Hire in Malaysia

How WorkMotion Hires Employees in Malaysia

WorkMotion provides Employer of Record (EOR) services in Malaysia through its established partner network, giving your company a compliant path to hire Malaysian talent without registering a local entity.

Here is how the process works, from contract to payroll.

1. Contract Generation

WorkMotion generates an employment contract aligned with Malaysia’s Employment Act 1955 and its subsequent amendments.

The Employment Act sets out minimum statutory benefits and entitlements, and since January 2023 it applies to all employees under a contract of service, with certain provisions, including overtime payments and termination benefits, applying specifically to employees earning RM 4,000 or below per month.

The contract specifies the employee’s role, salary in Malaysian Ringgit, working hours, leave entitlements, notice periods, and all statutory obligations. It must state the employee’s job title and primary responsibilities, and explicitly set out the basic salary in Malaysian Ringgit along with payment frequency.

WorkMotion’s locally reviewed templates reflect the 2022 and 2025 amendments to the Employment Act, so your new hire receives a contract that is current and compliant from day one.

2. Statutory Registration

Before payroll can run, the employer of record must be registered with Malaysia’s three core statutory bodies.

Post-incorporation, employers must register with the Inland Revenue Board (LHDN) to obtain a Tax Identification Number, and with the Employees Provident Fund (EPF) and the Social Security Organisation (SOCSO).

Employers are required to register as an EPF employer within seven days of hiring workers.

WorkMotion’s partner network handles all of these registrations on your behalf, so you are not navigating Malaysian government portals or managing registration timelines yourself.

3. Payroll and Statutory Contributions Setup

Malaysia payroll involves four mandatory contributions:

• EPF (Employees Provident Fund), the largest at a 12–13% employer share
• SOCSO, covering employment injury and invalidity at approximately 1.75%
• EIS (Employment Insurance System), adding a 0.2% employer share
• PCB (Monthly Tax Deduction), the withholding mechanism for income tax

WorkMotion configures each of these correctly for your employee’s salary level, citizenship status, and age bracket, factors that all affect the applicable rates.

The EPF employer contribution increased from 12% to 13% for employees earning RM 5,000 and below, effective February 2024.

Getting these rates wrong triggers penalties and interest charges, so accurate setup from the first payroll cycle matters.

4. Benefits and Ancillaries

WorkMotion enrols your employee in all statutory leave entitlements required under Malaysian law.

Employees are statutorily entitled to paid annual leave over 12 months of continuous service:

• Eight days for fewer than two years of employment
• 12 days for two to five years
• 16 days for five or more years

Pregnant female employees are entitled to maternity leave of 98 days.

The 2025 Employment Act amendments, effective February 2025, introduced flexible work arrangements as a statutory right, reduced maximum working hours from 48 to 45 hours weekly, strengthened sexual harassment protections, and enhanced paternity leave.

WorkMotion tracks these legislative changes and updates employment terms accordingly, so your HR team does not need to monitor Malaysian regulatory updates independently.

5. Monthly Payroll and Contribution Remittance

All contributions, EPF, SOCSO, EIS, and PCB, are due by the 15th of the following month.

WorkMotion processes payroll in Malaysian Ringgit and remits all statutory contributions on time.

SOCSO contributions must be paid by the 15th of the month for the salary issued for the previous month. A late payment interest rate of 6% per annum per day is charged for each day of contribution not paid. This compounds quickly and can result in substantial penalties for delayed payments.

WorkMotion’s payroll team manages these deadlines across every pay cycle, so your employee’s contributions are never at risk of triggering enforcement action.

6. Compliance Monitoring

Malaysian employment law has seen significant amendments in 2022, 2023, and 2025, with further updates expected as the government continues to modernise its labour framework.

These amendments represent the most significant changes to Malaysian employment law in decades, requiring employers to review and update contracts, HR policies, and payroll practices.

WorkMotion monitors regulatory changes and updates employment terms, contribution rates, and payroll configurations as new rules take effect, without requiring action from your team.

WorkMotion’s EOR vs. Setting Up a Malaysia Entity

For most foreign companies hiring one to a handful of employees in Malaysia, the EOR route removes months of setup time and ongoing administrative overhead.

