Malaysia’s economy grew 4.4% in the first half of 2025, driven by strong domestic demand, particularly in the services and construction sectors. Its strategic location in Southeast Asia, skilled workforce, and business-friendly regulations make Malaysia a top destination for global companies.
Before expanding into Malaysia, you’ll need to understand contracts, taxes, wages, benefits, and other employment laws. Our guide will tell you everything you need to know about hiring in Malaysia.
What to know before hiring in Malaysia
If you’re expanding your business into Malaysia for the first time, there are important legal requirements to be aware of. These norms and laws influence hiring practices in Malaysia and many aspects of the employer-employee relationship, including compensation and benefits.
G-P Gia™, our AI-powered global HR agent, can answer your toughest compliance questions across 50 countries — including Malaysia — and all 50 U.S. states. Reduce your reliance on outside counsel and cut the time and cost of compliance by up to 95% with Gia.
Here are six things to know about hiring in Malaysia.
1. Languages in Malaysia
Malaysia is a multicultural country and home to many ethnic groups. Some of the most prominent are Malay, Indian, and Chinese. Malaysian Malay is the official language, but you’ll likely encounter professionals who speak Chinese, Tamil, or other languages, depending on what part of the country you’re hiring in.
English is a popular second language and is used in education settings. However, the English you hear in Malaysia is Malaysian Standard English (MySE). This is a pidgin language that draws on Malay, Tamil, and Chinese influences. Locals refer to it as “Manglish” or “Bahasa Rojak,” meaning mixed language.
2. Malaysia labor market
Malaysia has a diverse population. Malaysians are exceptionally well educated compared to other Southeast Asian countries. Malaysia’s manufacturing sector — especially the electrical and electronics (E&E) industry — is a big contributor to the country’s economy. It’s one reason why some global companies choose to establish operations there. Other notable industries include agriculture, services, and mining and quarrying.
3. Working hours in Malaysia
The maximum working hours is 45 hours per week, with a standard of eight hours per day. Overtime is paid at 1.5 times the hourly rate for work beyond normal hours, double the hourly rate for work on rest days, and triple for work on national holidays. Employees get at least one rest day per week.
4. Time off in Malaysia
Under the Employment Act 1955, Malaysia’s annual leave is:
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Eight days per year for employees with less than two years of service
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12 days for 2–5 years of service
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16 days for 5+ years or more
Unused leave is typically carried over or paid out upon termination, depending on company policy. Overtime and some leave entitlements may not apply to employees earning above RM 4,000 per month (except manual workers). Civil servants in Malaysia have their own leave system. This is generally more generous than the private sector.
Employees get at least 11 paid national holidays per year, including five compulsory holidays.
Statutory sick leave in Malaysia
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14 days per year for less than two years of service
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18 days for 2–5 years of service
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22 days for 5+ years of service
Employees also get 60 days of paid hospitalization leave per year.
5. Compensation in Malaysia
Malaysia’s minimum wage is RM 1,700 per month (2025). Many Malaysia-based employees expect performance bonuses. These aren’t legally required but are common in practice.
6. Taxes and social security in Malaysia
Income is taxed at progressive rates up to 30% for the highest income brackets. Employers are responsible for withholding employees’ income tax from their paychecks under the Monthly Tax Deduction (MTD) scheme. Employees contribute 11% of their income to the Employment Provident Fund (EPF). The EPF is a type of savings account for retirement or access on occasion for purposes like buying a house or paying medical expenses.
Both employees and employers have to contribute to SOCSO, which covers the Employment Injury Scheme and the Invalidity Scheme. Employers contribute 1.75% of monthly wages, while employees contribute 0.5%.
Top hiring hubs in Malaysia
Some cities in Malaysia are known for particular industries. Knowing what each city has to offer allows you to focus your hiring efforts in the right place and fill roles faster.
The top talent hubs in Malaysia are:
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Kuala Lumpur is the capital and largest city. Kuala Lumpur is Malaysia’s top business, financial, and technology center. It hosts the headquarters of many multinational corporations, banks, and startups.
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Selangor is a major industrial and commercial state. It includes Petaling Jaya, Shah Alam, and Cyberjaya. Cyberjaya is known as Malaysia’s tech and innovation hub, while Petaling Jaya and Shah Alam are key for manufacturing, logistics, and services.
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Penang is a leading hiring destination for electronics, manufacturing, and shared services. The Bayan Lepas Free Industrial Zone is home to many global tech and semiconductor companies.
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Johor Bahru is located near Singapore. It’s a major center for manufacturing, logistics, and cross-border business. The Iskandar Malaysia development region attracts big investment.
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Kuching and Kota Kinabalu are cities in the top economic centers in Sarawak and Sabah. They support growth in energy, agriculture, tourism, and services.
Key industries in Malaysia
Understanding Malaysia’s main industries allows you to benchmark salaries and benefits. You can use this insight to make smart choices about where to invest and grow your workforce.
The main industries in Malaysia include:
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Services: The services sector is the largest contributor to Malaysia's GDP, accounting for over half of the country's economic output. It includes a wide range of sub-sectors, including finance and banking, ICT, tourism, and retail.
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Manufacturing: Manufacturing is a key force in Malaysia's economy, with a strong focus on high-tech, knowledge-based, and capital-intensive industries. These include electronics, chemicals, automotive, and medical devices.
