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Hiring in Malaysia

Pre-employment background checks in Malaysia

Hiring options in Malaysia

Language requirements in Malaysia

Payroll setup in Malaysia

Build your global team with CXC

Employer of Record in Malaysia

Hiring in Malaysia involves navigating a variety of legal, cultural, and administrative processes that can be challenging for foreign businesses looking to expand. Whether you are considering hiring full-time, part-time, or contract employees, it is important to understand the nuances of employee types and the various expectations in the local market. Additionally, conducting background checks is essential for verifying the qualifications and reliability of your hires, particularly for roles involving sensitive data or financial responsibilities. Understanding the language requirements in Malaysia is also crucial, as businesses need to accommodate both English and Bahasa Malaysia, ensuring effective communication across teams.

Setting up a compliant payroll system in Malaysia is another significant consideration. Employers must ensure proper deductions for social security, tax, and other contributions, while also ensuring that the payroll system aligns with local regulations. With the complexities involved in managing payroll and employee benefits, it can be difficult for foreign companies to handle these processes independently.

Partnering with an experienced employer of record (EoR) can help businesses navigate these complexities. As a leading EoR agency in Malaysia, CXC simplifies the hiring process and ensures full compliance with Malaysian employment laws.

Our EOR solutions in Malaysia provide a streamlined approach to hiring, onboarding, and managing employees, removing the need for a local entity and reducing administrative burdens. We provide employer of record services in Malaysia that ensure your employees are well taken care of, from compensation and benefits to compliance with tax and labour laws.

Whether you require EOR outsourcing in Malaysia for a single employee or a larger team, CXC offers flexible, scalable solutions. As the best employer of record in Malaysia, we can help you expand smoothly while mitigating risks and focusing on business growth.

Hiring in Malaysia

Hiring employees in Malaysia means more than just filling a vacancy, it requires compliance with local labour laws, respect for cultural norms, and strategic planning. Whether you are a global company expanding into Southeast Asia or a business scaling its local workforce, knowing how to navigate the employment landscape in Malaysia will support long-term growth and compliance.

Hiring process in Malaysia

The hiring process in Malaysia typically follows a structured approach that includes recruitment, interviewing, job offers, and onboarding. Most employment relationships are formalised through written contracts, with terms aligned to the Employment Act 1955, which governs hours, wages, leave, and termination protocols.

Employers should also be mindful of non-discrimination laws and provide a workplace free from harassment. Employee rights in the workplace in Malaysia include entitlements to paid leave, maternity protection, and safe working conditions. Furthermore, employers must register employees with the Employees Provident Fund (EPF), Social Security Organisation (SOCSO), and the Employment Insurance System (EIS).

Hiring costs in Malaysia

Beyond salary, which often starts around 1,700 MYR/month for full-time positions, hiring costs include statutory contributions that typically range from 18.95% to 22.45% of monthly wages. These include EPF (minimum 12%), SOCSO, and EIS. Other expenses such as recruitment agency fees, medical benefits, bonuses, or relocation allowances may apply depending on the role and seniority.

Hiring foreign workers in Malaysia

Hiring foreign workers in Malaysia is tightly regulated. Employers must first obtain approval from the Ministry of Human Resources and the Immigration Department. The process of hiring foreign workers in Malaysia involves demonstrating a lack of local candidates, securing quota approvals, and managing work permit applications.

Companies must also understand the advantages and disadvantages of hiring foreign workers in Malaysia. On the one hand, expat hires may bring in-demand skills and international experience; on the other, the regulatory burden and associated costs can be significant.

Hiring expatriates requires additional steps, including sponsoring a Professional Visit Pass (PVP) or Employment Pass, and demonstrating the candidate meets salary and experience thresholds. For companies hiring expats in Malaysia, engaging a local employment partner can help ensure all requirements are met.

Employers are also encouraged to consider inclusivity when hiring. Incentives are available for hiring disabled workers in Malaysia, and companies that foster diverse and inclusive workforces often benefit from improved retention and public perception.

Pre-employment background checks in Malaysia

Hiring the right candidate involves more than assessing CVs and conducting interviews. For many employers in Malaysia, a pre-employment background check is a valuable part of the recruitment process, particularly when hiring for sensitive or high-trust roles. While not regulated by a single framework, these checks must still comply with broader laws such as the Personal Data Protection Act 2010 (PDPA).

Background checks in Malaysia

Employers may carry out a range of background checks in Malaysia, depending on the position, industry, and the level of responsibility involved. Although pre-employment background checks in Malaysia are not strictly regulated, employers must be mindful of privacy and consent obligations.

To remain compliant, it is important to get the candidate’s written consent before accessing personal data. The scope of the check should also be proportionate to the job being offered. For example, a financial institution might conduct more in-depth reviews, including financial history or regulatory checks, than a retail company would.

Medical record checks in Malaysia

Medical checks are generally permissible where they are directly relevant to the role, for instance, where physical fitness is a genuine job requirement or in sectors such as healthcare and food services. However, such checks must be carried out with the candidate’s consent and in accordance with PDPA.

