Employing someone in Malaysia means choosing the correct regional law, administering several separate payroll obligations and checking whether a proposed dismissal is lawful before calculating notice. A salary above RM4,000 does not remove an employee from all statutory protection. Registering an employer account does not postpone contribution liability.
Start with the employee's work location, duties and immigration status. Then assign responsibility for the contract, wage records, deductions, filings, payments and employee protections. These decisions remain necessary when an employer of record administers employment.
Rules checked 16 October 2026.
Which employment rules apply to your hire?
The Employment Act governs ordinary private-sector employment in Peninsular Malaysia and Labuan. Sabah and Sarawak have separate labour ordinances. Their 2025 reforms mean older regional summaries can misstate current rights; a Kuala Lumpur policy should not automatically become a Kota Kinabalu or Kuching policy.
Under the Act's First Schedule, non-manual employees earning above RM4,000 monthly generally fall outside specified statutory overtime, rest-day/holiday-work premiums and termination benefits. Manual workers and other listed categories have exceptions. Basic working-time limits and ordinary leave generally remain. Domestic employees and statutory part-time arrangements need their own rules.
Sabah and Sarawak need their own policy checks
The main 2025 amendments took effect on 1 May 2025 under the regional framework. Both ordinances now generally cover contract-of-service employees with provision-specific wage/category exclusions. Their ordinary week is 45 hours; annual and sick-leave service bands broadly align with the Act. Holiday entitlements differ materially: Sabah provides 15 gazetted paid holidays, including five fixed; Sarawak provides 18, including six fixed. Additional declared holidays and substitution rules still apply.
The detailed Employment Act provisions below concern Peninsular Malaysia and Labuan. Nationwide payroll duties describe a registered Malaysian employer, including a foreign-owned company or an EOR. A direct offshore arrangement needs a separate employer-registration and tax assessment.
Employer obligations at a glance
Contracts and the start of employment
For Peninsular/Labuan employment, a specified-term contract exceeding one month, or specified-work contract expected to exceed one month, must be written. Every written contract must state how it may be terminated. Separately, give certified written employment particulars by commencement: role, wage and allowance rates, normal hours, leave, notice and wage period. The statutory register's national-language requirement does not establish a Malay-only contract rule. Contract rules and particulars requirements are distinct.
Set any probation period in the contract. The Act does not prescribe a universal three- or six-month period, and probation does not suspend statutory entitlements. A local legal explanation distinguishes contractual probation from employment rights.
Check contract stamping separately. HASiL's August 2026 clarification says employment instruments with monthly remuneration of RM3,000 or less need neither stamping nor endorsement. Above that threshold, assess the principal employment instrument; related ancillary documents are treated separately. The first signatory is liable, commonly the employer, under the official FAQ. For a taxable instrument, the stamping clock is 30 days after execution in Malaysia, or receipt in Malaysia if executed abroad.
Keep registration clocks separate
Arrange employer tax-file and employee tax identifiers before the payroll submissions that require them. Register for EPF and PERKESO under their own clocks. HRD-covered employers also have a separate registration duty when industry and Malaysian-employee headcount bring them into scope.
The Act's workplace notification includes establishment details, responsible manager and employee categories/headcount. Its 90-day commencement clock can begin at business registration before the first hire. EPF account activation is another step: its guidance requires activation within 30 days of registration. PERKESO contributions accrue from the employment month even if registration is incomplete under Act 4. The filing window is not an insurance-free period; individual benefit eligibility remains scheme-specific.
For a new non-citizen hire within the Act's foreign-employee provisions, obtain prior labour approval before employment and furnish particulars within 14 days afterward. Immigration permission is separate. Permanent residents are excluded from this Part.
In Sabah and Sarawak, non-resident employment needs the regional labour licence before employment, followed by commencement particulars within 14 days under the applicable ordinance. Non-resident status can include Malaysians from other states. Both have separate 90-day workplace-notification provisions. The Sabah ordinance and Sarawak guidance also require qualifying term/work contracts exceeding one month in writing, signed and supplied to the employee; maintain the regional terms and wage records.
For intellectual property, identify work created in employment and pre-existing material. The Copyright Act provides a deemed transfer for employment-course and commissioned works, subject to agreement; other assignments or licences require writing. Patent ownership has different defaults and protected equitable-remuneration rights under section 20. An all-IP clause should not assume every earlier creation transfers or every inventor payment can be waived.
Pay, working time and employment records
The nationwide minimum basic wage is RM1,700 monthly, including covered non-citizens; domestic servants are excluded. Allowances do not replace the basic-wage floor.
Under the Act, wage periods cannot exceed a month. Ordinary wages are due within seven days after period end; overtime, rest-day and holiday-work payments may be paid by the end of the next wage period. Ordinarily pay through a financial institution; alternative payment needs the statutory conditions. Issue the wage statement by payday and update the wage register within three days after period end. Sabah and Sarawak also use monthly maximum wage periods, seventh-day ordinary payment and next-period-end extra-work payment under their amended ordinances.
