Employer of Record Malaysia (2026): EPF, SOCSO and EIS Employer Costs Explained

An Employer of Record (EOR) in Malaysia is a locally registered employer that hires your worker on your behalf, runs payroll and files the statutory contributions, so your foreign company does not need its own entity. As of October 2026, the main employer on-costs for a Malaysian citizen under 60 are EPF at 13% (wages up to RM5,000) or 12% (above RM5,000), SOCSO at 1.75% and EIS at 0.2%, both on wages capped at RM6,000. HRD Corp levy of 1% may also apply. Non-citizens follow different EPF rules since October 2025. Rates change, so confirm every figure with the agencies or local advisors before you budget.

Table of Contents

1. What an Employer of Record Does in Malaysia
2. EOR vs Entity vs Contractor in Malaysia
3. The Employment Act 1955: Coverage and Core Entitlements
4. EPF (KWSP) Contributions: Rates, Bands and Foreign Workers
5. SOCSO (PERKESO): Employment Injury, Invalidity and LINDUNG 24 Jam
6. The Employment Insurance System (EIS)
7. HRD Corp Levy and PCB Income Tax Withholding
8. Employer On-Cost Table by Component (As of October 2026)
9. Illustrative Scenario: Employee A in Kuala Lumpur
10. Foreign Talent: Employment Pass Rules and How They Interact With an EOR
11. How Knit's EOR Service Handles This
12. Decision Guide and Onboarding Checklist
13. Frequently Asked Questions
14. Glossary of Key Terms
15. About Knit
16. Related Reading

1. What an Employer of Record Does in Malaysia

A foreign company that wants one software engineer, one sales lead or a small team in Kuala Lumpur faces a basic problem. Malaysian employment law, social security and tax all assume that a locally registered employer stands behind each worker. Without a Malaysian entity, you have no employer number with the pension fund, no account with the social security agency and no way to withhold tax from salary.

An Employer of Record solves that by becoming the legal employer. The EOR signs the employment contract with your worker, runs payroll, withholds and remits statutory deductions, and keeps the personnel records the authorities expect. You direct the day-to-day work: assignments, performance, tools and team fit. The EOR carries the employer-side compliance. If you want the general model before the Malaysia detail, our guide on what an employer of record is covers it.

In Malaysia, the EOR's job maps to five agencies and one body of law:

• Employment Act 1955 and related rules, administered by the Ministry of Human Resources and its labour departments, which set working hours, leave, notice and related terms.
• KWSP (the Employees Provident Fund, or EPF), which collects monthly retirement contributions from both employer and employee.
• PERKESO (the Social Security Organisation, or SOCSO), which runs employment injury, invalidity and, since June 2026, a 24-hour non-employment injury scheme, plus the Employment Insurance System (EIS).
• HRD Corp, which collects a training levy from covered employers.
• LHDN (the Inland Revenue Board), which receives monthly income tax deductions known as PCB or MTD.

For a foreign national, a sixth layer sits on top: immigration approval through the Immigration Department's Expatriate Services Division (ESD). We cover that in section 10.

Two cautions up front. First, this article describes rules as published on official agency pages we reviewed in October 2026. Several rates changed in the past two years, so any older Malaysia payroll guide, including some on this site, may carry stale figures. Second, an EOR does not remove your obligations as the company directing the work. You still need sensible role design, accurate job descriptions and a view on whether the hire is truly an employee at all. Our Malaysia EOR page gives the service overview; this article is the cost and compliance explainer.

2. EOR vs Entity vs Contractor in Malaysia

Most foreign companies consider three routes. Each solves a different problem, and the right choice depends on headcount, how long you expect to stay and how much control you need over the employment relationship. For a general cost comparison, see our article on EOR vs entity setup and the real cost math. The table below applies the idea to Malaysia.

