If you’re hiring employees in Malaysia, you’re taking on a set of statutory contribution obligations that go well beyond income tax. Malaysian payroll involves five distinct employer obligations: EPF, SOCSO, EIS, HRD Corp, and monthly tax withholding. Miss any one of them and you’re exposed to penalties from multiple regulatory bodies. This guide covers each obligation, the exact rates for 2026, and what you need to get right from day one.
Epf: the core employer contribution
The Employees Provident Fund (EPF) is Malaysia’s mandatory retirement savings scheme. Contributions are due by the 15th of each month. The rates differ depending on whether your employee is a Malaysian citizen or a non-Malaysian national.
Malaysian employees
For Malaysian employees, the employer contributes 13% of monthly wages for employees earning RM 5,000 or less per month. For employees earning above RM 5,000, the employer rate drops to 12%. Employees contribute 11% regardless of salary level.
Non-malaysian employees
Effective October 2025, and applying throughout 2026, non-Malaysian employees and their employers each contribute 2%. This applies to non-citizen employees who aren’t permanent residents and weren’t registered with EPF before August 1, 1998. Non-Malaysian permanent residents, and those registered before August 1, 1998, pay the standard rates: 11% from the employee and 12–13% from the employer, depending on salary level. Domestic helpers and diplomatic staff are exempt from EPF entirely.
Socso and eis
SOCSO (the Social Security Organisation, also known as PERKESO) and EIS (the Employment Insurance System) are both capped at a monthly salary of RM 6,000. Contributions above that ceiling aren’t required, which means your exposure on these two levies is predictable for higher-earning employees.
For SOCSO, you contribute 1.75% of monthly wages and your employee contributes 0.5%. At the RM 6,000 ceiling, your maximum monthly SOCSO contribution is approximately RM 104.15, and the employee’s maximum is approximately RM 29.75.
For EIS, both employer and employee each contribute 0.2% of monthly wages, also capped at RM 6,000 per month. EIS funds go toward employment insurance benefits if a worker loses their job.
Hrd corp levy
If your company has 10 or more Malaysian employees, you’re required to contribute to the Human Resource Development Corporation (HRD Corp). The levy is 1% of total monthly wages, which includes basic salary plus any fixed allowances.
The funds aren’t simply a tax. Your company can draw them down to pay for approved employee training and upskilling programs. That said, unused funds can be forfeited after two years, so it’s worth building a training plan that makes use of what you’ve paid in.
Income tax withholding
As an employer, you’re responsible for withholding monthly tax deductions from your employees’ wages. This system is called PCB (Potongan Cukai Bulanan) or MTD (Monthly Tax Deduction), and it’s administered through the LHDN e-PCB portal.
For resident employees, the withholding follows Malaysia’s progressive income tax rates: 0% on the first RM 5,000 of chargeable income, scaling up to 30% on income above RM 2,000,000. The exact amount you withhold each month depends on the employee’s income level and any applicable reliefs they’ve declared.
For non-resident employees, the rate is a flat 30% with no progressive scale and no personal relief deductions. If you’re bringing in foreign talent on non-resident tax status, factor that flat rate into your total cost of employment.
Minimum wage and working hours
Malaysia’s minimum wage in 2026 is RM 1,700 per month. This applies nationally. The standard working week is 45 hours, with a maximum of 8 hours per day. Wages must be paid monthly and within 7 days of the end of the wage period. If you’re setting up payroll for the first time in Malaysia, that 7-day rule is worth flagging to your payroll team early.
Hiring in malaysia through an Employer of Record
Running payroll in Malaysia as a foreign company isn’t straightforward. You need to register with the EPF board, SOCSO, LHDN, and HRD Corp separately. Each body has its own registration process, contribution schedules, and filing requirements. A missed deadline with any one of them can trigger fines.
The faster path for most foreign companies is to hire through an Employer of Record (EOR). An EOR is the legal employer on record in Malaysia. They handle all local registrations, run payroll in Malaysian ringgit, manage statutory contributions across every scheme, and take on the compliance burden so you don’t have to set up a local entity.
If you’re new to this model, it’s worth understanding how an EOR works before you commit. And if you’re comparing providers, this breakdown of the best EOR services is a useful starting point.
Book a demo to see how RemotePass handles Malaysian payroll and compliance end to end.
Frequently asked questions
What’s the total employer payroll cost on top of salary in malaysia?
For a Malaysian employee earning RM 5,000 or less per month, your statutory contributions add up to roughly 15.95% on top of gross wages: 13% EPF, 1.75% SOCSO, 0.2% EIS, and 1% HRD Corp (if you have 10 or more Malaysian employees). For wages above RM 5,000, EPF drops to 12%, bringing the total to approximately 14.95% before the HRD Corp levy.
Do employers need to contribute to epf for foreign employees?
Yes. Since October 2025, non-Malaysian employees are subject to a 2% employer EPF contribution. The exception is non-Malaysian permanent residents and those registered with EPF before August 1, 1998, who are subject to the standard employer rate of 12% or 13% depending on their salary level.
When are monthly payroll contributions due?
EPF contributions are due by the 15th of each month. SOCSO and EIS follow the same monthly cycle. Wages themselves must be paid within 7 days of the end of the wage period.
Does hrd corp apply to companies with foreign employees?
The levy applies based on the number of Malaysian employees, not total headcount. If you have 10 or more Malaysian employees, you’re liable for the 1% levy on total monthly wages regardless of how many non-Malaysian staff you also employ.