Ordinary scheduling limits are eight hours daily, 45 weekly and a ten-hour spread, with at least a 30-minute break after no more than five consecutive hours. Agreement can permit nine-hour days when other days are shorter. Shift, continuous-work and authorised exceptions differ. Provide one whole weekly rest day; a shift worker's continuous 30 hours can qualify. Ordinary-day overtime is at least 1.5 times hourly pay for eligible employees, with a 104-hour monthly limit, subject to statutory exceptions or permission. Rest-day and holiday-work premiums use different formulas.
Complete the payroll cycle through payment
For Malaysian payroll, establish each employee's TIN, tax residence, remuneration, allowable relief inputs and prior current-year employment totals. Calculate PCB using the current specification, submit employee-level MTD data through authorised services and remit deductions by the next month's 15th. Apply CP38 when directed. Citizenship alone does not determine tax residence.
An accepted declaration is one completion check; successful payment and reconciliation are another. Show deductions on the wage statement. Deliver EA/EC by the following February's last day and file Form E with CP8D by 31 March. Do not carry a 2026 filing concession into 2027. Employment income is exempt from e-Invoice; payslips and annual statements remain necessary.
EPF requires both employee and employer shares under the applicable age, wage and membership schedule. For the covered non-PR foreign-worker category, 2% each generally applies from October 2025 wages; domestic workers and other specified categories differ. Submit contribution details and pay by the following month's 15th. EPF calls that following month the contribution month.
PERKESO injury/invalidity contributions and EIS are separate liabilities. The employer remits its own share plus the permitted employee share; second-category injury-only contributions are employer-funded. Use the applicable schedules; EIS generally adds 0.2% each for eligible local employees. Submit schedules and make actual payments by the next month's 15th.
The additional LINDUNG 24 Jam deduction is employee-funded: currently 0.75%, subject to the RM6,000 wage ceiling. It is mandatory for covered foreign workers; local participation became voluntary on 8 July 2026. Existing locals who did not opt out by 31 August remain participants. New local employees who decline must complete the opt-out before their first deduction. June 2026 liability remains mandatory; penalty grace does not cancel it.
HRD levy generally requires covered-sector employers with at least ten Malaysian employees to register within 30 days of becoming liable. Five to nine may opt in. The employer bears 1%, or 0.5% for elective coverage, on the prescribed base; never deduct it from employees. Pay by the following month's 15th under the amended rule. Check the 2026 education exemption where relevant.
There is no separate general state/local wage-payroll tax in the ordinary arrangements described here, including Kuala Lumpur, Labuan, Sabah and Sarawak. This follows the constitutional allocation of taxes to the federal sphere. Their state sales taxes are separate from wage withholding and payroll contributions. Business licences, property charges and immigration levies remain separate questions.
Retain labour-register entries for at least six years, and tax/PERKESO records for seven. Protect routine employee data through necessary collection, a national-language and English privacy notice, restricted access, security and retention controls. Appoint a DPO when processing exceeds 20,000 individuals, exceeds 10,000 individuals for sensitive/financial data, or involves regular systematic monitoring; notify the Commissioner within 21 days of appointment.
Leave, benefits and ongoing employer duties
For ordinary full-time Peninsular/Labuan employees, the Employment Act establishes the following employer-paid baseline. These figures are not an East Malaysia holiday schedule.
For paternity, the employee gives notice 30 days before expected confinement or as early as possible after birth. For maternity under the Act, the employee ordinarily notifies expected confinement and intended leave start within the 60 days preceding expected confinement. Apply the statutory protections for notice defects, mistake or reasonable cause; this is not a 60-day minimum notice requirement. Distinguish leave from allowance eligibility. An early return requires the employee's choice, employer consent and medical fitness. Birth-related statutory rights do not establish an adoption or shared-parental benefit; check the contract and collective agreement for additional leave.
The regional leave baseline also uses annual leave of 8/12/16 days, sick leave of 14/18/22 plus 60 hospitalisation days, 98 consecutive maternity days and seven consecutive paternity days, with the relevant service, notice and allowance conditions. Apply the regional holiday counts above.
EPF and social-insurance payments do not replace these wage/leave duties. Insurance benefits have their own eligibility; administer claims and safe return arrangements rather than treating an employee's absence as automatically unpaid.
Maintain a sexual-harassment complaints process, investigate as required and display the statutory awareness notice. Address discrimination disputes through the Act's framework and comply with Labour Director General orders. Do not restrict lawful union membership or organising; apply relevant collective terms.