The contractor row deserves attention. The PERKESO employed worker page defines an employee by a "contract of service," which it says can be express or implied, and oral or written. A worker who follows your schedule, uses your tools and works only for you can look like an employee whatever the paperwork says. Our guide to hiring a foreign independent contractor walks through the classification risks, and our comparison of PEO vs EOR explains why a co-employment model does not fit a company with no local entity.

A practical rule: if you expect fewer than a handful of Malaysian employees for the first year or two, an EOR usually costs less in management attention than an entity. If you plan to build a local leadership team, hold a lease and sign local customers, an entity starts to make sense. Put numbers on that decision with your finance team and local advisors, not with a rule of thumb.

3. The Employment Act 1955: Coverage and Core Entitlements

The Employment Act 1955 (Act 265) is the baseline for most private-sector employment terms in Malaysia. Three points shape how you use it.

Territory. The consolidated text we reviewed says the Act applies to Peninsular Malaysia only, and it has been extended to the Federal Territory of Labuan. Sabah and Sarawak have their own labour ordinances. The Malaysian government portal's labour law page lists both as separate headings. If your hire sits in Kuching or Kota Kinabalu, do not apply the rules below without local confirmation.

Coverage after the 2022 amendments. The Employment (Amendment) Act 2022 (Act A1651) took effect on 1 January 2023, according to a Malaysian government broadcaster (RTM) report quoting the Human Resources Minister. The consolidated text we reviewed is marked as amended up to that date. The Act defines an "employee" by reference to its First Schedule, and the 2022 changes widened who falls inside it. Some provisions, such as overtime and rest-day premiums, still depend on a monthly wage limit and on the type of work. We could not retrieve the Labour Department's own coverage page in this review, so we do not state the wage threshold here. Confirm the current coverage rules and the threshold on the Ministry of Human Resources and Peninsular Malaysia Labour Department (JTKSM) pages before you finalize a contract for a high or low earner.

Contract terms still matter. The Act sets minimums. Your employment contract can offer more, and a good EOR contract will.

The table summarizes the core entitlements as they appear in the consolidated text of the Act hosted by the International Labour Organization's NATLEX database (an unofficial updated text, marked "not an authentic text") and the Malaysian government portal's summary of the 2022 amendments.

A note on the sick leave tiers: the government portal summary we reviewed shows a slightly different figure for the middle tier than the consolidated text does. Treat the statute and JTKSM's own guidance as controlling, and have your EOR or counsel confirm the exact number before it goes into a contract.

Termination benefits. Section 60J of the Act lets the Minister make regulations on termination, lay-off and retirement benefits, including who is entitled and how much is payable. Those regulations, not the Act itself, set the amounts. We did not verify the current schedule for this article. If a termination involves redundancy or lay-off, ask your EOR or Malaysian counsel to calculate the benefit and the notice together, and to confirm the process before anything is communicated to the employee. Dismissal for misconduct also follows rules: section 14 calls for a due inquiry before an employer can dismiss on that ground.

4. EPF (KWSP) Contributions: Rates, Bands and Foreign Workers

The EPF is the largest single employer on-cost, and the KWSP employer section is the starting point for registration. The KWSP employer page on mandatory contribution states the rates under the Third Schedule of the EPF Act 1991, effective 1 October 2025, which is the schedule that still applied when we reviewed it in October 2026.

Who must be registered and when. Employers contribute for permanent, contract, part-time, temporary and probationary employees, and for salaried directors. An employee becomes eligible on receiving more than RM10 in a month, including part months. The minimum registration age is 14 and the upper contribution age is 75. Contributions are due by the 15th of the following month, and if the 15th falls on a weekend or public holiday, payment on the next working day does not attract a late payment charge.

Rates for Malaysian citizens, permanent residents and long-standing non-citizen members.

The age-60 rows come from KWSP's table, which flags that the 60-plus rates for non-citizen members need checking against the category definitions. Confirm with KWSP if you hire an older worker.

