Hiring in Malaysia in 2026: The Real Bill for Local and Foreign Staff
We priced a Malaysian hire and a foreign hire under the EPF, SOCSO and Employment Pass rules in force this October. We also compared the labour rules in eight regions, from Johor to Sarawak, and checked who holds the employment contract at ten EOR providers.
Five figures to check before the offer letter goes out
Four ringgit mistakes that skew a Malaysia hiring budget
Malaysian payroll rules moved three times in two years: the SOCSO ceiling in October 2024, EPF for foreign staff in October 2025 and the pass floors in June 2026. Sabah and Sarawak run their own Ordinances, and limits like RM4,000 on termination pay are easy to miss.
Leaving EPF out of a foreign hire’s cost
Employers have paid 2% EPF for foreign staff since October 2025 wages, matched by the employee. Skip it on an RM8,000 salary and the budget comes up RM160 a month short, or RM1,920 a year.
Budgeting a flat 17.6% on-cost
On RM8,000, EPF, SOCSO at the RM6,000 ceiling in force since 1 October 2024, EIS and the HRD Corp levy add RM1,156.05. A 17.6% rule of thumb books RM1,408 instead, which overstates the bill by RM251.95 a month and about RM3,023 a year.
Treating Sabah and Sarawak like Kuala Lumpur
Both states run their own Labour Ordinances, amended from 1 May 2025, and staff from other regions need a work pass or permit for stays over 90 days. Sarawak’s investment agency also lists its own Employment Pass from RM3,000 a month, so a foreign hire priced at the federal RM5,000 floor can be off by RM24,000 a year.
Staying on an EOR past the break-even
At a $599 fee and RM4.0812 to the dollar on 21 October 2026, three staff cost RM88,007 a year, more than the RM72,000 top-end running cost of a small Sdn Bhd. That is RM16,007 a year you could keep, and our break-even chart below shows how fast it grows.
Rates as in force on 22 October 2026. Figures match the worked examples further down this page.
Keeping a foreign hire on RM4,000 now costs RM1,117.50 more a month
Two changes in nine months hit foreign staff. EPF became compulsory for them from October 2025 wages. Then on 1 June 2026 the lowest Employment Pass salary rose from RM3,000 to RM5,000, and renewals must meet it too.
Category III pass in mid-2025
Salary RM4,000Same hire renewed in October 2026
Salary RM5,000PERKESO’s foreign worker page puts the employer’s SOCSO share for foreign staff at 1.75% since 1 July 2024, when invalidity cover was added to employment injury cover. A budget built on the older 1.25% rate falls RM29.75 a month short at the RM6,000 ceiling.
SOCSO from the PERKESO contribution table for each wage band. EPF at 2% under the KWSP rates for non-Malaysians. Foreign staff are outside EIS and the HRD Corp levy. Since 1 June 2026 employees also pay 0.75% for SOCSO’s new non-work injury cover, which comes out of their pay, not yours.
Year one for an RM8,000 software engineer, at three EOR price points
The statutory lines are the same at every provider. Only the fee changes, so the table keeps the ringgit costs and the dollar fee apart.
On this salary the HRD Corp levy adds RM960 a year, close to the RM1,249.80 that SOCSO costs. It applies to Malaysian staff where the employer has 10 or more of them, which is usually true of an EOR’s local company.
Not in these totals: bonuses, overtime, a refundable deposit that some providers ask for, and setup or exit fees. Our Malaysia EOR fee table lists what each provider publishes. At RM4.08 to the dollar, the $499 fee adds about RM24,440 a year.
Put your own salary through Malaysian payroll
Malaysia is already selected. Type a monthly gross salary in ringgit to see EPF, SOCSO, EIS and the HRD Corp levy line by line, then add an EOR fee for the total.
Peninsular, Labuan or Borneo: what changes with the address
EPF, SOCSO, EIS and the RM1,700 minimum wage are the same nationwide. The labour law, the weekend and the paperwork for staff moving between regions are not.
Sarawak runs its own pass system for foreign staff. The state investment agency’s page lists an Employment Pass 2 from RM3,000 a month and 90 days to process, against the federal RM5,000 floor. The page carries no date, so confirm with Sarawak Immigration before you rely on it.
Since 1 May 2025 the Sabah and Sarawak Ordinances match the Employment Act on most points: all employees covered, a 45-hour week, 98 days’ maternity and 7 days’ paternity leave, with overtime and termination benefits limited to staff on up to RM4,000. Holiday dates from the 2026 state lists. Employment Act staff get 11 paid holidays, 5 of them fixed. Checked 22 October 2026.
The point where a Sdn Bhd beats the monthly fee
Published adviser ranges put a small Sdn Bhd at up to RM6,000 a month to run, or RM72,000 a year. A $599 EOR fee comes to about RM29,336 a year per employee at RM4.08 to the dollar.