Under OSH law, assess and control workplace risks. Generally appoint an employee OSH coordinator at five employees unless safety-officer requirements apply; establish a committee at 40 employees or when directed. The Disabilities Act, section 29, requires protection of equal employment opportunities and safe, fair conditions. Assess abilities appropriately and provide suitable employment and management arrangements; identify needed workplace adjustments individually.
Changing terms and ending employment
Agree and document contractual changes rather than assuming a policy update changes agreed hours or pay. A written flexible-work request to vary hours, days or place requires a written decision within 60 days, giving reasons for refusal. It does not automatically approve the requested arrangement.
In Act redundancy cases involving similar-capacity workers, check the requirement to terminate relevant foreign employees before locals; permanent residents are excluded from this foreign-worker Part. Preserve selection and process evidence. A workman can bring a just-cause challenge within 60 days of dismissal, including during notice.
For eligible full-time employees with at least 12 months' service, termination benefits generally use 10, 15 or 20 days' wages per service year at the under-two, two-to-below-five and five-plus bands, with pro-rating. Scope and exclusions matter, including the RM4,000 non-manual carve-out, qualifying resignation, misconduct and renewal situations. Give a written calculation and pay within seven days. Ordinary final wages are generally due on termination day; an employee's without-notice departure has a separate third-day rule. Pay untaken statutory annual leave still due, including completed-month accrual, at the ordinary rate under s60E(3A); that payment provision excludes dismissal under s14(1)(a).
Check tax clearance before releasing final money. Where applicable, CP22A is due at least 30 days before cessation, or within 30 days after learning of death; PCB-related exemptions apply. CP21 for a taxable employee leaving Malaysia for over three months is generally due at least 30 days before departure, with a frequent-work-travel exception. A required tax hold can run to 90 days after HASiL receives the notice unless release is authorised earlier. Foreign-employee labour exit reports have separate 30-day employer/pass/repatriation and 14-day employee-departure/absconding clocks.
Three situations that change the employer's action
1. Incorporation happened before the first hire
Illustration: a Kuala Lumpur business registered on 1 June 2026 hires its first covered employee on 1 October. Its workplace-notification clock may already have expired because s63A uses the earlier event. The employer must address that filing, then schedule EPF's seven-day and PERKESO's 30-day registration duties separately. Contributions accrue from the employment month. Combining all three into “30 days after hiring” would miss obligations.
2. Two employees need different payroll deductions
Illustration: a covered foreign employee and a newly hired local employee join the same payroll. The foreign employee cannot opt out of LINDUNG 24 Jam; the local employee may decline before the first deduction using the required notice. EPF and EIS category checks remain separate. Use employee-specific eligibility and election records rather than copying one deduction template across both hires.
3. A pregnant employee's role becomes redundant
Illustration: a Peninsular employer proposes an ordinary redundancy for a pregnant employee with six years' service. Eight weeks' redundancy notice and Borang PK do not overcome s41A's restriction. Pause the proposed route and establish whether a permitted ground actually exists. If the facts are business closure, a listed exception, reason, procedure, notice and eligible payments still require separate decisions.
Managing these obligations through an EOR
An EOR can administer contracts, payroll deductions, statutory payments and benefits within an eligible arrangement. Confirm the legal employer, activity, work location and worker permissions before assigning responsibility.
Where the Peninsular/Labuan model meets the contractor-for-labour definition, Act s33A requires registration in the 14-day period before supplying employees, a written supply contract and inspectable worker registers. The former non-agricultural exemption was revoked from September 2023. Recruitment activity has a separate APS licensing regime. The EOR label alone establishes neither permission nor an exemption.
The client still supplies accurate hours, remuneration changes, leave and workplace information, and participates in management and exit decisions. Confirm ownership/licensing of work product and authority for any regulated activity. EOR employment does not itself grant immigration permission or remove corporate-tax exposure.
Questions employers ask about employment law in Malaysia
Does earning above RM4,000 remove statutory leave?
Generally no under the Employment Act. The threshold excludes specified premium-pay and termination-benefit provisions, with occupation exceptions. Ordinary annual, sick and family rights need their own eligibility checks.
Can payroll wait until PERKESO registration is complete?
No. The administrative window does not postpone Act 4 contribution accrual from the employment month. Registration, employee records and successful remittances are separate completion steps.
Are maternity leave and paid maternity allowance identical?
No. The 98-day leave entitlement and employer allowance have different eligibility conditions. Check service history, notification and the allowance conditions before confirming payment.
Does paying notice make a dismissal lawful?
No. Just cause, procedure, pregnancy protection and redundancy requirements can remain relevant after notice is paid. Determine the lawful route before communicating dismissal.
Can Borderless AI help administer employment in Malaysia?
Our Malaysia page lists EOR services, and our EOR service covers contracts, payroll, benefits and compliance administration. Discuss the employee's location, duties and status with Borderless AI to assess the proposed arrangement and confirm responsibilities.