How the contribution is calculated. KWSP's page is firm on this point: below RM20,000, employers use the wage-band amounts in the Third Schedule, not a straight percentage. Above RM20,000, they use the percentage. The page shows that for wages of RM3,250 the band method gives an employer share of RM424 and an employee share of RM359, while the percentage method would give a slightly different result and is marked incorrect. Total contributions are rounded up to the next ringgit, and payments are in whole ringgit only. Payroll software must use the schedule.

Who pays. The employee's share may be deducted from that month's wages. The employer's share may not be. KWSP's page cites penalties of up to six years' imprisonment, a fine of up to RM20,000, or both, for deducting the employer's share from wages, and similar maximums for deducting an employee's share and failing to remit it. This is one area where EOR payroll discipline matters.

Non-citizen employees: the October 2025 change. KWSP's guide for non-Malaysian citizen employees says mandatory EPF contributions apply from wages for October 2025, with the first payment due by 15 November 2025. The announcement covers non-citizens who hold a valid passport and a work pass and who are under a contract of service. KWSP's guide lists the Employment Pass, Visitor's Pass (Temporary Employment) and other pass types among those covered. The default rate is 2% from the employer and 2% from the employee. Domestic workers are excluded, as are employees of embassies and certain foreign government bodies. Permanent residents are outside the 2% scheme and contribute at the Malaysian rate.

Registration works differently by pass type. KWSP says Employment Pass and Visitor's Pass (Temporary Employment) holders are registered automatically, while holders of other passes must register or update records at an EPF office. Employees were advised to complete thumbprint verification at an EPF office from January 2026. Contributions stop at age 75 and, per KWSP's guide, two months before a work pass expires without extension. Members who opted in before 1 October 2025 move to 2% each unless they elect to keep the 11% rate through the form KWSP specifies.

Many older guides still say that EPF is voluntary for foreign workers. As of October 2026, KWSP's published position is that it is mandatory for the covered categories above. If your Employee A holds an Employment Pass, budget for the EPF.

Employers can also contribute more than the statutory rate through KWSP's i-Topup option, but that is a benefits design choice, not a legal requirement.

5. SOCSO (PERKESO): Employment Injury, Invalidity and LINDUNG 24 Jam

PERKESO administers three layers of coverage for employees: the Employment Injury Scheme, the Invalidity Scheme and, as of 1 June 2026, the Non-Employment Injury Scheme known as LINDUNG 24 Jam. The Employment Insurance System sits alongside them and is covered in section 6.

Wage ceiling. PERKESO's contribution rate page states that, effective 1 October 2024, the wage ceiling for contributions rose from RM5,000 to RM6,000 per month. Salaries above RM6,000 are capped at RM6,000 for SOCSO purposes. Any article quoting an RM5,000 ceiling is out of date.

The two core schemes. PERKESO's contributions page describes a First Category for employees under 60, covering Employment Injury and Invalidity, with 1.75% payable by the employer and 0.5% of monthly wages by the employee. A Second Category applies to employees aged 60 and above, covering Employment Injury only, at 1.25% payable by the employer. Employees who first become eligible at 55 or older are placed in the Second Category.

LINDUNG 24 Jam, the 2026 addition. PERKESO's LINDUNG 24 Jam FAQ says it provides 24-hour protection for accidents unrelated to work, effective 1 June 2026, and that contributions are mandatory for all employees covered by the Employees' Social Security Act 1969, local and foreign. The contribution is borne entirely by the employee: 0.75% in the first phase (1 June 2026 to 31 May 2028), rising to 1.00% from 1 June 2028 and 1.25% from 1 June 2031. The employer deducts it and remits it by the 15th of the following month. The FAQ also describes a six-month grace period from enforcement for non-compliance with the new scheme, so check with PERKESO or your EOR whether that period has ended for your payroll month.

