What you need to know before hiring in Malaysia
Key takeaways for hiring in Malaysia via EOR
- Setting up a Malaysian entity through the Companies Commission of Malaysia (SSM) takes months and requires ongoing reporting obligations; an EOR lets you employ compliantly without that infrastructure.
- Malaysia's Employment Act 1955 was significantly amended in 2022 and governs most employees, including expatriates, for core entitlements such as annual leave, sick leave, and public holidays.
- An EOR like Oyster handles EPF, SOCSO, and EIS registrations, payroll, and employment contracts on your behalf, so your team can focus on the work rather than the compliance machinery behind it.
Malaysia at a glance
Malaysia sits at UTC+8, which makes it workable for teams in Europe during morning hours and for US West Coast teams in the early afternoon. Payroll runs monthly, with salaries due by the 7th of the following month. Employer statutory contributions run up to 15.95% of gross salary. These cover three schemes: EPF (Employees Provident Fund), SOCSO (Social Security Organisation), and EIS (Employment Insurance System).
Employees are entitled to 13 public holidays per year, though the exact list varies by region. Maternity leave is at least 60 days fully paid.
There is no mandatory 13th-month salary. Standard working hours are 8 hours per day and 40 hours per week.
Probation periods are optional and commonly run 1 to 3 months. Non-compete clauses are legally void and cannot be enforced under Malaysian law.
Picture this before you hire in Malaysia
A real scenario for hiring your first Malaysian employee
You have extended a verbal offer to a senior software engineer in Kuala Lumpur. She is excellent, she has a competing offer, and she needs a signed contract within the week. Your company has no Malaysian entity. Registering with the SSM, appointing local directors, and completing the setup process would take months you do not have. Without a compliant employment structure, you cannot legally put her on payroll, and the offer falls apart.
An employer of record in Malaysia steps in as the legal employer. The EOR generates a compliant employment contract and registers for EPF, SOCSO, and EIS on her behalf. It gets her onto payroll in time for her start date. You retain full control of her day-to-day work. The compliance infrastructure is handled. Oyster targets contract generation within 48 hours of a hiring request, which means the gap between "we want to hire" and "she is onboarded" can close faster than most teams expect.
What an EOR in Malaysia does for your team
What is an employer of record in Malaysia
An Employer of Record in Malaysia is a locally licensed company that legally employs your workers on your behalf. The EOR handles payroll, benefits, taxes, and compliance under Malaysian law while you retain day-to-day management of the employee's work. Using an EOR is fully legal in Malaysia and is common among global companies entering the market without a local presence.
The distinction matters: you direct the work, set the objectives, and manage performance. The EOR is the entity on the employment contract, the one remitting EPF contributions to the government, and the one responsible for ensuring the employment relationship complies with the Employment Act 1955. That separation is what makes the model work.
Malaysian labor laws your EOR handles for you
Employment contracts and probation in Malaysia
Employment contracts in Malaysia should be written in Bahasa Malaysia or English. Probation periods are optional but commonly run 1 to 3 months. There is no legal distinction between a probationary employee and a permanent employee under the Employment Act 1955, which means probationary employees carry the same core entitlements from day one.
Contracts should specify the role, compensation, working hours, and leave entitlements. Non-compete clauses are legally void in Malaysia and cannot be enforced.
If protecting confidential information matters to your business, NDAs are the appropriate instrument. Oyster uses legal-reviewed employment agreements and monitors Employment Act amendments. Your contracts stay current without requiring your team to track Malaysian legislative changes.
Payroll, taxes, and statutory contributions in Malaysia
To run payroll for employees in Malaysia, salaries must be paid monthly, with disbursement due by the 7th of the following month. Employee income tax (PCB) is withheld at source on a graduated scale from 0% to 30%. Employer statutory contributions run up to 15.95% of gross salary. These cover three schemes: EPF (Employees Provident Fund), SOCSO (Social Security Organisation), and EIS (Employment Insurance System).
An EOR registers for and remits all three contributions on your behalf. That includes EPF, SOCSO, and EIS, none of which require a local entity or Malaysian tax registration.
The EOR also handles PCB withholding, so your employee receives a compliant payslip and you avoid under-remittance penalties.
Leave entitlements and benefits in Malaysia
Annual leave and sick leave entitlements in Malaysia vary by length of service. Employees are entitled to 13 public holidays per year, though the exact list varies by region. Maternity leave is at least 60 days fully paid for eligible employees. There is no statutory paternity leave, though some employers offer it voluntarily.
