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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 Malaysia’s current wage framework reflects the government’s focus on maintaining sustainable income levels while supporting business continuity. In 2026, there has been no further increase to the statutory minimum wage, and the framework introduced in 2025 continues to apply.

National minimum wage in Malaysia

Malaysia’s statutory minimum wage remains at MYR 1,700 per month in 2026. The phased implementation completed in 2025 now fully applies to all covered employers:

Phase 1 (from 1 February 2025) applied to:

Employers with five or more employees.
Employers in professional services, regardless of size.

Phase 2 (from 1 August 2025) extended coverage to:

All remaining employers, including micro-enterprises with fewer than five employees.

As of 2026, all non-exempt employers must comply with the MYR 1,700 monthly minimum wage.

Domestic workers (such as live-in maids and personal drivers) remain exempt from the statutory minimum wage, subject to future policy review.

Hourly and daily equivalents

Although Malaysia sets the minimum wage on a monthly basis, common equivalents based on standard working patterns are:

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

These figures are indicative and used to align part-time or non-standard schedules with the statutory monthly minimum.

Minimum wage policy outlook

The 2025 revision remains one of the most significant minimum wage adjustments in recent years, responding to cost-of-living pressures and wage reform objectives. In 2026:

No additional increase has been announced.
Employers are expected to maintain full compliance with the existing rate.

The government typically reviews the minimum wage every two years, making future adjustments possible but not yet confirmed

Compliance and employer obligations

Employers are encouraged to:

Ensure payroll systems remain updated and compliant.
Budget for sustained labour costs under the MYR 1,700 floor.
Conduct periodic wage audits to avoid underpayment.

Non-compliance may result in fines or sanctions under the National Wages Consultative Council Act 2011 (Act 732).

The minimum wage applies equally to local and foreign workers in covered roles, there is no separate minimum wage for foreign nationals.

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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FAQ's

How do companies run monthly payroll in Malaysia?

Companies run payroll in Malaysia by calculating each employee’s gross pay, making the required EPF, SOCSO, EIS and PCB deductions, paying net salary and submitting the monthly statutory contributions to the relevant authorities. Payroll must also account for the LINDUNG 24 Jam non-employment injury contribution where it applies.

Under the Employment Act 1955, the wage period cannot be longer than one month, and ordinary wages must generally be paid within seven days after the end of the wage period. Overtime, rest-day and public-holiday payments can follow a different deadline. These payments must generally be made no later than the last day of the following wage period.

For Malaysian employees below age 60, payroll usually includes an employee EPF deduction of 11%, with the employer contributing 13% for monthly wages of RM5,000 or below and 12% for wages above RM5,000.

SOCSO, EIS and monthly income tax deductions are calculated separately. Most statutory payments, including EPF, SOCSO/EIS and PCB, are due by the 15th of the following month.

What are the mandatory steps to set up payroll in Malaysia?

To set up payroll in Malaysia, an employer needs to register with LHDN for employer tax, register with EPF and PERKESO, enrol employees with the relevant statutory bodies and set up monthly PCB, EPF, SOCSO and EIS calculations.

Employers must register with EPF within seven days of hiring their first employee. PERKESO employer and employee registration is handled through the ASSIST portal, while businesses with employees also need an employer tax file with LHDN.

The payroll setup also needs each employee’s salary, tax details, EPF status and other information used to calculate statutory deductions. For foreign employees, valid passport and work-pass details also need to be recorded. Employers should also identify whether the employee is covered by the mandatory or optional LINDUNG 24 Jam contribution rules.

Employers with 10 or more Malaysian employees may also need to register with HRD Corp and pay a 1% monthly HRD levy. Registration is optional for employers with five to nine Malaysian employees, with a 0.5% levy if they opt in. These requirements apply to employers within the industries covered by the Pembangunan Sumber Manusia Berhad Act 2001.

Does a foreign company need a Malaysian legal entity to run payroll in Malaysia?

Not always. A foreign company can run payroll without incorporating a Malaysian subsidiary if it has the appropriate Malaysian registration and employer setup, or it can use an Employer of Record if it does not want to become the local employer itself.

A foreign company that carries on business in Malaysia can register the foreign company with the Companies Commission of Malaysia rather than incorporating a separate Sdn. Bhd. It would then need the employer, tax, EPF and PERKESO registrations required to employ and pay workers locally.

A payroll provider can process salaries and statutory filings, but the foreign company remains responsible as the employer. If the business does not want to establish or maintain its own Malaysian employer setup, an Employer of Record can employ the worker locally and manage payroll, tax and statutory contributions on its behalf.

What payroll taxes and statutory contributions must employers pay in Malaysia?

Employers in Malaysia generally pay EPF, SOCSO and EIS contributions, and qualifying employers may also pay the HRD Corp levy. Employers also withhold employee income tax through PCB, although PCB is deducted from the employee’s pay rather than being an employer cost.

For Malaysian employees below 60, the standard employer EPF rate is 13% for monthly wages of RM5,000 or below and 12% for wages above RM5,000. The employee generally contributes 11%.

For SOCSO, the standard employer share for eligible employees below 60 is generally 1.75%, with the employee contributing 0.5%. EIS adds 0.2% from the employer and 0.2% from the employee, subject to the RM6,000 wage ceiling. Actual contributions are determined using PERKESO’s statutory contribution schedules rather than simply applying the headline percentages to every salary.

