Outsourcing Payroll Services in Malaysia for Companies
Focus on your business operations while we handle the complexities of payroll, compliance, and regulations in Malaysia.
Why You Should Outsource Payroll
Ensure compliance with Malaysia’s complex local payroll regulations, reduce administrative burden, and improve payroll calculation accuracy.
Compliance with Malaysian Laws
Our team of local payroll specialists ensures all your statutory contributions, tax deductions and reporting are accurate and submitted on time.
Scale According to Your Needs
Whether you’re managing payroll for five or fifty employees, outsourcing payroll helps you adapt to your workforce size and complexity.
Save Time & Resources
Outsourcing payroll is ideal for companies without a legal entity in Malaysia or startups without HR or finance teams to manage payroll. By outsourcing, you can redirect resources towards your business growth.
Data Security & Accuracy
Payroll data is protected with encrypted cloud-based systems in complinace with the Personal Data Protection Act (PDPA). Give your employees access to digital payslips and self-service portals.
Understanding Payroll Regulations in Malaysia
We offer a full suite of payroll services to cover every aspect of your HR administration needs.
Payroll Calculation
Payroll calculation in Malaysia requires accurate aggregation of various salary components, calculation of statutory contributions (with updated 2025 rates), monthly tax deduction, and proration for partial months or overtime. As the employer, you need to make sure you comply with legal mininThis ensures ensuring compliance with legal minimum wages and labor requirements.
Minimum Wage in Malaysia
The minimum wage for employees in Malaysia is RM 1,700. This applies to all employees including non-citizens and contract apprentices but excludes domestic workers.
Overtime Calculation
Any work above the normal working hours is considered overtime and are compensated with a premium. Overtime pay is 1.5x the hourly rate.
Statutory Deductions
As the employer, you are obligated to remit and calculate the contributions to the Inland Revenue Board (IRB) and social security.
Wage Remittance
Salaries are typically paid at the end of the month, commonly between the 25th and 30th.
Statutory Contributions
Under Malaysian Labor and Tax Regulations, you and your employee are required to contribute to your employee’s retirement savings, social security, unemployment support, and religious obligations where applicable. You are also required to withhold and report taxes for your employees. Here is a breakdown of contributions:
| Statutory Deduction | Employee Contribution | Employer Contribution |
|---|---|---|
| Employees Provident Fund (EPF) | 11% of wages (5.5% if aged 60+) | 12% (or 13% if monthly salary ≤ RM5,000); 6% if aged 60+; 2% for foreign employees (applicable from Q4 2025) |
| Social Security Organization (SOCSO) | 0.5% of wages (under 60 years); None if 60+ | 1.75% (under 60 years); 1.25% if 60+ |
| Employment Insurance System (EIS) | 0.2% of wages (maximum limit applies) | 0.2% of wages (maximum limit applies) |
| Zakat (Optional for Muslim employees) | Optional deduction upon employee request | None |
Tax Reporting
As the employer, you are required to calculate, withhold, and remit employee Monthly Tax Deductions under the PCB (Potongan Cukai Bulanan) system.
Tax Rates for Employees
Income tax rates for employees in Malaysia are progressive from 1% to 30% depending on the employee’s salary.
Tax Deadline
The deducted amount must be remitted to LHDN by the 15th day of the following month.
Record Keeping
Maintain tax and payroll records for at least seven years and make them available upon request by LHDN.
End-of-Year Processes
Maintaining accurate records and adhering to the correct payment schedule are fundamental to payroll compliance in the Philippines.
EA Form (Employee Remuneration Statement)
As the employer, you are required to prepare and issue Form EA to all employees by the 28th February of the following year. This form summarizes each of your employee’s total earnings, tax deductions, and other tax information.
Form E (Employer’s Annual Return)
You are required to submit Form E to the IRB by the 31st March following the tax year. This form declares all employee renumeration and the amount of tax deducted during the year.
Tax Clearance
This includes payslips, attendance logs (timesheets), tax forms (e.g., BIR Form 2316), proof of contribution remittances, and employment contracts.
Have questions about your payroll regulations in Malaysia?
Our Payroll Outsourcing Process
Here’s what you can expect when you partner with us
01
Onboarding
We gather payroll information and employee details, integrating your existing data securely.
02
Payroll Processing
Monthly salary calculations, tax deductions, and statutory contributions are handled precisely.
03
Disbursement and Reporting
Employees are paid accurately and on time, with your management receiving timely payroll reports.
04
Compliance Management
We ensure submissions to LHDN, EPF, SOCSO, and other authorities meet regulatory deadlines.
Simplify your payroll management needs with Emerhub
Our advisors can provide you with helpful information about payroll management in Malaysia.
Stay compliant with Payroll Regulations in Malaysia
Let Us Help You Manage Your Payroll for your Employees
Frequently Asked Questions About Outsourcing Payroll Services
For payroll compliance in Malaysia, you must register your company with the following key government agencies:
- Inland Revenue Board of Malaysia (LHDN or IRBM)
- Employees Provident Fund (EPF / KWSP)
- Social Security Organisation (SOCSO / PERKESO)
- Employment Insurance System (EIS, under SOCSO)
According to the Malaysian Employment Act 1955, salaries must be paid no later than the 7th day of the following month. Monthly payroll is the norm in Malaysia, though some companies may have variations like bi-monthly (mid-month and end-month) payments or less commonly weekly/daily wages.
As of 2025, the minimum wage in Malaysia has been increased to RM1,700 per month. This minimum wage applies to all employees except domestic workers, including non-citizen workers and contract apprentices. Employers are required to ensure no employee receives less than this minimum basic salary and review their salary structures accordingly.
Non-compliance with payroll regulations can result in severe penalties. Employers can face fines between RM200 to RM20,000 for late or incorrect tax filings, with additional penalties up to 200% of undercharged tax. Failure to comply with the RM1,700 minimum wage may lead to fines up to RM10,000 per employee, escalating to RM20,000 or imprisonment for repeat offenses. Other statutory obligations such as social security and provident fund contributions also carry penalties if not properly met.
Foreign companies cannot directly pay Malaysian employees without a local registered entity due to mandatory payroll compliance requirements. They are required to register with the IRB, EPF, and SOCSO. These registrations are essential to lawfully withhold and remit employee income tax, make mandatory social security and retirement contributions, and comply with labor and tax laws.
Employers in Malaysia are not legally required to provide a 13th-month bonus or gratuity. The 13th-month bonus is a customary practice rather than a statutory obligation. Many companies voluntarily offer this bonus as part of their employee compensation packages, typically paying it at the end of the year.
Ready to discuss setting up your company in Malaysia?
Schedule a free, no-obligation consultation with our team of experts. We’ll discuss your needs and how we can help you setup your business in Malaysia.
Email Us
malaysia@emerhub.com
Call Us
+60 19 228 4420
Visit Us
C-18-6, KL Trillion, Kampung Datuk Keramat,
50400 Kuala Lumpur, Malaysia