What are the legal requirements for hiring in Malaysia?

The legal requirements for hiring in Malaysia include understanding employment contracts, labor laws, and tax regulations. It's important to ensure compliance with local laws to avoid any legal issues.

What are the best practices for hiring in Malaysia?

Best practices for hiring in Malaysia include creating clear job descriptions, using effective recruitment strategies, and understanding the local job market. It's also beneficial to be familiar with cultural nuances and labor laws.

How can Multiplier assist with hiring in Malaysia?

Multiplier can assist with hiring in Malaysia by providing guidance on legal requirements, offering recruitment services, and ensuring compliance with local laws. We help simplify the hiring process for businesses.

How to Hire Employees in Malaysia

With an estimated GDP of $488.25 billion*, Malaysia has a thriving economy and a rising labor force participation of 70.6%. With competitive hiring costs, a young workforce, and strong regional connectivity, the country is a strategic business hub, ideal for companies building and scaling a skilled workforce in Southeast Asia.

Hiring trends in Malaysia, 2025

After three years of rapid growth driven by shared services centers, hiring activity in Malaysia is expected to stabilize in 2025*
A rapid influx of semiconductors, manufacturing plants, and data centers is driving large-scale hiring.
Programs like the Malaysia Techlympics are building a future-ready talent pool specializing in AI, robotics, and electronics.
Kuala Lumpur has become an emerging hub for tech talent.
The unemployment rate remains low and steady at 3.1% in 2025*, reflecting continued stability in the job market.
Malaysian job seekers value flexibility, with over 55% of Malaysian employees preferring a hybrid work model.
Attractive salaries and benefits are a top priority for Malaysians* to match rising costs and inflation.

Malaysia is excellent for businesses building offshore, remote, and hybrid teams, especially in technology, tech support, finance, and customer service. Its labor laws are relatively employer-friendly (compared to more rigid markets like Europe), but setting up an entity to hire teams here can be costly and take months.

Before hiring, companies must decide whether to hire in-house or via an Employer of Record (EOR). This guide covers the key steps to successful hiring in Malaysia and explores whether an EOR is a better option for your business.

But first, let’s explore why this dynamic country is the ideal place to grow your business.

Why businesses hire teams in Malaysia

Malaysia is relatively stable politically compared to neighbors like Myanmar or even parts of Indonesia, making it a safer bet for growing remote teams. From the emerging tech hub of Kuala Lumpur to the special economic zone of Johor, businesses are drawn to this country because:

It boasts a highly skilled workforce, supported by an impressive 95% adult literacy rate* and over 16.6 million professionals actively participating in the labor market.
Cross-border talent initiatives in Special Economic Zones (SEZs) expand access to skilled workers.
English literacy is high (unlike many other Asian markets) — you can onboard talent quickly without language barriers.
Malaysia has an attractive time zone (GMT+8), making it ideal for companies in APAC, the Middle East, and even parts of Europe that need overlapping work hours.
Salaries for similar roles (tech, finance, operations) are much lower — often 30–50% lower than Singapore, for example. You cut costs without compromising on quality.

While the advantages of building a workforce in Malaysia are clear, the actual hiring process can be more complex.

How to hire in Malaysia? Complexities and costs

Before initiating the recruitment process in Malaysia, it’s crucial to factor in operational costs and additional expenses.

Important cost considerations include:

Company registration: Establishing a legal entity is a prerequisite for hiring in-house. Share capital expenses and consulting fees at this stage can vary from RM 1,000 to RM 5,000.
Legal assistance: Navigating Malaysia’s regulatory and compliance landscape often requires engaging legal counsel, especially for foreign entities. These fees vary based on the firm’s reputation and the complexity of services, with corporate law hourly rates generally ranging from RM300 to RM1,500.
Job advertisement and agency fees: You may need to spend money advertising on job search portals or recruitment boards. Or you may engage a recruitment agency for talent acquisition, and their fees will typically be15%-30% of the gross employee salary.
Human resources staffing: Hiring staff, managing benefits, payroll, and other administrative tasks requires time and human resources. When calculating expenses, factor in the costs associated with additional staff, both international and local.
Office rentals: Renting out a physical location can cost between RM 1,000–RM 5,000 per month, depending on the location chosen.
Work hours and statutory leave provisions: As per The Employment Act 1955, employees working past standard work hours are entitled to overtime pay equal to 1.5 times their standard pay.
Social Security and taxation framework: Your contribution to Social Security and the EPF ranges between 12% and 13% of an employee’s gross monthly income. Employers must contribute to the Employment Insurance System if their employees are not eligible for the pension scheme.

Companies can reduce or eliminate many of the costs mentioned above by using an EOR to hire teams in Malaysia. Let us explore how this option works.

What is an EOR, and how does it simplify recruitment?

An Employer of Record (EOR) is a third-party organization that legally employs talent on your behalf. You manage talent acquisition and day-to-day work while the EOR handles everything else — contracts, payroll, taxes, benefits, and compliance.