Put together, a Malaysian employee under 60 on the first-phase rates contributes 1.25% (0.5% for the core schemes plus 0.75% for LINDUNG 24 Jam), while the employer's share stays at 1.75%.

Foreign workers and expatriates. PERKESO's foreign worker page says that foreign workers, including expatriates and foreign domestic workers, are protected under the Employment Injury Scheme, the Invalidity Scheme and the Non-Employment Injury Scheme. This is the extension of coverage to foreign workers that many older guides do not reflect: the Employment Injury Scheme for foreign workers dates from 1 January 2019, and the Invalidity Scheme from 1 July 2024. The page gives the employer rates as 1.25% for Employment Injury and 0.5% for Invalidity (1.75% in total), and the worker rates as 0.5% for Invalidity plus 0.75% for the Non-Employment Injury scheme in its first phase. Eligibility requires a valid passport and a valid work pass. The employer is responsible for registering foreign workers.

Penalties. PERKESO states that non-compliance is an offence under the Employees' Social Security Act 1969, with a fine of up to RM10,000, up to two years' imprisonment, or both.

A caution on exact amounts. PERKESO publishes its contributions as a table of wage bands. Employer and employee shares in the table follow the band, not the exact percentage, so actual ringgit amounts can differ by cents from a simple percentage calculation. Payroll should use PERKESO's schedule or its contribution calculator.

6. The Employment Insurance System (EIS)

The EIS, also branded LINDUNG KERJAYA, is the job-loss safety net. It started on 1 January 2018 under the Employment Insurance System Act 2017. According to PERKESO's contributions page, the rate is 0.4% of the employee's assumed monthly salary, split 0.2% employer and 0.2% employee, capped at an assumed monthly salary of RM6,000. Eligible ages are 18 to 60, and employees aged 57 and above with no prior contributions before 57 are exempt. The scheme applies to private-sector employers. Government staff, domestic workers and the self-employed are exempt.

On benefits, PERKESO's Employment Insurance page lists a Job Search Allowance, a Reduced Income Allowance, an Early Re-employment Allowance, training support and, for job loss on or after 1 October 2026, a new Mobility Allowance, along with higher training fee limits and revised allowance amounts. These benefit changes matter to your employees, not to your cost line, but they are worth mentioning in onboarding. PERKESO's page says applicants must apply within 60 days from the date of loss of employment.

Foreign workers and EIS. PERKESO's foreign worker page lists three schemes for foreign workers, and EIS is not among them. The EIS contribution text we reviewed describes eligibility for employees aged 18 to 60 and does not address foreign workers. We therefore do not include EIS in the foreign-worker cost line in this article. Because this is the kind of detail that changes, ask PERKESO or your EOR to confirm the current position for your specific pass type before you finalize a budget.

7. HRD Corp Levy and PCB Income Tax Withholding

HRD Corp levy

HRD Corp (Pembangunan Sumber Manusia Berhad) collects a levy under the PSMB Act 2001, used to fund employee training. HRD Corp's registered employers page and employer FAQ set out the main rules:

• Employers with 10 or more Malaysian employees in a covered sector must register, and the levy is 1% of monthly wages.
• Employers with 5 to 9 Malaysian employees may register, and the levy is 0.5%.
• The headcount tests refer to Malaysian citizens. The pages we reviewed do not say how foreign workers or permanent residents are treated, so confirm that point with HRD Corp.
• Wages for levy purposes are basic salary plus fixed allowances. HRD Corp's support guidance excludes items such as bonuses, commissions, overtime and variable allowances.
• Payment is due by the 15th of the following month.
• Employers may not deduct the levy from employee wages.
• Penalties for late or non-payment can include a fine of up to RM20,000, imprisonment of up to two years, or both. Failing to register can carry a fine of up to RM10,000, imprisonment of up to one year, or both.

