Hiring employees in Malaysia, even just one, makes you an employer under several laws at once. You register with KWSP (EPF), PERKESO (SOCSO and EIS) and LHDN, pay at least RM1,700 a month, and follow the Employment Act 1955 on hours, leave and dismissal. The contribution rules apply nationwide, but the Employment Act itself covers Peninsular Malaysia and Labuan, while Sabah and Sarawak have their own Labour Ordinances, as the Department of Labour Peninsular Malaysia (JTKSM) explains in its FAQ on the amended Act.

This guide sets out what each obligation is, who it applies to and from when. It explains the law; it does not replace advice. For your own case, ask the agency concerned, a licensed payroll provider or an employment lawyer.

What changes the day you hire someone

The moment someone works for you under a contract of service, four sets of duties start. Most of them run on a monthly cycle, so the first payroll is where gaps show.

• KWSP (EPF): register as an employer and pay both your share and the employee’s share every month.
• PERKESO: register the business and each employee for social security (Act 4) and, for local staff, the Employment Insurance System (Act 800).
• LHDN: register an employer’s number, report the new employee, and deduct monthly tax (PCB) where the employee’s pay is taxable.
• Department of Labour: the Employment Act sets the floor for the contract, and the department’s approval is needed before you employ a foreign worker.

Two more apply only above a size or to certain workers. HRD Corp registration depends on how many Malaysian employees you have, and foreign workers bring their own permit, EPF and PERKESO rules, covered further down.

If you have not yet decided what kind of business entity will be the employer, settle that first. A sole proprietor and a Sdn Bhd hire under the same labour laws, but the registrations sit under different names and numbers, a point covered in our guide on how to register a company in Malaysia.

Minimum wage: RM1,700 for every employer

The Minimum Wages Order 2024 set the national minimum at RM1,700 a month, or RM8.72 an hour, according to law firm Skrine’s summary of the gazetted Order.

The Order was phased in. It bound employers with five or more employees, and professional firms classed under MASCO whatever their size, from 1 February 2025. Every other employer followed on 1 August 2025, so no business is too small for the floor, the same Skrine alert records.

The Order also sets daily rates, which differ by how many days a week the employee works, so check the rate that matches the contract. The same Skrine summary notes that the minimum applies to foreign workers as well as Malaysians. The Order does not apply to domestic servants.

The rate does not stay fixed for long. The National Wages Consultative Council Act 2011 requires the council to review the minimum wages order at least once every two years, and the government can ask for an earlier review. Salary bands pegged exactly at the floor will need revisiting each time the rate moves.

EPF (KWSP): the largest monthly cost

Under section 43(1) of the EPF Act 1991, every employee and employer pays monthly contributions at the rates in the Act’s Third Schedule. KWSP’s employer page on mandatory contributions puts the duty plainly: you pay for anyone engaged under a contract of service or apprenticeship. You pay both shares and may deduct the employee’s share from the salary.

For a Malaysian employee, the employer pays 13% of monthly wages up to RM5,000, according to the same KWSP page. Above that, the employer’s share is 12%.

The employee’s share is 11% at both levels until age 60. From then, a Malaysian employee’s share drops to zero and the employer pays 4%, the KWSP table shows.

Permanent residents, and non-Malaysians who joined EPF before 1 August 1998, pay the same rates as Malaysians below 60 but a separate scale from 60, so check the member’s status before the first payroll.

Use the wage bands, not a calculator

KWSP warns against simply multiplying the salary by the percentage. It says contributions must follow the wage ranges in the Third Schedule, and exact percentages are allowed only for salaries above RM20,000, the KWSP page notes. In its own examples the banded amounts come out slightly higher than the straight calculation, which is why the worked example further down uses KWSP’s figures.

Payment is due on or before the 15th of the month after the wage month, so January salaries are paid in by 15 February.

KWSP sets 14 as the minimum age to register and contribute, and 75 as the maximum age of contribution.