An EOR handles all the legal, compliance, payroll, and HR aspects of employing teams in Malaysia, simplifying every step of the hiring process.

A step-by-step guide to hiring employees in Malaysia

Whether you use an EOR or in-house teams to hire your employees in Malaysia, here are some key steps to follow:

Step 1: Set up your legal entity and register for taxes

To hire employees directly in Malaysia, you must first establish a legal entity, such as a private limited company (Sdn. Bhd.), and register with the Companies Commission of Malaysia (SSM).
You must also register your business with the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri, LHDN) to obtain a company tax identification number.

How an EOR helps

You don’t need to set up a Malaysian entity. Your EOR becomes the legal employer of record, allowing you to hire quickly and saving the time and expenses of company registration.

Step 2: Job search, interviews, and screening

Initiate your recruitment process by crafting comprehensive job descriptions that clearly outline the skills and qualifications you require. Leverage both online platforms (such as LinkedIn) and offline channels (like local or national newspapers) to maximize your reach.

Job portals are another way to scout for talent. Some of the most common online job portals that you can use are:

LinkedIn
Adnexio
Sling
JobStreet
WOBB

You can also work with other recruitment agencies to find the right match for your job. Most Malaysians submit cover letters and one or two-page resumes when applying for jobs. Your HR teams can screen the candidates themselves or use the help of an agency.

Job interview

Once you select an applicant, inform them about the interview process. Employers in Malaysia prefer an in-person interview, but online interviews are increasingly popular, especially for remote job roles.

Background checks

Employers in Malaysia are permitted to conduct background checks to check if a candidate is appropriate for the role.

How an EOR helps

Recruiting and hiring the right candidate may not be easy, but it is a strategic and vital step for meeting your business goals. From background screening to payroll and compliance, an EOR handles all administrative aspects of hiring, so you can truly focus on this key step.

Step 3: Drafting and extending employment contracts

After selecting the most qualified applicants, email formal offer letters and share a draft of the employment contract for their review. Malaysian hiring practices necessitate drafting a legally sound written employment contract.

How an EOR helps

An EOR can help you draft an employment contract within minutes, with fully compliant benefits and insurance setup. Make the first step of your employee experience smooth, seamless, and compliant.

Step 4: Set up payroll and work permits

As an employer, you will need to register with the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri – LHDN) for payroll tax purposes and remit monthly tax deductions (Potongan Cukai Bulanan – PCB) from your employees’ salaries.

How an EOR helps

Your EOR registers employees for Malaysia’s statutory schemes — EPF, SOCSO, and EIS — and manages monthly payroll deductions, tax filings, and contributions. This ensures full compliance with Malaysian payroll laws while saving your team time and effort.

Step 5: Manage statutory and optional employee benefits

Once payroll and compliance are in place, you’ll need to offer benefits that meet both legal obligations and local employee expectations.

Mandatory benefits in Malaysia include

EPF (Employees Provident Fund): A retirement savings scheme with mandatory employer contributions
SOCSO (Social Security Organisation): Insurance coverage for workplace injury, disability, and death
EIS (Employment Insurance System): A government insurance scheme that supports employees in the event of layoffs

You must register both your company and each employee with the appropriate government bodies and remit monthly contributions on time. These contributions are based on the employee’s monthly wages and are required by law.

Apart from these mandatory benefits, additional perks can improve employer branding and retention in Malaysia’s candidate-driven job market.

Additional (non-mandatory) benefits include

Private health insurance or personal accident coverage
Annual performance bonuses or a 13th-month salary
Flexible working hours or hybrid work arrangements
Housing, transport, or meal allowances
Wellness programs, including mental health support or gym reimbursements
Annual health check-ups and preventive care coverage
Upskilling and training allowances

How an EOR helps

Your EOR will automatically register employees for all mandatory benefits and can advise on additional perks based on local benchmarks. This ensures your offer remains competitive while staying compliant and cost-effective.

Hiring foreign employees in Malaysia

Employment in Malaysia for foreigners requires approval from the Immigration Department of Malaysia and the Ministry of Home Affairs. Work permits are tied to specific job roles and require justification that the position cannot be filled locally.

Malaysia issues several types of work passes:

Employment Pass (EP): For skilled professionals earning above RM 3,000/month with relevant qualifications
Temporary Employment Pass (TEP): For semi-skilled workers in sectors like manufacturing and construction
Professional Visit Pass (PVP): For short-term contract workers and visiting professionals

Employers must act as sponsors and submit supporting documents, including employment contracts, job descriptions, and education credentials. The approval process typically takes 4–6 weeks.

How an EOR helps

An EOR can also support foreign hiring in permitted cases, helping you navigate local employment law without the administrative burden of managing work permits.