The Employment Act covers expatriates for annual leave, sick leave, public holidays, and maternity or paternity leave where offered. Foreign nationals working in Malaysia under a compliant employment structure are not exempt from these entitlements.
A 13th-month salary is not mandatory in Malaysia.
Overtime, working hours, and termination in Malaysia
Standard working hours are 8 hours per day and 40 hours per week. Overtime is paid at 150% of the standard hourly rate. Overtime cannot exceed 8 hours per 7 consecutive days, or 12 hours with written employee consent.
Employees dismissed for reasons unrelated to conduct are entitled to severance pay calculated on length of service. Termination for misconduct or poor performance follows a different process under the Employment Act, with specific procedural requirements that must be met before a dismissal is valid. An EOR manages the termination process and calculates any severance owed, which matters most in the moments when getting it wrong is most costly.
Why global teams choose to hire in Malaysia
The talent and workforce landscape in Malaysia
Malaysia has a multilingual, technically skilled workforce concentrated in Kuala Lumpur, Penang, and Johor. English proficiency is high, particularly in tech, finance, and professional services. The country sits at MYT (UTC+8), which makes it workable for teams across Europe, the US, and Asia-Pacific without requiring anyone to work unreasonable hours.
The case for hiring in Malaysia is not primarily about cost. It is about where strong talent pools exist. US, UK, and Spain-based companies are among the most active hirers of Malaysian talent through Oyster, which reflects the depth of the available talent base rather than a cost arbitrage play. If your team needs engineering, finance, or operations talent with strong English communication skills and ASEAN market knowledge, Malaysia is a serious option worth evaluating on its merits.
How to pick the right EOR for Malaysia
Compliance criteria to evaluate in a Malaysian EOR
The first question to ask any EOR is whether they hold a locally established Malaysian entity or subcontract employment to a third party. Subcontracting introduces a layer of risk that is not always visible until something goes wrong. A provider with a direct Malaysian entity is the more defensible structure.
Beyond entity structure, verify that employment agreements are reviewed against the Employment Act 1955 and updated when legislation changes. The 2022 amendments were significant, and any provider whose contracts have not been updated since then is operating on outdated terms. Confirm the EOR handles EPF, SOCSO, EIS, and PCB registrations directly. Ask how they manage legislative changes and what their process is for notifying clients when the law shifts. Oyster uses in-house employment specialists rather than outsourced legal networks, which means the people monitoring Malaysian law are the same people drafting your employment agreements.
Pricing transparency and what you should expect to pay
EOR pricing in Malaysia typically ranges from USD 100 to USD 500+ per employee per month, depending on headcount and salary levels. Pricing models vary: some providers charge a percentage of salary that grows as your team grows, while others use flat per-employee fees. The percentage model can look attractive at low headcount and become expensive quickly as you scale.
Watch for fees that are not visible in the headline rate: currency conversion charges, benefits administration fees, and offboarding costs are common additions that change the total cost of the service. Oyster uses transparent, flat pricing with no hidden fees and no termination charges. For a specific quote, visit Oyster pricing or Book a Free Demo to talk through your hiring plan.
How fast your EOR gets your Malaysian hire onboarded
An EOR can onboard employees in Malaysia in as little as two weeks. Oyster targets contract generation within 48 hours of submitting a hiring request. The typical steps from there: confirm right-to-work status, complete EPF and SOCSO registrations, and run first payroll on the monthly cycle.
Compare that to entity setup, which takes several months before a single employee can be legally employed. If you have a start date commitment to a candidate, the EOR path is the only one that keeps the offer intact. (The engineer from Kuala Lumpur in the scenario above? She would have been onboarded before her competing offer deadline.)
How Oyster compares to other EOR providers in Malaysia
When evaluating EOR providers for Malaysia, Deel is a name that appears consistently in the market. Based on Deel's public documentation, their model relies on outsourced legal networks in some markets. Oyster uses in-house employment specialists for Malaysian compliance, which means the people reviewing your contracts are the same people monitoring the Employment Act for changes.
Oyster is also the only B Corp-certified EOR, which means ethical employment practices are built into every hire, not treated as optional. Flat pricing, no termination fees, and a dedicated contact rather than a shared support queue are the practical differences. These show up in day-to-day operations.
Start hiring your Malaysian team today
Book a demo and hire in Malaysia with confidence
Oyster handles Malaysian compliance, payroll, and care for your team so you can focus on building one. No hidden fees, no asterisks, no compliance surprises across 120+ countries.
Book a Demo to walk through your Malaysian hiring plan with someone who knows the Employment Act and can get your first hire onboarded in days.