Foreign employees contribute too

EPF contributions became compulsory for foreign employees from October 2025 salaries, Bernama reported. Employer and employee each pay 2% of monthly wages.

The rule covers foreign workers holding a valid passport and work permit issued by the Immigration Department, and leaves out domestic helpers, according to the same report. KWSP’s table applies the 2% rate to non-Malaysians who registered as members from 1 August 1998; those who joined before that date stay on the local rates.

SOCSO (PERKESO): injury, invalidity and 24-hour cover

PERKESO runs social security under the Employees’ Social Security Act 1969, known as Act 4. Its Employer Circular No. 2 of 2026 restates the basic duty: every employee engaged under a contract of service or apprenticeship must be registered and contributed for. The duty starts with the first employee.

Contributions are calculated on wages up to a ceiling. PERKESO raised that ceiling to RM6,000 a month from 1 October 2024, for both Act 4 and the Employment Insurance System, according to its FAQ on the new ceiling. The old ceiling was RM5,000.

The two long-standing schemes

The Employment Injury Scheme covers accidents and occupational diseases connected with work, and the employer pays it alone at 1.25%, the 2026 circular’s rate table shows. The Invalidity Scheme is shared, at 0.5% from each side.

Which schemes apply depends on age. Employees who first join PERKESO before 55 pay the First Category, covering all schemes. Those who first join at 55 or later, or who keep working past 60, pay the Second Category, which drops the Invalidity Scheme, the circular explains.

LINDUNG 24 Jam from 1 June 2026

The third layer is the Non-Employment Injury Scheme, branded LINDUNG 24 Jam, which covers accidents outside work, including road accidents. It rests on the Employees’ Social Security (Amendment) Act 2026 [Act A1788], gazetted on 5 March 2026. PERKESO’s circular dated 28 April 2026 sets out how it applies from 1 June 2026, and makes registration and contribution mandatory for every employee covered by Act 4.

The contribution is borne fully by the employee, at 0.75% of wages in the first phase, and the employer deducts it from salary and remits it with the rest. The circular sets later phases of 1.00% and 1.25%, with the dates to be fixed by PERKESO. Unlike the Invalidity Scheme, it has no age limit, so cover continues for older employees.

The circular also tells employers to show both shares on the payslip. Failing to deduct the LINDUNG 24 Jam share does not make it go away: PERKESO says it can recover the arrears with late-payment interest, even for staff who have since left.

EIS: insurance for staff who lose their jobs

The Employment Insurance System under Act 800 gives insured employees who lose their jobs income replacement, help finding work and access to training, PERKESO’s EIS page explains. PERKESO administers it alongside SOCSO, and the same RM6,000 wage ceiling applies, its ceiling FAQ confirms. The same FAQ states that foreign workers are not covered by Act 800.

Employer and employee pay equal amounts, roughly 0.2% of wages each, set out band by band in PERKESO’s Act 800 contribution table. At the ceiling, each side pays RM11.90 a month.

Summary: who pays what each month

The table brings the statutory contributions together for a typical employee. Rates are those in the sources linked above; the actual ringgit amounts come from each agency’s wage-band schedule.

Sources for the table: KWSP, PERKESO Employer Circular No. 2 of 2026, PERKESO’s foreign worker page and HRD Corp’s employer FAQ.

What one hire costs: a worked example

Take a Malaysian employee in their thirties on RM3,250 a month. The EPF figures below are from KWSP’s own worked example, the SOCSO and LINDUNG 24 Jam figures from the circular’s First Category table for wages between RM3,200 and RM3,300, and the EIS figures from PERKESO’s Act 800 table.

The totals are the sum of the rows. They put the real monthly cost of this hire at about RM3,737, before HRD Corp levy, allowances, bonuses or leave cover, while the employee takes home RM2,843.90 before any income tax deduction. Run the same sum for each salary you plan to offer and fold it into the hiring budget; our guide to cash flow management for Malaysian SMEs covers how to plan for fixed monthly outgoings like these.