It is not common practice to conduct broad health checks unless required by law (e.g., for foreign workers as part of immigration processes). Employers should be cautious to avoid discrimination on health-related grounds.

Criminal record checks in Malaysia

Criminal background checks in Malaysia are possible, though they are not always easy to obtain unless the individual provides authorisation. In practice, many companies rely on self-disclosure, supported by written declarations in employment forms.

Checks are more formalised when hiring foreign workers, where immigration regulations may require a criminal background check as part of the visa or permit application process. Employers must ensure all foreign hires have the appropriate pass or permit issued by the Malaysian Immigration Department.

Key notes for pre-employment background checks in Malaysia

In Malaysia, employee background checks are generally allowed, but not mandatory.
Employers should obtain consent and limit checks to what is necessary and relevant.
Always comply with the Personal Data Protection Act 2010 when processing candidate information.

For companies scaling up their teams, a thoughtful approach to employment background checks in Malaysia can help mitigate risks while respecting individual rights.

Hiring options in Malaysia

Malaysia’s diverse economy and growing talent pool offer employers several flexible ways to hire employees in Malaysia. Whether you are expanding a multinational operation or setting up a new local business, choosing the right type of worker can impact everything from compliance obligations to operational efficiency. Here is a closer look at the hiring models available.

Types of employees to hire in Malaysia

Employers can engage different types of workers depending on their business needs. Below are the common categories:

Permanent employees: Hired without a fixed end date, permanent employees are typically full-time and entitled to the full range of benefits under the Employment Act 1955, including paid leave, public holidays, and termination protections.
Fixed-term employees: These workers are engaged for a specific period or project. If their employment continues beyond the contract term, they may be considered permanent.
Full-time employees: Those holding a full-time job in Malaysia typically work up to 48 hours per week and receive the full suite of statutory benefits.
Part-time employees: Working fewer hours than full-time staff, part time job holders in Malaysia contracts offer pro-rated benefits. Defined under law as employees working less than 70% of a full-time schedule.
Independent contractors: Contractor’s work on a freelance basis, either as individuals or through a personal services company. Employers must take care not to exert excessive control or integrate them too deeply into the business, or risk misclassification—potentially leading to penalties and backdated benefits.
Agency workers: Often used for short-term or project-based roles, these workers are employed by a third-party hiring agent in Malaysia and seconded to your business. They are common in sectors like logistics, hospitality, and manufacturing, where flexibility is key.

Direct hiring in Malaysia

Direct hiring in Malaysia refers to forming a formal employment relationship between the company and the employee, either local or foreign. This is common for permanent and fixed-term roles. Employers are responsible for drafting compliant employment contracts, managing payroll, and making all required statutory contributions, including to EPF, SOCSO, and EIS.

Unlike hiring through an agency, direct hires give you full oversight of your workforce and workplace culture. However, this model also comes with full legal and administrative obligations. If you are sourcing local talent for direct hiring jobs in Malaysia, or looking to bring in foreign professionals, you will also need to ensure compliance with immigration requirements and work permits.

Each hiring model offers trade-offs between control, cost, and flexibility. Choosing the right option can help you meet operational demands while staying compliant with local employment laws.

Language requirements in Malaysia

When hiring employees in Malaysia, understanding the language preferences of your workforce is crucial for smooth business operations. Malaysia is a multilingual country with a diverse workforce, and the ability to communicate effectively in both official and informal languages plays a significant role in recruitment, employee engagement, and compliance.

Main language used in Malaysia

Malaysia is a vibrant, multicultural country with a population that speaks a variety of languages, including Malay, English, Mandarin, and Tamil. The main language used in Malaysia for government, education, and public services is Bahasa Malaysia, which is also the country’s official language. However, the use of the English language in Malaysia is widespread, especially in corporate settings, international trade, and professional services.

In the private sector, English is commonly used for employment contracts, business communications, and workplace documentation. Many companies, especially multinationals and those operating in urban areas, conduct their day-to-day operations in English.

It is worth noting that jobs that require foreign language skills in Malaysia are also prevalent in industries such as shared services, tourism, and export-focused businesses. Roles may require fluency in Japanese, Korean, German, or Arabic, depending on the company’s market focus. Employers should tailor their job descriptions to reflect any specific language requirements to attract the right talent.

There is no legal restriction on the freedom to use different languages in Malaysia, except where specified by regulation. For example, under the Personal Data Protection Act 2010, any data privacy consent or notice must be issued in both Bahasa Malaysia and English to ensure full compliance and accessibility.

Best language practices when operating in Malaysia

There are no strict statutory requirements mandating the language of employment documents such as contracts or internal policies. However, it is a common and practical approach to issue these documents in English, especially for businesses working with a diverse or international workforce.

Despite this, employers are encouraged to consider the language proficiency of their employees. Where workers may have limited fluency in English, particularly in sectors like manufacturing, construction, or domestic work, providing documents and training materials in Bahasa Malaysia can improve clarity and reduce the risk of miscommunication.