Hiring successfully in Malaysia involves multiple compliance touchpoints for compliance, clarity, and efficiency. Let’s quickly recap:

Recap: Checklist for Malaysia hiring

Draft compliant job descriptions that align with Malaysian labor classifications.
Create legally sound employment contracts under the Employment Act 1955.
Register your company and obtain a tax ID with the appropriate Malaysian authorities (SSM and LHDN).
Set up payroll and manage Potongan Cukai Bulanan (PCB) tax deductions.
Register employees for EPF (pension), SOCSO (insurance), and EIS (unemployment fund).
Offer additional benefits like bonuses, insurance, and wellness programs to stay competitive.
If you’re employing foreigners, apply for the correct work permits.

An Employer of Record (EOR) helps you check all the boxes so your hiring process becomes streamlined, efficient, and hassle-free. Here’s a snapshot view of how it compares to in-house hiring.

Snapshot: In-house hiring vs. Employer of Record (EOR) services

Companies planning large, long-term operations may benefit from registering a local entity to access government incentives, and in-house hiring can be a viable option for them. But, for companies testing the market or expanding teams quickly without a legal or administrative setup here — an EOR is a flexible, low-risk option.

A robust EOR like Multiplier combines local expertise, legal compliance, and automation. From cost estimates to onboarding workflows, it makes hiring transparent, trackable, and scalable.

With Multiplier, you get:

Automated tax withholdings and payroll management
All-in-one platform to simplify HR tasks across onboarding, benefits, and more
Complete compliance with legal norms in the market
Assistance with work permits for foreign employees in Malaysia

Why HR teams love Multiplier for hiring teams in Malaysia and beyond

Multiplier has helped hundreds of businesses scale confidently across borders in Malaysia and beyond. It’s comprehensive solution combines international expertise (100+ with a local understanding of the Malaysian landscape.

HR teams love the transparent pricing, 24/7 support, and intuitive platform on which they can manage onboarding, payroll, and offboarding for teams in Malaysia and 150+ other countries

Ready to simplify your expansion into Malaysia?

Book a demo with Multiplier today and discover how our global employment platform can power your international growth.

Frequently asked questions

Q. How is payroll calculated in Malaysia?

The payroll system in Malaysia is similar to many other countries. An employee’s salary in Malaysia includes basic pay, allowances, perquisites, overtime, and incentives. Both the employer and employee contribute to the payroll, which is deducted from the employee’s gross salary.

Contributions towards income tax and social security in Malaysia include

Monthly Tax Deduction (MTD) system
Social Security and Employee Provident Fund
SOCSO social protection schemes (Employment Injury Insurance Scheme and Invalidity Pension Scheme)
Employees’ Provident Fund (EPF)
Employment Insurance Scheme

Learn more about Malaysian payroll management in our guide

Q. What is the salary structure in Malaysia?

Before you implement the payroll policies and procedures in Malaysia, you must understand the critical elements in the country’s salary structure. Below is a list of the different components that constitute employees’ payroll in Malaysia:

Basic salary: Basic salary refers to the fixed amount in the overall compensation package and excludes overtime pay or any other compensation.
Gross pay: Gross pay is the income after adding allowances to the basic salary, but excluding taxes and other deductions. For example, an employee earning 2,000 MYR (477.73 USD) monthly gets a gross pay of 2,000 MYR, including bonuses, holiday pay, overtime, etc.
Net pay: Net pay is what the employee gets after adjusting taxes and other deductions to the gross pay. Using our previous example, if an employee earns 2,000 MYR as gross pay, the amount that will eventually end up in their salary account will be less than the gross income due to deductions.
Incentive pay: Payroll in Malaysia also includes various performance-based incentives such as commissions, bonuses, profit shares, and gratuity.
Overtime: If an employee agrees to overtime, the employer must pay at least one and a half times the standard hourly wage for regular workdays. The employee is entitled to two and three times the hourly rate for overtime on rest days and public holidays, respectively.

Perquisites: The payroll in Malaysia also includes perquisites. These are benefits in cash or kind that can be converted into money. Examples of perquisites include travel allowances, gift vouchers, and professional subscriptions. Some perquisites are exempt from the payroll tax in Malaysia.
Allowances: Employees are paid allowances to cover certain expenses incurred in the line of work. Examples include meals, travel, and phone allowance.
‍Benefits-in-kinds (BIKs): BIKs are benefits that cannot be converted into cash. These typically include medical benefits, a driver and company car, and a phone provided by the employer. Since BIKs are not cash payments, they may not reflect in the employee’s payslips but may be considered for tax purposes.

Q. What are standard work hours, and what constitutes overtime in Malaysia?

The Employment Act 1955 mandates a standard 48-hour workweek, with a daily limit of 8 working hours spread across a maximum of six working days. Employees working overtime are entitled to ovrtime pay.

Overtime pay = 1.5 x (employee’s standard pay)

Additionally, employees working a six-day week are entitled to one rest day.

Q. What are the statutory leaves I must give Malaysian employees?

Employees in the country are also entitled to an annual paid vacation, and before they reach their 2-year mark in the company, they should have received at least eight days of leave annually. After this period, the minimum day goes up to 12, and after five years, it increases to 16 days.

Employees are also entitled to