The Employment Act 1955 after the 2022 amendments

The Employment (Amendment) Act 2022 came into force on 1 January 2023 and widened the Act to every private-sector employee in Peninsular Malaysia and Labuan, regardless of salary, JTKSM’s FAQ on the amendments explains. Before that, much of the Act applied only to employees below a wage limit.

One wage line survives. An employee earning more than RM4,000 a month, other than a manual worker, is not entitled under the Act to overtime pay, pay for work on rest days or public holidays, or termination benefits, the same FAQ states. Everything else in the Act, from leave to protection against discrimination, applies to them in full.

In Sabah and Sarawak, the FAQ points to the Labour Ordinance (Sabah) Cap. 67 and the Labour Ordinance (Sarawak) Cap. 76 instead. If you hire there, check the current ordinance with the state labour department rather than relying on the Peninsular rules below.

Hours, leave and holidays

Normal working hours are capped at 45 a week, down from 48, and employers had to update contracts to match, according to the JTKSM FAQ. The leave entitlements below are the statutory minimum: under section 7 of the Act, a contract term less favourable than the Act is void to that extent, while better terms are allowed.

Sources for the table: the JTKSM FAQ for sick, hospitalisation, maternity and paternity leave, and the Employment Act 1955 for annual leave and holidays.

For paternity leave, the employee must notify you at least 30 days before the expected birth, or as early as possible after it, the FAQ sets out. The cap of five births applies however many wives an employee has.

The fixed public holidays under section 60D of the Act are National Day, the Yang di-Pertuan Agong’s birthday, the birthday of the state Ruler or Yang di-Pertua Negeri (Federal Territory Day in the Federal Territories), Workers’ Day and Malaysia Day. The other six come from the list of gazetted public holidays.

Duties added by the 2022 amendments

The 2022 amendments also added duties beyond pay and leave. Each is explained in the JTKSM FAQ.

• Flexible working requests: an employee may apply in writing to change working hours, working days or place of work, and you must reply in writing within 60 days, giving reasons if you refuse.
• Sexual harassment notice: a notice raising awareness of sexual harassment must be displayed where staff can see it, such as where attendance is recorded.
• Discrimination and forced labour: the Director General of JTKSM can investigate and decide disputes over discrimination in employment, and forced labour is an offence under the Act.
• Apprenticeships: an apprenticeship contract must be in writing and run for at least six and at most 24 months.
• Higher fines: the general penalty for breaching the Act rose from RM10,000 to a maximum of RM50,000.

Hiring foreign workers: approval comes first

Since the 2022 amendments took effect in 2023, an employer must get prior approval from the Director General of JTKSM before employing a foreign worker, under section 60K of the Act. Approval depends on the employer having no unresolved decisions or orders under the Employment Act, no outstanding convictions under it or related labour and social security laws, and no conviction for trafficking in persons or forced labour, the JTKSM FAQ sets out. Employing a foreign worker without it can bring a fine of up to RM100,000, up to five years’ jail, or both.

Once approved, the contribution picture differs from a local hire. Foreign workers are covered by all three Act 4 schemes, employment injury, invalidity and LINDUNG 24 Jam, each from the start date shown in the summary table, PERKESO’s foreign worker page shows. Employer and worker shares match those for local staff, but foreign workers are outside EIS and pay the 2% EPF rate described above.

The minimum wage applies to them in full. Immigration permits, levies and quotas sit with other agencies and are outside the scope of this guide.

Tax duties with LHDN

Hiring also makes you a link in the income tax chain. LHDN’s page on employer responsibilities lists the core duties.

• Register an employer’s number with LHDN.
• Report each new employee who is taxable or likely to be, using Form CP22 within 30 days of the start date; since 1 September 2024 this must go through e-CP22 on the MyTax portal.
• Deduct monthly tax (PCB/MTD) from pay using LHDN’s schedule or computerised method, and remit it by the 15th of the following month.
• Give each employee Form EA by the last day of February for the previous year’s pay.
• File Form E, with C.P.8D, by 31 March of the following year; companies must file it through e-Filing.
• Keep records for seven years, and give notice with Form CP22A when an employee leaves.