Here is how the two approaches compare.

Factor	WorkMotion EOR	Own Entity (Sdn Bhd)
Setup cost	No entity setup cost; per-employee monthly fee	Estimated: registration fees from RM 1,000–1,100 plus professional fees; year-one total costs of RM 13,700–32,600 depending on nominee director requirements and service providers
Time to first hire	Days from signed contract	Estimated: SSM registration takes 3–7 business days, but full operational readiness, including bank account opening, typically requires 6–14 weeks
Ongoing legal exposure	WorkMotion assumes legal employer obligations; compliance risk managed by the EOR	Your entity is directly liable for Employment Act compliance, EPF/SOCSO/EIS filings, tax returns, and annual SSM filings
Ongoing admin burden	Payroll, contributions, and compliance handled by WorkMotion	Internal or outsourced payroll management, annual returns, audited financial statements, and corporate secretarial obligations
Exit flexibility	Wind down a hire without dissolving an entity	Closing a Sdn Bhd requires a formal liquidation or strike-off process with SSM

EOR is the right fit when you need to hire quickly, test a market, or keep headcount in Malaysia lean without committing to a permanent legal structure.

For businesses committed to serious, long-term expansion in Malaysia, entity incorporation is usually the more strategic path. If you reach the point where a local entity makes commercial sense, WorkMotion can support the transition.

Use WorkMotion’s employment cost calculator to estimate the full cost of hiring in Malaysia, including gross salary, employer contributions, and service fees, before you commit.

What Foreign Employers Often Get Wrong When Hiring in Malaysia

Malaysia’s employment framework has changed substantially in recent years. Foreign employers who rely on outdated assumptions or generic APAC templates frequently run into compliance gaps.

These are the rules that catch companies out most often.

The Employment Act Now Covers All Employees

Many foreign employers assume the Employment Act 1955 only applies to lower-paid workers. When hiring in Malaysia, one of the first compliance checks is understanding who falls under the Employment Act 1955 (Amendment 2022).

The Act now fundamentally protects all employees under a contract of service, regardless of salary. The salary threshold of RM 4,000 still determines eligibility for certain enhanced protections, such as overtime pay and termination benefits, but the core framework applies universally.

WorkMotion generates contracts that reflect the correct entitlements for each employee’s salary band, so nothing is inadvertently omitted.

The 2025 Working Hours Reduction Is Already in Force

Effective February 2025, the Employment Act amendments reduced maximum working hours from 48 to 45 hours per week and introduced flexible work arrangements as a statutory right.

Contracts drafted before this amendment that still reference 48-hour maximums are now non-compliant. WorkMotion’s contract templates are updated to reflect the current statutory limits, and existing employment terms are reviewed when legislative changes take effect.

EPF Contribution Rates Depend on Salary and Citizenship

The EPF receives and manages retirement savings encompassing mandatory contributions by all employees working in Malaysia, including Malaysian citizens, permanent residents, and non-Malaysian citizens.

Contribution rates vary based on citizenship status, age, and monthly wages. Foreign workers are not subject to mandatory EPF contributions in the same way as Malaysian citizens and permanent residents, but the rules around voluntary contributions and the applicable rates differ.

Getting this wrong means either under-contributing (a compliance breach) or over-deducting from an employee’s salary (an employment dispute). WorkMotion applies the correct rate for each employee’s profile from the first payroll run.

SOCSO Now Covers Foreign Workers Too

As of 1 July 2024, all foreign workers employed in Malaysia are mandated to be covered under the Invalidity Scheme, a benefit previously restricted to local employees under the age of 60.

This requirement applies to all employers who employ foreign workers with valid passes or permits issued by the Director General of Immigration for the purpose of working in Malaysia.

Foreign employers who assumed SOCSO was only relevant for local hires now have additional contribution obligations for expatriate employees. WorkMotion’s payroll configuration accounts for these requirements by default.

The SOCSO and EIS Wage Ceiling Changed in October 2024

Effective 1 October 2024, PERKESO enforced a new wage ceiling for contributions, rising from RM 5,000 to RM 6,000 per month.

Employees earning between RM 4,001 and RM 6,000 now have higher SOCSO and EIS contributions calculated on their full salary rather than being capped at RM 4,000. This affects both employer and employee contribution amounts.

