expatriate Committee approval, rather than to the employee's nationality.

The processing time is usually two to six weeks after the application is submitted, and approval of the Employment Pass often takes five to ten working days at the first stage. 

Once the application is approved through the Expatriate Services Division (ESD), a Visa with Reference (VDR) is issued for the employee to enter Malaysia. After arrival, the employee submits their passport to the Immigration Department and collects the physical Employment Pass within 30 days.

A Malaysian work permit cannot be obtained without a job offer, since the Employment Pass is employer-sponsored and tied to a named company. The employer files the application through ESD, and the expatriate normally enters Malaysia on a Visa with Reference (VDR). There is no routine in-country switch from a social or business visit visa to an Employment Pass.

Hiring a foreign national in Malaysia means clearing the expatriate post approval, submitting the Employment Pass application through the Expatriate Services Division (ESD), securing the Visa with Reference, and collecting the Employment Pass within 30 days of arrival. This sequence often runs two to six weeks before a hire can start.

Skuad supports the work permit process on your behalf, including:

• Supporting work permit applications for foreign employees joining your team
• Helping coordinate visa documentation with relevant local immigration authorities
• Assisting with residence or work permit conversions as required by local immigration law
• Helping track documentation requirements and deadlines across the full permit lifecycle
• Helping keep your team aligned with compliance requirements as permit renewals come due

Book a demo to see how Skuad supports Malaysia work permits end-to-end

Payroll & taxes in Malaysia

Payroll setup in Malaysia

Several guidelines govern the payroll and taxes in Malaysia. Some companies process the payroll internally for all employees, while others opt for payroll outsourcing in Malaysia. For a foreign company that wishes to expand in Malaysia, several laws are in place, and it is important to be mindful of them.

• Remote Payroll: In this situation, the employee is on the payroll of a foreign company in Malaysia. Here, the company outsources the entire HR system.
• Local Payroll Administration: In this case, the company registers itself in Malaysia but assigns another company to handle payroll for all its employees. Here, the Malaysian employer payroll taxes are also managed by the local payroll administrator in some cases.
• Internal Payroll: Some companies enter Malaysia with the vision of staying and expanding their business. These companies are large enough to hire a dedicated team and manage the payroll internally. Several HR professionals will have to be onboarded to run the payroll function in this case.

Skuad can help your company set up any of these payroll systems. Talk to us to learn more about our Malaysian EOR solutions.

Taxes in Malaysia

The standard corporate tax rate for Malaysian companies is 24% for resident companies with paid-up capital above RM2.5 million.

The rate is lower for small and medium enterprises. A resident SME with paid-up capital of RM2.5 million or less and gross income up to RM50 million pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000, and 24% on anything above RM600,000.

Different rates apply to businesses dealing with banking, insurance, oil, and petroleum.

Malaysia abolished the Goods and Services Tax (GST) in September 2018 and replaced it with the Sales and Service Tax (SST). Sales tax is charged at 5% or 10%, and service tax is 8% for most services since 1 March 2024, with some categories remaining at 6%.

Further, no withholding taxes apply to dividends paid by the company to non-residents of Malaysia. However, a 15% tax is applied to the interest paid to non-residents of Malaysia. 

Malaysia does not impose a general capital tax. It levies Real Property Gains Tax (RPGT) on gains from property disposals, and from 2024, a capital gains tax on disposals of unlisted shares. These apply to residents and non-residents alike, not only to non-residents.

Skuad can file taxes on your company’s behalf.

Malaysia payroll tax rates

The rate of tax changes with the level of income. The following table indicates the income slabs along with the tax rates applicable.

Employer taxation

Employee taxation

Employer costs in Malaysia stack up beyond gross salary. Contributions to the Employees Provident Fund (EPF), Social Security Organisation (SOCSO), and Employment Insurance System (EIS) add roughly 15 to 20 percent on top of pay, and the exact figure shifts with the employee's age and income band.

Before you budget a Malaysia hire, it helps to model the fully loaded cost. Skuad's employee cost calculator estimates gross salary, statutory employer contributions, and platform fees for a hire in Malaysia, so you can compare the real monthly cost against an entity setup.

