The Legal Side of Hiring Your First Employee in Malaysia
EPF, SOCSO, EIS, PCB — the compliance checklist every first-time Malaysian employer needs before sending an offer letter.
Lawgistics December 1, 2024 5 min read
InsightsBringing your first employee on board in Malaysia involves more legal obligations than most first-time employers expect. Getting them right from day one protects both you and your team member.
Employment Act 1955 Coverage
The EA covers all employees earning up to RM4,000/month and certain categories of manual workers regardless of salary. EA employees have minimum rights on notice periods, annual leave, sick leave, maternity leave, and termination that your contract cannot reduce below statute.
Statutory Contributions
- EPF (KWSP):Employer contributes 13% (for employees under 60), employee contributes 11%. Registration required before first payroll.
- SOCSO (PERKESO):Covers employees earning under RM5,000/month for work injury and invalidity. Employer and employee both contribute.
- EIS (SIP):Employment Insurance System contributions for retrenchment coverage.
- HRDF:Human Resources Development Fund levy for employers with 10+ employees (or 5+ in certain sectors).
Payroll Tax (PCB)
Monthly Tax Deduction (MTD/PCB) must be calculated and remitted to LHDN on behalf of your employee from the first payroll. Failure to do so creates personal liability for the employer-director.
The Offer Letter
Always confirm employment in writing before the start date. Your offer letter should include salary, job title, start date, probation period, and a reference to the full employment contract. Don't let someone start work without a signed document in hand.
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