For an EOR hire, the levy question belongs to the employing entity's total Malaysian headcount, not to your one employee. An EOR with many Malaysian employees is usually a mandatory registrant, so the levy is likely to appear as a cost component in the EOR's invoice. Ask how it is passed through, and ask separately about training claims, since the ability to claim against levy credits depends on the registered employer's participation. The Malaysian Investment Development Authority describes the same thresholds on its HRDF page.

PCB income tax withholding

PCB (Potongan Cukai Bulanan), also called MTD (monthly tax deduction), is not an employer cost. It is income tax withheld from the employee's salary and remitted to LHDN. The employer's job is to deduct correctly and file on time. The LHDN (HASiL) employer responsibilities page lists these deadlines:

• Remit MTD on or before the 15th day of the following month.
• Notify LHDN of a new employee within 30 days after employment begins (Form CP22).
• Notify LHDN of cessation of employment at least 30 days before the employee leaves (Form CP22A).
• Give each employee a remuneration statement (Form EA) by the last day of February.
• File the employer's annual return (Form E) by 31 March of the following year.
• Keep records for seven years.
• Withhold certain monies for up to 90 days, or until a tax clearance letter arrives, when an employee leaves the country for more than three months, resigns or dies, in the cases the page describes.

How much tax is withheld depends on residence status. LHDN's tax treatment guidance for residents and non-residents (a YA 2025 document) says an individual present in Malaysia for 182 days or more in the basis year is a resident, and that residents are taxed at scale rates with access to personal reliefs, while non-residents pay a fixed 30% on employment income from YA 2020. Tax residence is based on physical presence, not nationality. An expatriate who arrives mid-year may therefore be treated differently in the first year than in the second. Your EOR or a Malaysian tax advisor should model the withholding position for each hire, particularly for foreign nationals and for anyone who will split time between countries.

8. Employer On-Cost Table by Component (As of October 2026)

The table below collects the employer-side statutory costs for a typical full-time hire. Rates are as published on the official agency pages cited in this article, as of October 2026. The "basis" column shows the wage cap or condition. Check the source agency before relying on any figure, because the rules change.

For a Malaysian citizen under 60 earning above RM6,000 a month, the statutory employer on-cost before the HRD Corp levy is EPF at 12% of wages plus SOCSO and EIS on the RM6,000 ceiling, or roughly 13.5% of an RM8,000 salary in our example below. Add the levy and the figure rises by one percentage point. These are statutory percentages only. Paid leave, bonuses, medical benefits, equipment and the EOR's service fee all come on top, and we do not state fees here because Knit does not publish them in this article.

9. Illustrative Scenario: Employee A in Kuala Lumpur

Illustrative scenario (hypothetical, not a real client). A US software company with no Malaysian presence wants a back-end engineer in Kuala Lumpur and engages an EOR to employ the person.

Assumptions

• Employee A is a Malaysian citizen, aged 34, working in Peninsular Malaysia.
• Monthly basic salary is RM8,000, with no fixed allowances, overtime or bonus in the month.
• Employee A is a tax resident.
• The EOR's employing entity has more than 10 Malaysian employees, so the HRD Corp levy applies at 1%.
• Rates are those in the table in section 8, as of October 2026. Figures use straight percentages for clarity. The real EPF and SOCSO amounts follow the agencies' wage-band schedules and may differ slightly.
• PCB is excluded, because it depends on reliefs, family status and residence.

What the numbers show. Statutory employer on-costs before the levy come to RM1,077, about 13.5% of base salary. With the levy, they reach RM1,157, about 14.5%. The total statutory cost of employment is RM9,077 before the levy, or RM9,157 with it. Employee A's take-home before PCB is RM8,000 less RM967, or RM7,033. The EOR's fee, paid leave cost, benefits and any bonus are not included.

What changes if the facts change.