Scale: RM150,000 a year. Running cost is the top of a published RM3,500 to RM6,000 a month range. Setup is the top of Deel’s published RM13,500 to RM31,000 range, so year one totals RM103,000. EOR fee at $599 a month, converted at RM4.0812 on 21 October 2026.
On running costs, three people on an EOR already cost more than your own company. In the first year, setup moves that to four. At the low end of the running range, RM42,000 a year, the switch comes at two. One catch changes the sums for foreign hires. A fully foreign-owned company needs RM500,000 of paid-up capital to sponsor Employment Passes. That money isn’t spent, but it is tied up, and an EOR’s entity carries it for you.
Capital is the cost the break-even bars leave out. Deel’s own Malaysia entity guide, updated March 2026, calls RM500,000 the practical minimum for a foreign company that wants to sponsor work passes, even though the legal minimum capital is RM1.
Which EORs sign the Malaysian contract themselves
We looked on each provider’s own site for the company that employs Malaysian staff. Four of the ten we rank name an entity they own. Two say they use a local partner, and four don’t say.
The evidence isn’t equally strong. Deel and Remote.com say it on their Malaysia pages. Multiplier names UseMultiplier Technologies Sdn. Bhd. only on its company entity list, and Rivermate’s Malaysia guide names a local entity but also calls the firm a hiring partner. Ask for the employer’s name on the contract either way.
Names its own Sdn Bhd as the Malaysian employer and runs support from Singapore, in the same time zone.
Says it owns its Malaysian entity, bills month to month and scores 4.6 for compliance with us.
No setup, onboarding or termination fee and no minimum term. A local partner holds the contract, so ask which one.
Our top compliance score for Malaysia, 4.7. Its Malaysia page doesn’t say who employs the hire.
Prices are published starting fees per employee per month, checked on vendor sites in October 2026.
See all 10 ranked providersNotice and termination pay, worked in ringgit
The first three cards are for an employee on RM4,000 a month, the top of the range the termination benefit rules cover, with notice paid in lieu. The fourth shows what happens one salary band up.
The 10 to 20 days a year apply only to staff on up to RM4,000 a month. That limit is why a five-year employee on RM8,000 has a smaller statutory bill than one on RM4,000, RM14,769.23 against RM22,769.23. The contract can still promise more.
Above RM4,000, dismissal still needs a reason. Any employee can take an unfair dismissal claim to the Industrial Court, which can order reinstatement or compensation. Daily pay for termination benefits is monthly pay divided by 26. Notice pay here is weekly pay, or monthly pay times 12 divided by 52, for each week of notice.
Six signs the law reads a contractor as your employee
Since January 2023, section 101C of the Employment Act presumes employment where the arrangement looks like it, unless a contract shows otherwise. Each question below is one of the six signs it lists. A yes means back EPF and SOCSO could be owed.
Do you control how they do the work?
Yes adds riskDo you set their working hours?
Yes adds riskDo you supply the laptop, tools or materials?
Yes adds riskIs their work a core part of your business?
Yes adds riskDo they work only for you?
Yes adds riskAre they paid at regular intervals, and is it most of their income?
Yes adds riskTools and guides for a Malaysia team
How we built this Malaysia guide
Co-founder and Editor, HR Stacks
Manjuri runs the editorial process behind our provider reviews and country hiring guides. She has more than ten years of editorial experience, the last five spent on employer of record and global employment.
More from Manjuri- We worked every ringgit figure ourselves from the KWSP contribution rates, the PERKESO tables at the RM6,000 ceiling and PERKESO’s foreign worker page, then ran each total twice.
- We compared eight regions using the Sabah and Sarawak Ordinance amendments in force from 1 May 2025, the 2026 state holiday lists and Sarawak’s own immigration guidance.
- We checked each provider’s own Malaysia page in October 2026 for who holds the contract, and used the scores from our Malaysia EOR ranking.
- We priced four exits and the switch to your own company using the Employment Act notice and termination benefit rules, published entity costs and the exchange rate on 21 October 2026.
- We recheck the page when a rule changes. Next up is the RM2,000 minimum wage once its legislation passes, then SOCSO’s non-work injury rate rising in 2028.
Malaysia hiring questions, answered in ringgit
What is the minimum wage in Malaysia in 2026?
How much EPF does the employer pay?
Do foreign employees have to pay EPF?
How much does it cost to hire an employee in Malaysia?
What is the minimum salary for an Employment Pass?
How much severance is owed in Malaysia?
When is my own Sdn Bhd cheaper than an EOR?
Find the right employer for your Malaysian hire
Ten employer of record providers, ranked on what they charge for Malaysia, who signs the contract and how they scored on eight parameters.