LHDN accepts PCB statements only through its own e-PCB, e-Data PCB or e-CP39 applications, the same page notes. If you use payroll software, confirm it produces a file those channels accept.

HRD Corp: when the training levy applies

The Pembangunan Sumber Manusia Berhad Act 2001 sets which employers must pay the training levy, and an amendment order in 2021 widened the list of industries covered. Registration with HRD Corp is compulsory once you employ ten or more Malaysian employees in a covered industry, and optional with five to nine, according to HRD Corp’s employer FAQ.

Registered employers pay a monthly levy of 1% in the mandatory category or 0.5% in the optional one, calculated on monthly wages plus fixed allowances. In return, you can apply for training grants and claim reimbursement for approved courses, up to the approved amount, the same FAQ explains.

What to do next: a first-hire checklist

Work through these in order before the first salary is paid. Each step points to the body that runs it, which is where any doubt should be settled.

1. Write the contract. Set out wages, hours, rest days, leave and notice in writing, and check every term meets the Employment Act floor. JTKSM publishes guidance and takes enquiries on the Act.
2. Check the pay against the minimum. Confirm the monthly, daily or hourly rate is at or above the Minimum Wages Order 2024 figures for the days the person works.
3. Register with KWSP as an employer, then add the employee, and diarise the 15th of each month for contributions.
4. Register with PERKESO through its ASSIST portal for Act 4 and Act 800, and register the employee. Note the LINDUNG 24 Jam deduction on the payslip.
5. Register with LHDN for an employer’s number, submit e-CP22 within 30 days of the start date, and set up PCB.
6. Check HRD Corp once your Malaysian headcount nears ten in a covered industry.
7. Put up the sexual harassment notice and set a simple written process for flexible working requests.
8. For a foreign hire, obtain JTKSM’s section 60K approval before anything else, then the permits from the relevant agencies.
9. Keep records of wages, contributions and leave; LHDN expects seven years.

Handing payroll to a provider moves the arithmetic, not the duty. KWSP’s rules, for example, make the employer responsible for paying both shares, whoever prepares the file.

FAQ

Do I have to pay EPF and SOCSO for a part-time employee?

KWSP and PERKESO both tie the duty to a contract of service or apprenticeship, not to full-time status, according to the KWSP employer page and PERKESO’s 2026 circular. Contributions follow the wage band the part-timer’s pay falls in. Whether a particular arrangement is a contract of service or a contract for services is a legal question worth putting to the agency or a lawyer.

Is a freelancer my employee?

Not automatically, but in a prosecution under the Act they can be presumed to be one. Section 101C, added by the 2022 amendments, applies that presumption where there is no written contract and any one of several signs is present, such as you controlling how or when they work, supplying their tools, or paying them regularly as most of their income, the JTKSM FAQ explains. If an arrangement looks like that, ask JTKSM or a lawyer before treating the person as a contractor.

Does the Employment Act apply to a manager earning RM8,000?

Yes, since 1 January 2023 the Act covers employees in Peninsular Malaysia and Labuan at every salary, the JTKSM FAQ confirms. Above RM4,000 a month, non-manual employees lose the statutory rights to overtime, rest-day and public holiday pay rates and termination benefits; leave, maternity and paternity protection still apply.

Can the employee ask me to pay their LINDUNG 24 Jam share?

The law puts the 0.75% on the employee, and the PERKESO circular requires you to deduct it from wages. The circular does not deal with an employer absorbing the share, so put that question to PERKESO before agreeing to it.

When is the first EPF payment due for a new hire?

Contributions for a month’s wages are due by the 15th of the following month, the KWSP page says. A hire paid for March is therefore first contributed for by 15 April, and the same cycle applies to PERKESO, whose circular keeps its deadline at the 15th of the following month.