• If Employee A were a non-citizen registered with EPF on or after 1 August 1998, the EPF line would drop to about 2% each way, or roughly RM160 from the employer. SOCSO would remain at 1.75% for the employer under PERKESO's foreign worker page. EIS would need confirmation from PERKESO, as explained in section 6.
• If Employee A were aged 60 or older, the EPF and SOCSO lines would change under the age-60 rules above.
• If the EOR entity had fewer than 10 Malaysian employees, the levy might be optional at 0.5% or not apply, though that is unlikely for an EOR.
• A non-citizen would also need an Employment Pass before starting, which affects timing, as section 10 explains.

10. Foreign Talent: Employment Pass Rules and How They Interact With an EOR

Hiring a Malaysian citizen or permanent resident requires no immigration approval. Hiring a foreign national who will work in Malaysia does. The main route for skilled expatriates is the Employment Pass (EP), handled by the Expatriate Services Division of the Immigration Department of Malaysia (ESD).

Revised salary policy from 1 June 2026. The ESD announced a Revised Expatriate Salary Policy. Its booklet says the policy applies to all new and renewal EP applications submitted on or after 1 June 2026. The salary used is basic monthly salary taxable in Malaysia, and it excludes allowances, incentives, bonuses and any salary paid outside Malaysia. ESD's FAQ on the policy names Category I at RM20,000 and above. The booklet shows lower bands that begin at RM10,000 and RM5,000, with different maximum durations, and says a succession plan becomes mandatory for Categories II and III from 1 January 2027. Its text extract is difficult to map cleanly to category labels, so confirm the exact category, salary band and pass duration for your candidate on the ESD page before you make an offer. Existing passes remain valid until expiry. ESD's FAQ also says extensions are subject to case-by-case evaluation.

Process. ESD's materials describe a one-time company registration in ESD Online, an application submitted by the company after any required supporting letter, and, where applicable, approval from the Peninsular Malaysia Labour Department under section 60K of the Employment Act 1955. The ESD Employment Pass page says approval from the Expatriate Committee or relevant authorities must come before the pass is issued, and that the pass is valid only in Peninsular Malaysia. ESD also posted an announcement in September 2026 reminding organizations to keep the authorised personnel details for the section 60K approval letter current in ESD Online.

How this interacts with an EOR. The sponsor in these processes is a company with an ESD account. That raises a question that the pages we reviewed do not answer: can the EOR's entity sponsor an EP for a worker whose day-to-day work is directed by your foreign company, and what does the authority expect to see in the role description, reporting line and succession plan? Do not assume the answer. Ask your EOR provider how they handle EP sponsorship in Malaysia, and have Malaysian immigration counsel review the structure before you promise a start date. Some roles also sit in regulated sectors where extra supporting letters apply.

Three further points for planning:

1. EPF applies to Employment Pass holders. Since October 2025 wages, KWSP lists the Employment Pass among the covered passes, as discussed in section 4.
2. Work location matters. Because the EP page states validity in Peninsular Malaysia, a plan to station the person in Sabah or Sarawak needs separate confirmation.
3. Do not start work early. A foreign national who begins work before the pass is issued creates risk for the worker and the employer. Wait for approval.

11. How Knit's EOR Service Handles This

Knit People is a global provider of Employer of Record, PEO, Global Payroll and Contractor of Record services. In an EOR arrangement, the provider acts as the legal employer for the worker: it issues the employment contract, runs payroll, makes the statutory deductions and contributions the host country requires, and handles the records and filings that follow. Your company directs the work. Knit's Employer of Record services are built around that model.

For a Malaysia hire, the questions we work through with a client before anything is signed are the same ones in this article:

• Is the worker a Malaysian citizen, a permanent resident or a foreign national, and what does that mean for EPF, SOCSO and, if relevant, the Employment Pass?
• Which Employment Act terms apply to this role and this location?
• How will leave, notice and termination terms be written so they meet the statutory minimums?
• Which cost components, including HRD Corp where it applies, sit on the invoice, and how are they presented?
• Who owns each filing and deadline: contributions by the 15th, PCB by the 15th, annual returns and year-end statements?

