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Minimum wage in Malaysia

Malaysia's payroll

Statutory benefits in Malaysia

Other employee benefits in Malaysia

Compliant, seamless payroll and benefits in Malaysia

Payroll in Malaysia

Effective management of payroll in Malaysia is crucial for employers looking to comply with local regulations and maintain a smooth business operation. Ensuring timely, accurate payroll processing while adhering to legal requirements can be a challenge, particularly for companies new to the country. In Malaysia, payroll systems must comply with various statutory obligations, including contributions to the Employees’ Provident Fund (EPF), Social Security Organisation (SOCSO), and the Employment Insurance Scheme (EIS). Employers must also stay updated on changes such as the minimum wage in Malaysia and the necessary adjustments to payroll policies in Malaysia.

Managing payroll internally or through a trusted payroll vendor in Malaysia can be a complex task, particularly when dealing with multiple benefit systems and tax structures. Many companies opt for payroll outsourcing to reduce administrative burden and ensure compliance.

Outsourcing payroll services in Malaysia can help streamline the process and reduce errors by using local expertise and automated systems. By partnering with professional payroll solutions, employers can navigate the intricacies of the payroll cycle, manage employee compensation efficiently, and remain compliant with government regulations.

For businesses dealing with contractors, it is also important to consider payroll contractors in Malaysia, ensuring that freelance or temporary workers are paid according to local tax requirements. Additionally, staying compliant with the payroll statutory requirements will help mitigate risks associated with payroll processing errors and potential penalties.

CXC, as an Employer of Record (EoR), can help simplify the complexities of payroll in Malaysia. By handling compliance, payroll processing, and employee benefits, CXC allows businesses to focus on growth while ensuring that all legal requirements are met without hassle.

Minimum wage in Malaysia

The conversation around fair pay continues to evolve, and the latest updates to Malaysia’s wage structure reflect the government’s renewed focus on sustainable income levels. As of 2025, a revised minimum wage in Malaysia of 1,700 MYR per month has been rolled out in phases to accommodate different business sizes and industry needs.

National minimum wage in Malaysia

Under the updated policy, announced as part of the national budget, employers must adhere to a tiered implementation schedule:

Phase 1 (effective 1 February 2025) applies to:

Companies with five or more employees.
Any employer in professional services, regardless of size.

Phase 2 (effective 1 August 2025) covers:

All other businesses, including micro-enterprises with fewer than five employees.

This increase in the Malaysian minimum wage forms part of broader economic reforms aimed at improving employee well-being and narrowing wage gaps. Domestic workers, such as maids and personal drivers, remain exempt for now, though further reviews are expected.

Hourly minimum wage in Malaysia

The wage adjustments are structured to reflect common working patterns:

6 working days/week: 65.38 MYR per day.
5 working days/week: 78.46 MYR per day.
4 working days/week: 98.08 MYR per day.
Malaysia minimum wage per hour: 8.72 MYR.

These figures aim to align with both the national minimum wage and cost of living changes, offering a fairer standard for full-time and part-time workers alike.

Minimum wage increase in Malaysia

The 2025 revision marks a significant minimum wage increase in Malaysia, responding to inflationary pressures and calls for wage reform. It is a strategic move meant to boost productivity and stimulate spending power, without placing undue strain on businesses.

Employers are encouraged to:

Update payroll systems for compliance.
Factor in rising labour costs when budgeting.
Use digital payroll tools to avoid errors and delays.

Non-compliance may result in fines or sanctions under the National Wages Consultative Council Act 2011 (Act 732). The government typically reviews Malaysia’s minimum wage every two years, making regular audits and adjustments essential.

It is also worth noting that while the policy does not directly address the minimum wage in Malaysia for foreigners, all workers in eligible roles are covered, regardless of nationality. Businesses should stay informed on future policy changes that could affect employment terms for foreign hires.

For employers, keeping up with wage policies is not just about compliance, it’s about building a workforce that feels valued and supported.

Malaysia's payroll

Managing payroll in Malaysia involves more than just paying employees on time. It requires businesses to adhere to a variety of legal and financial regulations, from statutory deductions to ensuring compliance with employment laws. This article outlines the key elements of payroll management in Malaysia, including the payroll cycle, tax obligations, and policies that employers need to be aware of.

Payroll cycle in Malaysia

The standard payroll cycle in Malaysia is monthly, with employers typically making payments on the last working day of each month. This ensures consistency and transparency, both of which are critical for maintaining good employer-employee relationships. While the monthly payroll cycle is the norm, some businesses may opt for other cycles (e.g., weekly or bi-weekly), depending on the nature of the business or the contract terms with employees. Employers are advised to clearly communicate the payroll cycle to employees to avoid confusion.

Payroll taxes in Malaysia

A significant part of payroll in Malaysia is the management of tax and statutory contributions. Employers must ensure that taxes and other required deductions are made and remitted to the relevant authorities.