From the June 2026 contribution month, PERKESO introduced the LINDUNG 24 Jam non-employment injury scheme. The additional contribution is borne by the employee according to the applicable contribution schedule. From July 2026, participation is generally optional for Malaysian employees but mandatory for covered foreign employees. The existing SOCSO employer contribution is not increased by this additional employee contribution. For most non-Malaysian employees, mandatory EPF contributions have applied since October 2025 at 2% from the employer and 2% from the employee. Different EPF rates continue to apply to permanent residents and non-Malaysian employees who became EPF members before 1 August 1998.

What statutory payroll-linked benefits must employers provide in Malaysia?

Statutory payroll-linked benefits in Malaysia include EPF retirement savings, SOCSO social security protection and EIS unemployment protection for eligible employees, with contributions calculated and paid through payroll. EPF provides retirement savings and other withdrawal benefits. For most Malaysian employees below 60, both the employer and employee contribute each month.

SOCSO provides protection for employment injury and invalidity, while EIS provides income support for eligible employees who lose their jobs. The employer deducts the employee share where applicable and pays both the employer and employee contributions through the monthly payroll process. PERKESO’s LINDUNG 24 Jam scheme additionally provides eligible employees with protection for accidents occurring outside work. From July 2026, the scheme is generally optional for Malaysian employees and mandatory for covered foreign employees, with the applicable contribution deducted from the employee’s wages.

Malaysia also expanded mandatory EPF coverage to most non-Malaysian employees from October 2025, with employer and employee contributions generally set at 2% each.

These statutory schemes are separate from optional employee benefits in Malaysia such as private medical insurance, bonuses or additional retirement contributions.

When should companies outsource payroll in Malaysia?

Companies should consider outsourcing Malaysia payroll when they do not have local payroll expertise, are hiring in Malaysia for the first time, are managing payroll across several countries or want to reduce the statutory administration handled by their HR and finance teams.

Malaysia payroll involves several monthly calculations and deadlines, including EPF, SOCSO, EIS and PCB. Employers also need to issue payslips, manage employee changes and complete annual tax reporting such as Form E and EA forms. Payroll systems must also be updated when statutory contribution schedules change, including the 2025 foreign-employee EPF rules and the 2026 LINDUNG 24 Jam scheme.

Outsourcing can also help when payroll includes expatriates, bonuses, frequent starters and leavers, or employees with different statutory contribution rules.

A company does not need a large Malaysian workforce before outsourcing becomes useful. Even a small team can justify it if the internal team would otherwise need to learn and maintain Malaysian payroll rules alongside other markets.

How much does payroll administration cost in Malaysia?

Payroll administration in Malaysia typically costs around RM50 to RM150 per employee per month for outsourced payroll, although some providers charge a minimum monthly fee or separate setup fee. These are indicative market prices rather than regulated fees.

It typically costs around RM60 per employee for smaller teams, around RM70 per employee for standard payroll packages, and RM80 per employee for teams of up to 25 workers. More comprehensive packages or expatriate payroll can cost more.

Some providers also use a monthly base fee. For example, one Malaysian service starts at RM400 per month plus RM10 per employee, while other charges a minimum RM200 monthly fee plus per-employee pricing. These administration fees are separate from employee salary, statutory employer contributions and benefits. Companies should compare what is included, especially statutory filing, year-end forms, employee registration and off-cycle payroll.

What is the minimum wage in Malaysia?

The minimum wage in Malaysia is RM1,700 per month in 2026, and the rate applies nationwide. The RM1,700 figure refers to basic salary in Malaysia, not allowances or other variable payments used to top up a lower base wage. An employer cannot agree with an employee to pay a basic salary below the minimum simply because the employee accepts it.

The RM1,700 rate now applies to all employers after the phased implementation of the Minimum Wages Order 2024 was completed in 2025.

Employers should treat the minimum wage as the legal floor rather than a market salary benchmark. Salaries for professional, technical and specialist roles can be significantly higher based on experience, industry and location.

What is PCB or MTD in Malaysia payroll, and how does an employer calculate and remit monthly income tax deductions to LHDN?

PCB, also called Monthly Tax Deduction (MTD), is the income tax that employers deduct from an employee’s monthly salary and remit to Malaysia’s Inland Revenue Board, LHDN.

Employers calculate PCB using the official LHDN calculation method, either through the electronic PCB schedule or payroll software that follows LHDN’s current computerised calculation specification. The amount can vary based on the employee’s taxable pay, personal relief information and income received from previous employers during the same year.

The employer deducts the calculated amount from the employee’s salary each month and must remit it to LHDN by the 15th of the following month. LHDN requires employers to submit PCB information using its approved electronic channels, including e-PCB, e-Data PCB or e-CP39. Employers may also use e-PCB Plus through the MyTax portal, and LHDN’s 2026 computerised-calculation specification recommends e-PCB Plus or an approved CP39 file-submission method.

Employers also submit Form E and employee remuneration information annually and provide employees with an EA or EC statement by the end of February. Form E is generally due by 31 March following the relevant year of remuneration, subject to any applicable electronic-filing concession announced by LHDN.

How can CXC help businesses ensure payroll compliance in Malaysia?

CXC helps businesses manage payroll compliance in Malaysia by handling payroll calculations, tax withholding, statutory contributions, employee benefits and the local payroll administration required for each pay cycle.

Our Malaysia payroll support covers requirements such as EPF, SOCSO, EIS and PCB, alongside employee salary payments and statutory reporting. CXC can also help manage payroll changes when employees join, leave, receive salary adjustments or have other changes that affect their pay.

For international employers, this gives HR and finance teams local payroll support without having to manage every Malaysian contribution rate, filing deadline and payroll update internally.

Where CXC is also supporting the employment arrangement, payroll can sit alongside onboarding, employee administration and benefits management, giving the business one process for the local workforce.

Speak to our team to learn more about payroll and benefits management in Malaysia with CXC.

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