Where a point depends on a regulator's reading, such as foreign-worker EIS treatment, the coverage wage limit or Employment Pass sponsorship through an EOR, we ask the relevant agency or licensed local counsel rather than guess. Knit's team can confirm the delivery structure for a Malaysian engagement at scoping. For related country context, our guides on hiring through an EOR in Singapore and the Philippines show how neighboring jurisdictions compare, and the global hiring guides index lists the other countries.

12. Decision Guide and Onboarding Checklist

Decision guide

Use these questions to decide whether an EOR is the right fit before you start.

1. How many Malaysian employees do you expect in 12 months? One to a few suggests an EOR. A growing team with local managers points toward an entity.
2. Is the role an employee role? If the person works under your direction on a continuing basis, plan for employment, not a contractor agreement.
3. Is the candidate a citizen, a PR or a foreign national? Foreign nationals add immigration approval, EPF changes and possibly different SOCSO treatment.
4. Where will the person work? Peninsular Malaysia and Labuan follow the Employment Act. Sabah and Sarawak need separate review.
5. Who will sponsor any work pass? Settle this before you promise a start date.
6. What is your exit plan? Understand notice, termination benefits and the process before you sign, not after.

Onboarding checklist

The table below sets out a practical sequence for a Malaysian hire through an EOR. The owner column shows who normally leads each step.

13. Frequently Asked Questions

Is an Employer of Record legal in Malaysia?

‍An EOR is a commercial arrangement, not a separately licensed category on the agency pages we reviewed. The EOR acts as the registered employer for contributions, payroll and tax. How the structure is documented, and how work passes operate for foreign hires, should be confirmed with Malaysian counsel before you sign.

What is the employer EPF rate in Malaysia in 2026?

‍For Malaysian citizens, PRs and non-citizens registered before 1 August 1998, aged under 60, KWSP lists 13% for wages up to RM5,000 and 12% above RM5,000, under the Third Schedule effective 1 October 2025. Citizens aged 60 and above are at 4%. Non-citizens registered from 1 August 1998 contribute 2% each, as of October 2026.

Do foreign employees have to pay EPF in Malaysia?

‍Yes, for the covered categories. KWSP says mandatory contributions for non-citizen employees with a valid passport and work pass apply from October 2025 wages, at 2% each from employer and employee. Domestic workers and certain embassy staff are excluded, and permanent residents follow the Malaysian rates. Registration steps vary by pass type.

What is the SOCSO wage ceiling?

‍PERKESO's contribution rate page says the ceiling rose from RM5,000 to RM6,000 per month from 1 October 2024. Salaries above RM6,000 are capped at RM6,000 for SOCSO. The EIS assumed salary cap is also RM6,000. Use PERKESO's contribution calculator or schedule for exact ringgit amounts, because they follow wage bands.

Are foreign workers covered by SOCSO?

‍Yes. PERKESO's foreign worker page says foreign workers, including expatriates, are protected under the Employment Injury and Invalidity Schemes, and under the Non-Employment Injury Scheme (LINDUNG 24 Jam) from 1 June 2026. The employer pays 1.75% in total, and the worker pays 0.5% plus 0.75% in phase one. A valid passport and work pass are required.

Does EIS apply to foreign workers?

‍The PERKESO pages we reviewed list EIS contribution rules for employees aged 18 to 60 but do not address foreign workers, and the foreign worker page lists three other schemes. We have not verified EIS treatment for foreign employees. Confirm the current position with PERKESO or your EOR before you budget for it.

Who has to register with HRD Corp?

‍HRD Corp says employers with 10 or more Malaysian employees in a covered sector must register and pay a 1% levy on monthly wages, while employers with 5 to 9 Malaysian employees may register and pay 0.5%. Foreign worker treatment is not addressed on the pages we reviewed. Confirm with HRD Corp.

What is the Employment Pass minimum salary in 2026?