Employee Provident Fund (EPF): Employers must contribute to the EPF, which is a compulsory savings scheme for Malaysian workers. The contribution rates are 12% for employees earning above 5,000 MYR per month and 13% for those earning 5,000 MYR or below. This contribution is intended to provide workers with retirement savings.
Social Security Organisation (SOCSO): Employers must also contribute to SOCSO, which provides social security protection to employees. The rate of contribution is approximately 1.75% of an employee’s salary, though the exact percentage may vary depending on the wage category.

Failure to comply with these statutory requirements can lead to penalties, including fines or legal action under Malaysia’s payroll statutory requirements. Employers are encouraged to seek professional advice or use payroll software to ensure compliance.

Payroll policies in Malaysia

To maintain smooth operations, employers should have clear and transparent payroll policies in Malaysia. These policies should outline important elements such as:

Overtime: Any hours worked beyond the normal working hours must be paid as overtime, at rates stipulated by the Employment Act.
Leave entitlements: This includes annual leave, sick leave, and public holidays, all of which must be accounted for within the payroll structure.
Bonuses: Some companies offer bonuses as part of their compensation package. The most common bonus is the annual 13th-month salary, which is often included in the employment contract.

Having a well-defined payroll policy ensures that employees are clear on how their pay is calculated, including deductions, bonuses, and overtime. It also ensures that the company complies with the requirements set out by Malaysian labour laws.

13-month salary in Malaysia

The 13-month salary in Malaysia is a customary practice rather than a legal requirement. It is typically paid at the end of the year, either as a bonus or an additional salary. While not legally mandatory, many companies offer this as part of their compensation package to employees, particularly in the private sector. Employers should clearly define the 13th-month salary in the employment contract, ensuring that employees understand how and when it will be paid.

Statutory benefits in Malaysia

Employers in Malaysia are required to provide various statutory benefits to employees, ensuring that workers are protected in case of illness, injury, job loss, or retirement. These benefits are an essential part of the country’s labour framework, designed to provide a safety net for employees while contributing to overall economic stability. The statutory benefits system is managed by several government agencies, most notably the Social Security Organisation (SOCSO) and the Employee Provident Fund (EPF). Understanding these benefits and their requirements is crucial for businesses to remain compliant and to provide fair treatment to all employees.

Social security in Malaysia

The social security system in Malaysia provides essential protection to employees in the event of accidents, injuries, disabilities, or death. Managed by the Social Security Organisation (SOCSO), this system is designed to safeguard workers against financial hardship in the event of an injury or illness. It includes two primary schemes:

Employment Injury Scheme (EIS): This scheme provides compensation for employees who suffer from work-related injuries or occupational diseases. It covers medical expenses, disability benefits, and survivor benefits in case of death.
Invalidity Scheme (IS): This scheme offers protection for workers who suffer from permanent disability that prevents them from working, providing a pension for the rest of their lives.

Both of these schemes are mandatory for Malaysian citizens and permanent residents working in Malaysia.

Employers and employees contribute to SOCSO based on the employee’s monthly salary. The maximum contribution for the employer is MYR 104.15, while the employee’s contribution is MYR 29.75.

For foreign employees, the contribution to SOCSO is mandatory under certain conditions. Employers must ensure that they are meeting their legal obligations for all workers, including expatriates, as failure to comply can result in penalties under the National Social Security Act.

Malaysia’s Employee Provident Fund

The Employee Provident Fund is one of Malaysia’s key retirement savings schemes. It is compulsory for all employees in the private sector, and it plays a critical role in ensuring workers have savings for retirement. Both the employer and the employee contribute to the fund, with the employer’s contribution typically higher than the employee’s.

As part of the contributions, the employer’s share of EPF is typically set at 12% for employees earning above MYR 5,000 per month and 13% for those earning less. Employees contribute a percentage of their salary, which can be adjusted if required. These contributions are deposited into the EPF accounts of employees, where they are managed and invested. The employee can access these funds when they retire or in certain situations such as housing or medical emergencies.

Employees who are not Malaysian citizens or permanent residents are not required to contribute to the EPF unless they voluntarily opt to do so. Employers are also required to manage the EPF contribution system accurately and ensure all employee wages are appropriately accounted for, especially if an employee’s status changes, such as when a foreign employee transitions to permanent residency.

Employment Insurance Scheme in Malaysia

The Employment Insurance Scheme (EIS) is designed to provide income and reemployment support for employees who lose their jobs, such as due to retrenchment or the closure of a business. The scheme is intended to ease the financial burden on employees during periods of unemployment while helping them find new jobs.

Under the EIS, employees can receive financial assistance, as well as retraining opportunities, for up to six months after losing their jobs. The scheme also includes job search assistance and career counselling to help employees reintegrate into the workforce more quickly.

Both the employer and the employee are required to contribute to the EIS fund. Each party contributes 0.2% of the employee’s monthly salary, with the employer handling the payment of contributions directly to the Social Security Organisation (SOCSO).