Calculate the true cost of a Malaysian hire

Incorporation

Incorporating a company in Malaysia comes down to four main considerations. 

• Business Factors: The business factors include the industry and type of business you want to get into. Also, the elements of trade relationships and agreements become relevant if you are planning to set up a business in a foreign country.
• Cultural factors: EORs can help you to understand the local culture. Malaysia is known to be a multicultural society. You need to comprehend the regional and ethnic trends before setting up a business.
• Language: Language can become a barrier to your new business. Ensure that the region you select has people who can speak a globally recognized language.
• MyCoID: This government portal aids you in registering your business in the country. It is a one-stop application on which you can perform the necessary steps to get your company registered.

Skuad can also help you with incorporating a holding company in Malaysia. It has the expertise in handling the formalities that come with the job. 

Customer Story: How Microsense Networks Scaled Across Southeast Asia with Skuad

Microsense Networks, a hospitality-focused High-Speed Internet Access provider with a pan-India base, set out to expand into Indonesia, Sri Lanka, and Thailand. Hiring and paying contractors across three Southeast Asian markets meant handling separate local regulations and cross-border payments without a local entity in any of them. 

Skuad supported the effort with localized contractor agreements, country-specific documentation, and multi-currency payments from a single platform. Microsense onboarded 9 contractors across the three markets while staying aligned with local compliance.

Read the full case study

Hire in Malaysia without setting up an entity 

Hiring in Malaysia involves a lot of moving parts. The Employment Act 1955, EPF and SOCSO contributions, tenure-based notice periods, work permits for foreign nationals, and state-specific public holidays all shape how you employ people there.

Skuad supports the operational complexity of hiring in Malaysia, including employment contracts, statutory contributions, payroll in 70+ currencies, work permits, and compliance monitoring, so your team can focus on the work rather than the paperwork.

Companies across SaaS, technology, fintech, and professional services use Skuad to support their entry into Malaysia, stay aligned with regulations as they change, and scale a local team without building HR infrastructure from scratch.

Book a demo to see how Skuad gets your first Malaysia hire onboarded in weeks, not months

FAQs

1. What is an employer of record in Malaysia?

An Employer of Record (EOR) in Malaysia is a locally registered company that legally employs staff for a foreign business. It manages payroll, Employees Provident Fund (EPF) and Social Security Organisation (SOCSO) contributions, contracts, and Employment Act 1955 compliance, so you hire without a local entity.

2. How much does an EOR in Malaysia cost?

Most providers charge a flat fee of roughly USD 300 to 800 per employee per month, or 10 to 15 percent of gross salary. Statutory employer contributions to EPF, SOCSO, and Employment Insurance System (EIS) add about 15 to 20 percent on top. Pricing varies by headcount and salary.

3. Can a foreign company hire in Malaysia without a local entity?

A foreign company can hire in Malaysia by partnering with an EOR. The EOR acts as the legal employer, holds the local contract, and manages EPF, SOCSO, and EIS filings. You direct the employee's daily work while the EOR carries compliance obligations.

4. What are the compliance risks of misclassifying workers in Malaysia?

Misclassifying a worker as a contractor when the relationship resembles employment exposes you to back payment of EPF and SOCSO contributions, unpaid statutory benefits, and claims under the Employment Act 1955. Full-time staff can also file unfair dismissal claims under the Industrial Relations Act 1967.

5. Is it better to use an EOR or set up a local entity in Malaysia?

For lean teams or market testing, an EOR is usually faster and cheaper. Registering a local entity with the Companies Commission of Malaysia means legal setup, bank accounts, and ongoing EPF and SOCSO administration, often taking months. A local entity makes sense once headcount grows past a few employees.

6. How long does it take to onboard an employee in Malaysia through an EOR?

Local hires can typically be onboarded within one to two weeks, once identity documents, the signed contract, and EPF and SOCSO details are ready. Hiring a foreign national takes longer, since the work permit and visa sequence, including the DP10 submission, adds two to six weeks.