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Hiring in Malaysia goes beyond offering a competitive salary. Every employer must also comply with Statutory Contributions in Malaysia that make up a significant part of total employment costs. Many businesses expanding into Malaysia underestimate these obligations, leading to budget miscalculations, delayed remittances, and compliance risks. The varying rules for local and foreign employees often add complexity, especially for companies managing cross-border teams or hiring through an Employer of Record (EOR) partner.
Without a clear understanding of statutory contributions, businesses risk overspending or eroding employee trust when benefits like pension funds or insurance are mishandled. In a competitive market like Malaysia, compliance is more than a legal formality, it’s essential to building credibility, protecting your workforce, and managing costs effectively.
Statutory Contributions in Malaysia refer to mandatory payments that employers and employees must make to government bodies such as the EPF, SOCSO, and EIS. These contributions fund essential benefits like retirement savings, social security, and unemployment protection, ensuring both legal compliance and employee welfare in the workplace.
Below are the key statutory contributions every employer must understand when operating or hiring in Malaysia:
The Employees Provident Fund (EPF) serves as a retirement savings scheme for Malaysian citizens and permanent residents, where both employer and employee contributions are mandatory. Employees typically contribute 11% of their monthly wages, while employers contribute 13% for those earning RM5,000 or less, and 12% for those earning above RM5,000.
For foreign employees, contributions have been optional in the past, but beginning 1 October 2025, a new amendment makes EPF contributions mandatory at 2% each for employers and foreign employees. Employers must register with EPF, enrol employees, deduct the employee’s share, and remit the combined total by the 15th of the following month. It’s also worth noting that certain payments, such as travel allowances, gratuities, or director’s fees, are excluded from EPF contributions.
Key Takeways:
1.Contribution Rates for Local Employees
2.Update for Foreign Employees (Effective 1 October 2025)
3. Employer Responsibilities
The Social Security Organisation (SOCSO) contribution is compulsory in Malaysia for most employees under the Employees’ Social Security Act 1969. All employers who hire one or more employees are legally required to register and make monthly SOCSO contributions to provide protection against work-related injuries, invalidity, and other social security risks. Foreign workers are also required to contribute to SOCSO at the same rate and coverage as local employees.
For employees below 60 years old, employers contribute around 1.75% of the employee’s monthly wages, while employees contribute 0.5%. Once an employee reaches 60 years of age, the employee contribution stops, and the employer continues contributing at a reduced rate of 1.25%.
Employers must register their business and employees with SOCSO, submit monthly payments promptly, and report any workplace accidents within 48 hours. As of 1 October 2024, the salary ceiling for SOCSO contributions has increased from RM5,000 to RM6,000, meaning higher coverage and contribution obligations for employers.
Key Takeways:
Contribution Rates
Coverage for Foreign Employees
The EIS provides unemployment benefits and re-employment assistance to local workers who lose their jobs. Both employers and employees contribute 0.2% of monthly wages to this scheme. However, EIS coverage does not extend to foreign workers, as it is designed specifically for Malaysian citizens and permanent residents. Though small, this contribution remains a required component of total employment costs for eligible employees.
Key Takeways:
Contribution Rates
The Human Resources Development Corporation (HRD Corp) levy applies to companies with ten or more local employees. Employers are required to contribute 1% of their employees’ monthly wages to the HRD Corp fund, which supports workforce training and development initiatives across industries. This contribution helps businesses upskill their workforce and maintain a competitive edge through continuous learning.
The payment must be made before the 15th of the following month through the HRD Corp online portal. Though often overlooked in cost planning, the HRD Corp levy remains a crucial part of total employment costs and compliance responsibilities for businesses operating in Malaysia.
Handling EPF, SOCSO, and EIS contributions can be time-consuming and complex—especially when managing both local and foreign employees. With Glints TalentHub, you don’t have to worry about compliance details or payroll calculations. Our end-to-end solution ensures every statutory contribution in Malaysia is managed accurately and on time, giving you peace of mind and freeing your team to focus on growth.
Get started with Glints TalentHub and simplify how you hire, onboard, and manage employees in Malaysia, compliantly and effortlessly.
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