🇲🇾 Hiring in Malaysia

💡 Everything you need to know to hire and manage employees in Malaysia through Toku. Toku handles payroll processing, tax withholding, social contributions, and statutory compliance. This guide covers what you need to plan costs and manage your team.

At a Glance

Onboarding a New Hire

Plan for 7-10 business days between submitting a new hire and their start date. The employee provides their MyKad (or a valid work permit for foreign nationals), and Toku completes the SOCSO, EPF, and EIS registrations before they start.

Submit your new hire through the Toku platform and we take it from there: local employment agreement, statutory registrations, and payroll setup. See Onboard Contributors as a Client Admin in Toku for the step-by-step process, and the Country Readiness Live Tracker for lead times across all countries.

Employer Costs

On top of gross salary, you pay the following employer contributions in Malaysia:

As a rule of thumb, total cost of employment is roughly 112-115% of gross salary, with the effective rate slightly lower for higher earners because SOCSO and EIS are capped.

Employees pay their own EPF contribution (11% for Malaysian citizens and permanent residents; 2% for foreign workers), SOCSO (~0.5%), EIS (0.2%), and monthly income tax deductions (progressive resident rates from 0% to 30%; non-residents pay a flat 30%). These are withheld from gross salary, not charged on top. Toku calculates and remits all of the above.

Compensation & Payroll

Payroll in Malaysia is monthly. Toku runs one payroll per month, and employees receive an itemized payslip each cycle. Salaries are paid in MYR by bank transfer, no later than the 7th day after the end of the wage period.

The national minimum wage is MYR 1,700 per month (MYR 8.72 per hour), effective 1 February 2025, with no further increase announced for 2026. There is no statutory 13th month salary, though performance or contractual bonuses are common.

Employment Contracts & Probation

• Toku issues a compliant local employment agreement for every hire, covering pay, hours, leave, notice, and probation terms.
• Employment can be indefinite, fixed-term, or part-time. Fixed-term contracts that are repeatedly renewed can be deemed indefinite by the Industrial Court.
• Probation is set in the employment agreement; Malaysia has no statutory maximum, and 3-6 months is the market norm. A shorter notice period (typically one week) can apply during probation where the contract provides for it.

Working Hours

Standard hours are 8 per day and 45 per week, with at least one full rest day per week. Overtime is capped at 104 hours per month and paid at 1.5x the hourly rate on weekdays, 2x on rest days, and 3x on public holidays.

Leave Entitlements

All statutory leave in Malaysia is employer-funded. Bereavement leave is not required by law, but most employers grant 1-3 days as policy.

Public Holidays (2026)

Malaysia guarantees a minimum of 11 paid public holidays per year, five of which are compulsory (Labour Day, the Agong's Birthday, Hari Merdeka, Malaysia Day, and the state ruler's birthday); the rest are chosen from the gazetted list. Additional state-level holidays vary by state, Islamic dates are subject to moon-sighting confirmation, and holidays falling on a rest day are observed the next working day.

Benefits: Required vs. Common Extras

Statutory (included in employer costs above): EPF retirement savings, SOCSO employment injury and invalidity protection, EIS unemployment insurance, and the paid annual, sick, hospitalization, maternity, and paternity leave described above.

Toku offers fully sponsored international health coverage through Remote Health. See Remote Health, Your Global Insurance Plan for coverage details and enrollment.

Other common extras in Malaysia include private medical and hospitalization insurance (often covering dependents), dental benefits, annual performance bonuses, and car, phone, or education allowances. Employer-provided medical and childcare benefits enjoy tax exemptions, while most other benefits-in-kind are taxable. Toku can advise on how each of these affects your total cost.

Ending Employment

Malaysian terminations must follow fair procedure: dismissals for misconduct or poor performance require a written show-cause letter and a domestic inquiry, and pregnant employees are protected from dismissal except for misconduct or business closure. Involve Toku early whenever you are considering a termination. For the process, see How to Terminate an Employee or Contractor.

Payment in lieu of notice is permitted. Statutory severance applies to retrenchment and business closure: 10 days' wages per year of service (under 2 years), 15 days (2-5 years), or 20 days (5+ years), prorated for partial years. Employees dismissed for misconduct or who resign are not entitled to severance. Retrenchments require advance notification to the Labour Department at least 30 days ahead and fair selection.

Hiring Someone from Overseas?

Foreign professionals need an Employment Pass, which is tiered by salary: from 1 June 2026, Category I covers salaries of MYR 20,000+ per month (up to 5 years), Category II covers MYR 10,000-19,999 (up to 2 years), and Category III covers MYR 5,000-9,999 (up to 12 months). Processing takes 2-8 weeks, and applicants generally need a relevant degree plus 3 or more years of experience. Talk to Toku before extending an offer to a candidate who needs sponsorship.

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Last verified July 2026. This guide is for general information and doesn't constitute legal or tax advice. Your Toku account manager can confirm specifics for your situation.