For companies engaging with a multicultural workforce or targeting the local talent pool, adopting a dual-language approach for onboarding, handbooks, safety instructions, and performance policies is a best practice. Doing so demonstrates inclusivity, increases employee engagement, and may help avoid future disputes stemming from misunderstandings.

Additionally, hiring managers and HR teams should consider the language requirements of the job role itself. While English may be sufficient for administrative roles, positions involving public-facing duties or collaboration with government agencies may require proficiency in Bahasa Malaysia. Understanding the language landscape of your industry will help shape recruitment strategy and workforce integration.

Whether you are hiring for a full-time job in Malaysia or planning a multilingual recruitment campaign, choosing the right communication strategy is key to building a legally compliant and high-performing team.

Payroll setup in Malaysia

Setting up an effective payroll system in Malaysia is a critical aspect of managing a business, especially for foreign employers looking to expand operations in the country. Whether you are engaging a few employees or running a larger operation, it is important to navigate the complexities of the payroll system in Malaysia efficiently.

Payroll system in Malaysia

Malaysia’s payroll process and system involves a range of requirements to ensure compliance with local tax laws and employee benefit schemes. Malaysia’s employment laws mandate that employers make certain statutory contributions, including deductions for income tax, the Employees’ Provident Fund (EPF), Social Security Organisation (SOCSO), and the Employment Insurance Scheme (EIS). Understanding these obligations is crucial for both local and foreign companies operating in Malaysia.

HR’s role in the payroll system in Malaysia typically includes features such as calculating employee salaries, generating payslips, processing deductions, and making employer contributions to statutory funds. There are various types of payroll software available in Malaysia, and many businesses opt to either manage the payroll in-house or outsource the process to a third-party service provider. The choice depends largely on the size of the company, the number of employees, and the complexity of the payroll requirements.

For foreign companies engaging employees in Malaysia, it is important to note that there are several administrative options to consider. Foreign employers can choose to run payroll directly from the foreign entity, set up a local entity in Malaysia, or outsource payroll to a third-party provider. Each of these options has its advantages, depending on factors such as the company’s structure, tax implications, and operational preferences.

Setting up payroll in Malaysia

To set up payroll in Malaysia, employers need to follow specific steps to ensure full compliance with local laws. First, businesses must register with the relevant authorities, including the Inland Revenue Board of Malaysia (IRBM) for tax purposes and the EPF, SOCSO, and EIS for employee contributions.

A foreign company can engage employees in Malaysia without a local corporate presence, subject to certain administrative, accounting, and tax considerations. While foreign companies are not automatically considered to be “carrying on business” in Malaysia just because they hire employees, the Companies Act requires foreign entities to register as a foreign company under Malaysian law before they can operate in the country. Additionally, businesses must evaluate the most appropriate method for running payroll.

Running payroll directly from the foreign entity: This option may work for companies that do not have a substantial presence in Malaysia and prefer to manage payroll remotely.
Setting up an entity in Malaysia: This is a more structured approach and is suitable for foreign companies that plan to establish a long-term presence in Malaysia.
Outsourcing payroll to a third-party provider: This option is common for companies seeking to streamline payroll processing and ensure compliance with local regulations.

Regardless of the approach chosen, employers must deduct income tax from employees’ salaries and make the necessary contributions to the EPF, SOCSO, and EIS. These deductions are important for ensuring compliance with Malaysian tax laws and providing employees with social security and retirement benefits.

Payroll format in Malaysia

The payroll format in Malaysia generally includes detailed information about the employee’s salary, deductions, and contributions. It is common for payslips to include the following:

Employee details: Name, position, and employee number.
Gross salary: The total amount earned before deductions.
Deductions: Taxes, EPF, SOCSO, and EIS contributions.
Net salary: The amount payable to the employee after deductions.
Employer contributions: The employer’s share of EPF, SOCSO, and EIS, which is usually listed separately.

Employers are also required to issue a payslip to employees each month, providing transparency regarding salary and deductions. The payslip serves as a legal document in case of disputes or queries about compensation.

Build your global team with CXC

Expanding your business into Malaysia presents exciting opportunities for growth, but it also comes with unique challenges. Setting up a legal entity can be a complex, time-consuming, and costly process, and handling it independently may expose your business to compliance risks. This is where CXC can assist you. As a trusted Employer of Record (EoR) in Malaysia, we simplify the hiring process and help you navigate the complexities of local employment laws.

From ensuring compliance with Malaysian labour laws and drafting employment contracts to managing smooth onboarding and offboarding processes, we handle every detail—allowing you to focus on growing your business. Whether you are looking to hire full-time employees or manage a flexible workforce, CXC provides the support and expertise to ensure your operations run seamlessly.

Ready to expand your team in Malaysia with confidence and full compliance? Reach out to our experts today to discover how CXC can help you scale efficiently while minimising risk.

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