‍ESD's revised policy applies to applications from 1 June 2026 and names Category I at RM20,000 basic monthly salary and above. Its booklet shows lower bands starting at RM5,000 for other categories, but the table layout is hard to read. Check the ESD page for the category that fits your candidate.

Does Malaysian labour law apply in Sabah and Sarawak?

‍Not through the Employment Act 1955. The consolidated text says the Act applies to Peninsular Malaysia only and has been extended to Labuan. Sabah and Sarawak have their own labour ordinances. If your worker will be based in either state, ask your EOR or counsel to confirm the rules before you draft the contract.

What notice does an employer have to give to end employment?

‍Section 12(2) of the consolidated Employment Act text lists four weeks for under two years of service, six weeks for two to under five years, and eight weeks for five years or more. The contract may set its own terms, and termination benefits may apply under separate regulations. Take advice before acting.

14. Glossary of Key Terms

Employer of Record (EOR): A provider that acts as the legal employer of a worker for payroll, tax, social security and employment law purposes, while the client directs the work.

KWSP / EPF: Kumpulan Wang Simpanan Pekerja, the Employees Provident Fund, Malaysia's mandatory retirement savings scheme.

PERKESO / SOCSO: Pertubuhan Keselamatan Sosial, the Social Security Organisation, which runs employment injury, invalidity and related schemes.

EIS (LINDUNG KERJAYA): The Employment Insurance System, a job-loss insurance scheme under the Employment Insurance System Act 2017.

LINDUNG 24 Jam: PERKESO's Non-Employment Injury Scheme, effective 1 June 2026, giving 24-hour protection for accidents unrelated to work.

HRD Corp: The agency that collects the human resource development levy and funds employer training programs under the PSMB Act 2001.

PCB / MTD: Potongan Cukai Bulanan, or monthly tax deduction, income tax withheld from salary by the employer and remitted to LHDN.

LHDN / IRBM: Lembaga Hasil Dalam Negeri, the Inland Revenue Board of Malaysia.

Employment Pass (EP): A work pass for skilled expatriates, issued through the Expatriate Services Division of the Immigration Department.

JTKSM: Jabatan Tenaga Kerja Semenanjung Malaysia, the Labour Department for Peninsular Malaysia under the Ministry of Human Resources.

Third Schedule: The EPF Act 1991 schedule that sets contribution amounts by wage band; the Third Schedule of the Employees' Social Security Act 1969 plays a similar role for SOCSO.

15. About Knit

Knit People is a Canada-founded global workforce provider established in 2015, with about 11 years of experience, 4,000+ clients, coverage across 172 countries and regions, over USD 600 million in annual payroll processed, 60+ owned entities and a China operations hub in Shenzhen (MSB license No. M23187879). Its services include Employer of Record, PEO, Global Payroll, Contractor of Record, headhunting and recruitment, background checks, entity registration, global tax, insurance and work visa support. To discuss a Malaysia hire, contact the Knit team.

16. Related Reading

• Employer of Record in Malaysia: Knit's Malaysia service overview.
• What Is an Employer of Record?: the model explained from first principles.
• EOR vs Setting Up a Foreign Entity: The Cost Math: how to compare the two routes.
• Hiring a Foreign Independent Contractor: classification and compliance risks.
• PEO vs EOR: choosing between the two models.
• Global Hiring Guides: country-by-country hiring guides.

This article provides general educational information about hiring in Malaysia and is not legal, tax, social security or immigration advice. Employment Act coverage, EPF, SOCSO, EIS and HRD Corp rates, wage ceilings, Employment Pass salary bands and tax rules change, and they differ by state, worker status and facts. Figures reflect official agency pages reviewed in October 2026 and may have been updated since. Before you hire, set pay or end employment, confirm the current position with Knit's local team or a licensed Malaysian employment lawyer, tax advisor or immigration adviser, and check the relevant agency directly.