Employers who have not updated their payroll configurations since September 2024 are likely calculating contributions incorrectly. WorkMotion updated its payroll engine when the new ceiling took effect.

Non-Competition Clauses Are Generally Unenforceable

In Malaysia, non-competition clauses cannot be enforced as they contravene Section 28 of the Contracts Act 1950.

Foreign employers who include standard non-compete provisions from their home-country contract templates are relying on clauses that Malaysian courts will not uphold. WorkMotion’s locally reviewed contracts use enforceable alternatives, such as properly scoped confidentiality and non-solicitation provisions, that comply with Malaysian law.

Termination Requires Just Cause and Due Process

Employment termination in Malaysia must follow strict due process under Part XII of the Employment Act. Whether an employee leaves voluntarily, is terminated for misconduct, or faces retrenchment, the employer must ensure that notice, documentation, and payments align with statutory obligations.

When there is termination without good reasons, employees can file an unfair dismissal claim in the Industrial Court, where the Court can award statutory compensation of up to 24 months of back wages.

WorkMotion’s team guides clients through compliant termination processes and ensures all documentation meets the statutory standard before any termination is executed.

Who Hires in Malaysia Through WorkMotion

European Tech Companies Accessing APAC Engineering Talent

Germany, Netherlands, and UK-based SaaS and AI companies frequently use WorkMotion’s EOR services in Malaysia to hire software engineers and product specialists they cannot find, or cannot afford, in their home markets.

Malaysia’s ICT sector has grown significantly as the country moved up the industry value chain, producing a strong pipeline of technical talent.

For a company with 50–300 employees that needs two or three engineers in Kuala Lumpur without committing to a Sdn Bhd, WorkMotion’s partner network provides a compliant, fast path to employment. The alternative, waiting months for entity setup while a competitor fills the same roles, is not a viable option when hiring timelines are measured in weeks.

B2B SaaS Companies Entering Southeast Asia

For a European or US-based SaaS company testing the Malaysian market with a local sales or customer success hire, entity setup is disproportionate to the initial commitment.

WorkMotion lets the company hire a market-entry lead in Malaysia, compliantly, with a locally valid employment contract, EPF and SOCSO contributions managed, and payroll running in Ringgit, without incorporating a Sdn Bhd.

Companies expanding across the region often pair a Malaysian hire with headcount in neighbouring markets such as Indonesia, using the same platform for each. If the market proves out and headcount grows, the company can evaluate entity setup from a position of knowledge rather than urgency.

Fintech and E-Commerce Companies Building Regional Operations

Malaysia’s position as a regional hub for financial services and ICT makes it a natural base for fintech and e-commerce companies expanding across ASEAN.

Companies with 100–500 employees that already have a presence in one ASEAN market often use WorkMotion to add Malaysian headcount quickly, hiring operations leads, compliance managers, or regional account managers, without the overhead of a separate legal entity in each country.

WorkMotion’s EOR solution in Malaysia handles the employment compliance layer so the company can focus on the commercial build-out.

Remote-First Companies Hiring Where the Talent Is

For companies that operate without a fixed geographic footprint, Malaysia offers a strong talent pool across tech, finance, and professional services.

Remote-first SMEs, typically 50–500 employees, headquartered in Europe, use WorkMotion to hire Malaysian employees as part of a distributed team, with the same compliance rigour applied to each hire regardless of country.

The employee receives a locally compliant contract, statutory benefits, and payroll in their local currency. The employer gets a single platform and a single point of accountability for employment compliance across multiple countries.

Start Hiring in Malaysia With WorkMotion Today

You have found the right candidate in Malaysia. The next step is not entity registration, not a six-month legal project, and not a stack of government portals to navigate.

WorkMotion’s EOR services in Malaysia, delivered through our established partner network, give you a compliant employment structure, locally valid contracts, and payroll running in Malaysian Ringgit, typically within days of a signed agreement.

Malaysia’s Employment Act has changed significantly in recent years, and the statutory contribution landscape continues to evolve. WorkMotion tracks those changes so your team does not have to.

If you are ready to make your first hire in Malaysia, or add to an existing team there, we can get you started.

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