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Mining and quarrying: Malaysia is rich in mineral resources such as petroleum, natural gas, and metallic ores. The country is a historical producer of tin, and has reserves of bauxite, copper, and iron.
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Agriculture: Malaysia is one of the world's top producers and exporters of palm oil. The country’s forests are heavily exploited for timber, particularly in East Malaysia. It has a long history of rubber production, which is closely tied to its manufacturing sector.
Cost of hiring an employee in Malaysia
Whether you’re hiring one employee or an entire team in Malaysia, expenses are inevitable. Budget for the following:
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Entity setup (unless you partner with an employer of record)
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Job advertisements
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Labor costs for applicant review
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Payroll and taxes
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Salaries and benefits
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Bonuses and allowances
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Insurance and travel
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Translator (if applicable)
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Orientation programs
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Initial training and materials
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Workstation setup, equipment, and software licenses
According to G-P Verified Sources fromGia, the employer burden rate in Malaysia, which includes costs triggered on top of salaries, is up to 14.95%.
What does a company need to do to hire employees in Malaysia?
Make sure you cover these essentials before expanding your team in Malaysia:
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Register a local entity with the Companies Commission of Malaysia (SSM).
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Register with statutory bodies like Employees Provident Fund (EPF), Social Security Organization (SOCSO/PERKESO), Employment Insurance System (EIS), and Inland Revenue Board (LHDN).
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Draft employment contracts that comply with the Employment Act 1955.
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Set up payroll and statutory deductions.
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Adhere to minimum wage and working hour laws.
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Provide statutory benefits.
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Maintain employment records.
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Secure work permits for international hires.
Setting up a Malaysia subsidiary can take weeks or months. Use G-P EOR to hire full-time employees in Malaysia without setting up your own entity. Build your team in Malaysia at a lower cost and with peace of mind that you’re doing so compliantly.
Steps to hiring in Malaysia
The hiring process in Malaysia is similar to the one you’re likely familiar with in your own country. The hiring process follows five basic steps: advertising the job, evaluating applications, interviewing candidates, sending job offers, and onboarding new employees.
1. Advertise job vacancies in Malaysia
Define the role, responsibilities, and qualifications you need. JobStreet, LinkedIn, Indeed, Maukerja, Hiredly, and MYFutureJobs are popular job sites in Malaysia.
You’re not legally required to disclose salary in all job ads. But if you advertise on the official MYFutureJobs portal (mandatory for international worker recruitment), you have to include a clear salary range.
2. Evaluate applications in Malaysia
Collect applications and review resumes. Screen candidates based on their qualifications, experience, and fit for the role. If you do an initial screening, avoid asking candidates about their race, gender, and religion.
The Personal Data Protection Act 2010 (PDPA) requires you to:
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Get informed consent from applicants before collecting personal data.
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Clearly state the purpose of data collection.
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Store data securely and retain it only as long as necessary.
3. Interviewing candidates in Malaysia
Interview candidates who made it onto your shortlist. Use structured, nondiscriminatory interview questions. Gia can help you create questions that follow anti-discrimination laws in Malaysia, so you can find the best fit for the role while complying with local regulations.
4. Making job offers in Malaysia
Contact your chosen candidate to offer them a position with your company. Prepare and sign a compliant employment contract outlining job scope, compensation, benefits, and statutory requirements.
5. Onboarding new employees in Malaysia
Now you can onboard new employees. Register your new hire with the Employees Provident Fund (EPF), Social Security Organization (SOCSO), and Employment Insurance System (EIS). Update payroll and tax records.
If you’re working with an EOR like G-P™, you won’t have to worry about the administrative burden of onboarding. We’ll streamline the process, so you can focus on training your new hire and integrating them into your company culture.
Hiring contractors in Malaysia
Working with independent contractors in Malaysia can be a cost-effective way to test the market and build a presence, without the commitment of full-time employees. Contractors based in Malaysia understand local consumer behavior, rules, and business practices. They’ll be ready to start working quickly with their own equipment and established work processes.
Hiring contractors allows you to easily adjust your talent pool based on your business needs, without the complexities and costs of employment.
Before you enter an agreement with an independent contractor in Malaysia, consider the following:
1. Employees vs. independent contractors in Malaysia
It’s important to understand the difference between employees and independent contractors. In Malaysia, employers hire employees to do work and, in return, pay them a regular salary and benefits. Independent contractors provide services. Unlike employees, contractors set their schedules, use their own equipment, and work on specific projects rather than having an ongoing role.
2. Penalties for misclassification in Malaysia
Classifying someone as a contractor when they’re not can lead to severe penalties. If misclassification occurs, you’ll have to:
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Pay all unpaid statutory benefits retroactively, including wages, overtime, annual and sick leave.
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Pay fines of up to RM 50,000 per offense for non-compliance with statutory obligations under the Employment Act 1955.
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Face claims from misclassified workers in the labor court for unpaid wages, wrongful dismissal, or denial of statutory benefits.
3. How to pay contractors in Malaysia
G-P Contractor™ takes away the messy, time-consuming process of hiring and paying international contractors. You can create and issue contracts and pay contractors with just a few clicks, all while ensuring a compliant process.
Hire employees and contractors in Malaysia with G-P
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Make your expansion to Malaysia easier with G-P. Contact us or book a demo today.
