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Employer of Record & PEO
Published:
October 1, 2026
Last updated:
Onboarding an employee in Malaysia follows a set sequence of legal steps: a written employment contract, registration with EPF, SOCSO and EIS, a tax notification to LHDN, and a first payroll with every deduction calculated correctly. Each step has its own deadline, and the shortest, EPF registration, falls just 7 days after the start date.
Every one of these steps can be completed online, and none needs weeks. With the groundwork done before the start date, a new employee can be fully compliant within their first 7 days.
This guide sets out how to onboard an employee in Malaysia in three phases: what to settle before Day 1, a day-by-day plan for the first week, and what to check in the first payroll cycle. It also includes a 2026 statutory contribution reference table and a checklist of what your employment contract should cover.
Other filings allow up to 30 days, but completing everything within 7 days has clear advantages:
This timeline applies to Malaysian citizens and permanent residents. Foreign hires follow a longer path, covered separately below.
The timeline at a glance
Three things need to be settled before the start date for the first week to run smoothly.
The hiring entity needs an EPF employer number, a PERKESO employer code and an LHDN employer tax file (E number). A company hiring its first Malaysian employee must register with EPF within 7 days and with PERKESO within 30 days of that first hire, which can push the timeline past a week. Companies without a Malaysian entity typically hire through an Employer of Record (EOR) whose registrations are already in place.
Under the Employment Act 1955, a contract of service longer than one month must be in writing. Whether you start from a Malaysia employment contract template or draft your own, check that it covers the terms below and is no less favourable than the Act. Basic salary must be at least RM1,700 per month, and allowances cannot be counted towards that minimum.
What an employment agreement template for Malaysia should cover:
Fixed-term contract workers are employees too: EPF, SOCSO, EIS and PCB apply, and so does the same first-week timeline. Have any template reviewed locally before use.
Phase 2 starts on the employee's first working day and covers every statutory registration: EPF, SOCSO, EIS and the LHDN tax notification. Each agency has its own online portal, so the plan below handles one agency per day, using the employer's portal access and the documents collected in Phase 1.
Aim to finish by Day 5. Days 6 and 7 are a buffer for missing documents or portal delays, and still land inside the EPF deadline.
Phase 3 runs from the end of the employee's first wage period to the 15th of the following month. Depending on the start date, that falls between two and seven weeks after Day 1. It is the first time wages, deductions and contributions all run through payroll together, so any setup gap from Phase 2 shows up here.
Rates below apply to Malaysian citizens and PRs under 60. Always calculate using the official contribution tables, not a flat percentage.
*SOCSO and EIS follows a tabled rate, not a standard percentage rate. Find the full table here: PERKESO Contribution Rate
SOCSO and EIS are capped at wages of RM6,000 per month. Late EPF payments attract interest charges, and each agency applies its own penalties, so one missed cycle can trigger several separate charges.
The first-week timeline does not apply to foreign nationals. They need an Employment Pass sponsored by a Malaysian entity before starting work, and approval typically takes several weeks. From 1 June 2026, the Employment Pass minimum salaries also increased, with Category III starting at RM5,000 per month. Since 1 October 2025, EPF is mandatory for foreign employees too, at 2% from both employer and employee.
Once the pass is approved, the same Phase 2 and Phase 3 steps apply.
For companies without a Malaysian entity, the first prerequisite is usually the slowest. An Employer of Record removes it: the EOR is the legal employer, holds the EPF, PERKESO and LHDN registrations, and runs every step in this timeline on the company's behalf.
AYP Group employs through its own legal entity in Malaysia, with an in-market team handling contracts, statutory registrations and monthly payroll. The company directs the employee's work; AYP carries the employment compliance.
Planning a hire in Malaysia? Estimate the full employment cost, including EPF, SOCSO and EIS, with the AYP Employee Cost Calculator, or speak with our Malaysia team about your hiring plans here.
For a Malaysian citizen or PR, all statutory onboarding can be completed within 7 days of the start date, in line with the EPF registration deadline, provided the employer is already registered with EPF, PERKESO and LHDN. Foreign hires take longer because an Employment Pass must be approved first.
Within 7 days of the employee's start date.
Within 30 days of the start date, although SOCSO coverage applies from the first day of work.
RM1,700 per month in basic salary. Allowances do not count towards the minimum.
Yes, if the contract runs longer than one month. When adapting a contract worker agreement sample for Malaysia, confirm it states the fixed end date, pay, working hours and leave. Statutory contributions apply to contract workers as they do to permanent staff.
Yes, through an Employer of Record, which employs the worker locally and manages contracts, statutory contributions and payroll. AYP Group's EOR service in Malaysia runs through its own local legal entity, with an in-market team handling employment contracts, EPF, SOCSO, EIS and PCB registrations, and monthly payroll. Companies can hire in Malaysia within this timeline without setting up a Sdn Bhd.
