How to Hire in Malaysia: A Complete Guide for Global Employers

Malaysia is Southeast Asia’s third-largest economy and a well-established hub for technology operations, financial services, and shared service centres. Kuala Lumpur offers a highly educated, multilingual workforce at competitive cost relative to Singapore, within a legal framework built on the Employment Act 1955 (EA) and the Industrial Relations Act 1967. For global employers, compliant hiring in Malaysia requires managing EPF contributions, SOCSO registration, EIS deductions, and HRD Corp levies, plus strict rules on employment contract classification and fixed-term contract limitations.

The most efficient route to compliant market entry is through a provider that specialises in How to Hire in Malaysia using an EOR model. The EOR registers with the Employees Provident Fund (KWSP), Social Security Organisation (SOCSO/PERKESO), Employment Insurance System (EIS), and the Inland Revenue Board (LHDN), managing all monthly contribution submissions and income tax withholding.

The Legal Framework for Hiring in Malaysia

The Employment Act 1955 (as amended by Act 877 in 2022) governs employees earning up to MYR 4,000 per month and manual workers regardless of salary. Above this threshold, common law and contract terms apply, though the amended EA extended several protections to all employees. All employment contracts must specify the nature of employment (permanent, fixed-term, or part-time), and fixed-term contracts must not be used as a device to circumvent permanent employment obligations.

Key Compliance Obligations for 2026

• EA 2022 Reform Compliance: The 2022 Employment Act amendments introduced 60 days paternity leave (in stages from 2023), expanded anti-sexual harassment provisions, and extended EA protections to all employees. An EOR maintains compliant contracts reflecting all 2022 amendments.
• EPF (KWSP) Mandatory Contributions: All Malaysian citizens and permanent residents must contribute to EPF. An EOR manages the split contributions and submits the monthly EPF i-Akaun file by the 15th of the following month.
• SOCSO (PERKESO) Registration: Both the Employment Injury Scheme and Invalidity Scheme contributions are mandatory for employees under 60 earning under MYR 5,000. An EOR manages SOCSO registration and monthly contribution submission via the i-SEMS system.
• HRD Corp Levy: Companies with 10 or more employees must register with the Human Resources Development Corporation and pay a 1% levy on the gross monthly payroll. An EOR manages HRD Corp registration and levy payment.
• Minimum Wage Compliance: Malaysia’s national minimum wage is MYR 1,500 per month (2024 rate, subject to revision). All employees, regardless of citizenship, must receive at least this rate.

2026 Personal Income Tax Brackets

Malaysia applies a progressive income tax system on chargeable annual income after personal reliefs.

Statutory Contributions (2026)

Work Standards and Leave Entitlements

The EA sets maximum working hours at 45 hours per week (8 hours per day on a 5-day week; 9 hours per day if working 5 days or fewer). Overtime is compensated at 1.5x the hourly rate on regular days.

• Annual Leave: 8 days per year for employees with less than 2 years of service; 12 days for 2-5 years; 16 days for over 5 years.
• Sick Leave: 14 days per year (under 2 years), 18 days (2-5 years), 22 days (over 5 years). Hospitalised employees receive 60 days’ paid sick leave in all cases.
• Maternity Leave: 98 consecutive days of paid maternity leave for each confinement, for up to 5 confinements. Benefit payable by employer for the first 5 confinements.
• Paternity Leave: 7 consecutive days of paid paternity leave for male employees (introduced under EA 2022 amendments), applicable for the first 5 confinements.
• Public Holidays: 11 national public holidays. Work on a public holiday is compensated at triple the ordinary daily rate.

Termination and Separation

• Notice Period: 4 weeks for less than 2 years of service; 6 weeks for 2-5 years; 8 weeks for over 5 years. Employer may pay in lieu.
• Termination Benefits: Employees covered by the EA and terminated other than for misconduct or voluntary resignation are entitled to termination and layoff benefits under the Employment (Termination and Lay-off Benefits) Regulations 1980.
• Industrial Court: Malaysia’s Industrial Court adjudicates unfair dismissal claims. Employers must demonstrate just cause and excuse. Reinstatement or compensation (up to 24 months’ back wages) are the standard remedies.

Conclusion

Malaysia in 2026 offers a compelling combination of talent depth, cost efficiency, and legal stability, but the EPF, SOCSO, EIS, and HRD Corp contribution stack requires active management from the first hire. The Employees Provident Fund (EPF / KWSP) is the definitive source for contribution schedules and employer obligations. An EOR removes entity requirements and manages the full compliance stack so your Malaysia team is operational quickly.