Other statutory benefits in Malaysia

Apart from the EPF and EIS, employees in Malaysia are entitled to a range of other statutory benefits, including:

Paid annual leave: Employees are entitled to a minimum number of paid leave days, based on the length of their service.
Sick leave: Employees are entitled to paid sick leave, which varies depending on the duration of their employment.
Maternity leave: Female employees are entitled to 60 days of paid maternity leave, as outlined in the Employment Act 1955.
Public holidays: Employees are entitled to paid leave on public holidays, and if they work on these days, they are entitled to additional compensation.

Employers are required to comply with these statutory benefits, ensuring that they provide the minimum levels of support set by the government. These benefits not only protect employees but also foster positive working relationships, improve job satisfaction, and ensure that businesses comply with the law.

For foreign workers, while the benefits mentioned above apply, certain exemptions or adjustments may occur, particularly with regards to the EPF. The application of statutory benefits to foreign workers depends on their work status and the nature of their employment contract, so employers should ensure that these aspects are clearly outlined in their contracts.

Other employee benefits in Malaysia

In addition to statutory benefits, many employers in Malaysia offer supplementary employee benefits that contribute to a well-rounded compensation package. These benefits not only help attract and retain top talent but also foster a supportive and engaged workforce. Whether it is medical insurance, performance bonuses, or other rewards, these additional benefits can significantly improve employee satisfaction and productivity.

Employee medical benefits in Malaysia

Employee medical benefits in Malaysia are a common addition to many employment packages. Medical coverage typically includes insurance for hospitalisation, outpatient treatments, medical check-ups, and prescription medications. This benefit provides employees with the financial security needed to handle unexpected health expenses, which is particularly important in a country where healthcare costs can be significant.

Employers often offer comprehensive medical insurance plans that also extend to employees’ immediate families, adding further value to the benefits package. In some cases, employers may partner with local hospitals or clinics to provide discounted or free services, ensuring that employees have easy access to healthcare.

As health and wellness continue to be a focus for many employers, offering a strong employee medical benefit is not only a practical decision but also a means to demonstrate a company’s commitment to its staff’s well-being.

Performance bonuses in Malaysia

A performance bonus is another key element of employee benefits in Malaysia. These bonuses reward employees for their exceptional performance and can vary widely depending on the industry and the company’s internal policies. Performance bonuses are often awarded based on individual or team performance, or company-wide achievements, with the amounts varying accordingly.

In Malaysia, performance bonuses are a way for employers to incentivise high productivity and recognise the hard work of their employees. Bonuses can be paid in cash, or in some cases, they may include stock options or other non-cash incentives. This type of employee compensation not only motivates employees but also aligns their personal goals with the overall objectives of the company.

The concept of performance bonuses is integral to the Malaysian employment culture, helping to build morale and ensure that employees remain engaged and committed to their work.

Other common benefits in Malaysia

Aside from medical insurance, supplementary pensions, and performance bonuses, employers in Malaysia may offer a range of other benefits, depending on company policy and industry norms. These benefits can include:

Paid leave: Employees are entitled to paid annual leave, sick leave, and public holidays. Some employers offer additional leave entitlements, such as maternity or paternity leave.
Employee compensation and benefits in Malaysia: Companies may also provide compensation packages that include allowances for transportation, meals, or housing. These benefits help employees cover additional costs associated with their jobs.
Mental health support: Increasingly, companies are recognising the importance of mental healthcare benefits, providing employees with access to therapy, counselling, or stress-management services. These programmes are designed to improve employee well-being and productivity by addressing mental health challenges in the workplace.
Education and training support: Some employers offer professional development opportunities, including educational assistance, training programmes, or subsidies for courses. These benefits not only help employees enhance their skills but also foster a culture of continuous learning within the company.

By offering a wide range of employee benefits, companies in Malaysia can create a positive work environment that supports the personal and professional growth of their staff. A comprehensive benefits package helps to retain employees, build loyalty, and enhance overall job satisfaction, which ultimately contributes to the long-term success of the business.

The provision of employee benefits in Malaysia extends beyond what is required by law, allowing businesses to differentiate themselves in a competitive market. Offering a mix of medical insurance, supplementary pensions, performance bonuses, and other benefits can play a significant role in attracting and retaining talented individuals, improving morale, and enhancing employee loyalty.

Employers in Malaysia should regularly review their employee compensation and benefits structure to ensure it remains competitive and meets the evolving needs of their workforce. Doing so will not only help comply with legal requirements but also create a positive, supportive environment that fosters productivity and satisfaction among employees.

Compliant, seamless payroll and benefits in Malaysia

Managing payroll in Malaysia is not just about legal compliance, it is also about meeting employee expectations. Each country has its own standards when it comes to wages, statutory benefits, and compensation structures. In Malaysia, employees expect accurate and timely salary payments, proper EPF, SOCSO, and EIS contributions, and access to medical or performance-based benefits where applicable.

Falling short of these expectations can lead to higher employee turnover, dissatisfaction, and exposure to regulatory penalties. That is why having experienced local support makes all the difference.

At CXC, we help you take the guesswork out of workforce engagement. When you partner with us to manage workers in Malaysia, we handle everything from payroll processing and tax withholding to statutory compliance and employee benefits.

Want to ensure smooth payroll operations in Malaysia? Speak to our team today.

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