TL;DR, Hiring in Malaysia
- Fully-loaded employer cost: ~13–16% (EPF 12–13% + SOCSO + EIS + HRD levy)
- EPF contribution drops from 13% to 12% above RM5,000 monthly salary
- Mandatory HRD levy of 1% applies to employers with 10+ Malaysian employees
- Employment Act 1955 amendments (2022) extended protections to all employees regardless of salary
Last reviewed:
Statutory employer costs in Malaysia
In Malaysia, employer statutory contributions total ~13–16% above gross: EPF (Employees Provident Fund) at 13% below RM5,000/month or 12% above, SOCSO (employment injury + invalidity) at ~1.75%, EIS (employment insurance) at 0.2%, plus the HRD (Human Resource Development) Corp levy at 1% for employers with 10+ Malaysian employees. Severance under the Employment Act applies after 12 months tenure for employees earning under RM4,000/month and is contract-based for those above.
| Contribution | Employer rate | Notes |
|---|---|---|
| EPF (Employees Provident Fund) | 12–13% | Employer share. 13% on monthly wages ≤RM5,000, 12% above. Employee adds 11%. |
| SOCSO (Social Security Organisation) | 1.25–1.75% | Employment Injury Scheme + Invalidity Scheme. Capped at insurable wages of RM6,000/month (rising). |
| EIS (Employment Insurance System) | 0.2% | Unemployment protection (introduced 2018). Capped at RM6,000/month wage. |
| HRD Corp Levy | 1.0% | Applies only to employers with ≥10 Malaysian employees in covered sectors. 0.5% for smaller. Funds training; refundable via approved courses. |
Mandatory employee benefits
Beyond statutory contributions, Malaysia law requires the following benefits the employer must fund.
- Annual leave
- Employment Act minimum: 8 days (<2 years), 12 days (2–5 years), 16 days (>5 years). Tech/MNC typically offer 14–21 days.
- Public holidays
- 11 statutory federal holidays plus state-specific (varies by Sultanate/state). Total typically 14–16 days.
- Sick leave
- Without hospitalisation: 14 days (<2 yrs), 18 days (2–5), 22 days (>5). With hospitalisation: up to 60 days combined per year.
- Maternity leave
- 98 days paid (extended from 60 in 2022 EA amendments). Paternity: 7 days paid for fathers (also 2022 reform).
Termination, notice and severance
Probation
Typically 3–6 months by contract. Can be extended once. Termination during probation requires notice per contract terms.
Notice period
Employment Act minimum: 4 weeks (<2 yrs), 6 weeks (2–5 yrs), 8 weeks (>5 yrs). Higher contractual terms common at MNCs.
Severance
Statutory termination/lay-off benefits apply only to Employment Act-covered employees (earning ≤RM4,000/month or in manual labour, since 2022 reform): 10 days/year (<2 yrs), 15 days/year (2–5), 20 days/year (>5). Above RM4,000/month, severance is purely contractual. Industrial Court can award reinstatement + back pay for unjust dismissal; average award is 24 months' wages.
Common compliance pitfalls
- The 2022 Employment Act amendments extended core protections (paternity leave, flexible work request, anti-sexual-harassment) to ALL employees regardless of salary, removing the historical RM2,000/month cap. EOR contracts written before April 2023 often miss this.
- Industrial Court awards for unjust dismissal can be extreme: median award is ~24 months' wages with reinstatement. 'Without cause' dismissal of a 5-year hire on RM10,000/month easily costs RM240k+.
- EPF rate drops from 13% to 12% above RM5,000/month, a small but commonly missed detail when modelling cost-to-employer.
- Foreign workers (non-citizens) have a separate EPF voluntary scheme and different SOCSO terms. EOR providers sometimes default to citizen contribution tables; verify per hire.
Frequently asked questions
EOR platform fees for Malaysia range from $199–$699 per employee per month. On top, employer statutory contributions add ~13.5–16% of gross salary (EPF + SOCSO + EIS + HRD levy). HRD levy applies only if the EOR has 10+ Malaysian employees on its books; most large EORs do, so budget for it.
Yes if the EOR has 10+ Malaysian employees in HRD Corp-covered sectors (services, manufacturing, mining, ICT, etc.), which most established EORs do. The 1% levy is passed through to you. It is partially refundable via HRD Corp-approved training courses, so factor that in if you actually plan training.
No. Termination requires either 'just cause and excuse' (misconduct, poor performance documented through warnings) or genuine redundancy. Industrial Court unjust-dismissal claims commonly award 24 months' wages plus back pay or reinstatement. Mutual-separation agreements are the standard exit path.
Before 2023, EA coverage capped at RM2,000/month wage. Post-2022 amendments extended core EA protections to all employees regardless of salary, but statutory termination benefits (the 10/15/20 day tables) still only apply to employees earning ≤RM4,000/month. Above that, severance is contractual.
Most EOR providers can onboard a Malaysian hire within 5–10 business days once the candidate's IC number, EPF number, tax file number, and bank details are collected. Setting up your own Sdn Bhd takes 4–8 weeks with minimum paid-up capital of RM1.
Sources
Statutory rates and rules verified against the following authorities. We update this page when rates change.