---
title: "Malaysia Employer Cost Breakdown 2026 | EPF, SOCSO"
description: "Malaysia employer cost 2026: 13% EPF on salary up to RM5,000, 1.75% SOCSO, 8 days to 12 days paid leave. Full line-by-line breakdown."
canonical: https://www.teamed.global/country-hiring-guides/malaysia/cost-breakdown
---

Malaysia · Cost breakdown child

Served by Teamed vetted partner-entity network in Malaysia

# How much does it really cost to *hire in Malaysia* in 2026?

EPF alone adds 13% to your payroll for employees earning up to RM5,000 a month. It drops to 12% above that threshold. That split makes Malaysia one of the few countries where the employer's pension rate actually falls as salary rises.

Last reviewed 13 June 2026 · Malaysia guide

![The Kuala Lumpur skyline at dusk with the Petronas Twin Towers and the financial district lit against a deep blue sky.](/images/country-guides/malaysia-cost-breakdown.webp)

Illustration · Kuala Lumpur, Malaysia

Answer.cite this

EPF is Malaysia's mandatory pension fund. The employer contributes 13% of salary where the employee earns RM5,000 or less a month. It drops to 12% for higher earners. Both rates are among the highest employer pension obligations in Southeast Asia.

SOCSO adds 1.75% on top, on wages up to RM6,000 a month. Paid leave starts at 8 days days a year in the first two years, rising to 12 days days from year two. There are 11 federal public holidays plus additional state holidays depending on where your employee works.

The national minimum wage is MYR 1,700/month from August 2025, with no remaining employer exemptions. Budget from the correct base before layering on EPF and SOCSO.

![A Malaysian ringgit note and a pen resting on a printed EPF payslip breakdown on a clean office desk.](/images/country-guides/malaysia-cost-breakdown-polaroid-1.webp)

EPF, SOCSO and the lines most buyers miss

## The headline: what a Malaysia hire actually costs

Start with the gross monthly salary. Add 13% EPF for salaries at or below RM5,000 a month, or 12% for salaries above that. Then add 1.75% SOCSO on wages up to RM6,000. That is the core of the employer cost stack.

The table below shows illustrative totals at an RM5,000 monthly salary (RM60,000 a year). These are computed from verified statutory rates and labelled illustrative. They are not statutory figures.

The EPF dual-rate structure is the defining feature of Malaysian payroll. At RM5,000 a month the employer rate is 13%. At RM5,001 it steps down to 12%. The boundary is the salary, not the excess above it, so crossing RM5,000 reduces the rate on the entire salary, not just the portion above the threshold.

| Line | Illustrative annual cost on RM60,000 gross (RM5,000/month) | Source |
| --- | --- | --- |
| Gross salary | RM60,000 | Contract |
| EPF employer at 13% (salary at or below RM5,000/month) | RM7,800 (illustrative) | [EPF (KWSP) mandatory contribution](https://www.kwsp.gov.my/en/employer/responsibilities/mandatory-contribution) |
| SOCSO employer at 1.75% on wages up to RM6,000 | RM1,050 (illustrative) | [PERKESO contribution rates](https://www.perkeso.gov.my/en/rate-of-contribution.html) |
| EIS employer contribution (Employment Insurance System) | Modest additional cost (rate not confirmed in cache; described qualitatively below) | Employment Insurance System Act 2017 |
| Annual leave: 8 days days in first two years, built into salary | Included in salary | [Employment Act 1955 s.60E](https://jtksm.mohr.gov.my/sites/default/files/2023-11/Akta%20Kerja%201955%20(Akta%20265).pdf) |
| Public holidays: 11 federal days, built into salary | Included in salary | Employment Act 1955 s.60D |
| Sick pay: 14 days paid days in first two years (full salary) | Low average cost; event-driven | Employment Act 1955 s.60F(1) |
| **Total illustrative employer cost (EPF + SOCSO only, before EIS and Teamed fee)** | **RM68,850 (illustrative)** | **Approximately 115% of gross (illustrative)** |

These figures are illustrative. They are computed from the 13% EPF rate and 1.75% SOCSO rate confirmed for 2026. They are not statutory numbers and will vary with actual salary, EPF rate band, and any employer-provided benefits above the statutory floor.

Add the Teamed fee from $599 per employee per month and the total rises further. Use the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to run your own salary figures.

EPF (KWSP) · Mandatory employer contribution rates 2026

The employer EPF contribution rate is **13%** where the employee earns RM5,000 or less a month. It is 12% where the salary exceeds RM5,000. The employee contributes 11% at all salary levels (below age 60). Rates apply to Malaysian citizens and permanent residents. Foreign workers contribute 2% each from October 2025.

Source: [EPF (KWSP): Mandatory employer contribution rates](https://www.kwsp.gov.my/en/employer/responsibilities/mandatory-contribution)

1. Confirm gross salary and EPF band Fix the monthly gross salary first. Check whether it falls at or below RM5,000 or above it. That single threshold determines whether you pay EPF at the higher or lower employer rate.
2. Add EPF and SOCSO employer contributions Apply the correct EPF employer rate to the full monthly salary. Add SOCSO at the employer rate on wages up to the RM6,000 ceiling. Include EIS at the current rate, verified directly with PERKESO.
3. Check the national minimum wage floor Confirm the agreed salary is at or above the national minimum wage. No sector or employer-size exemptions remain from August 2025. The minimum applies to all employees in all states.
4. Allow for leave entitlements Budget the correct annual leave band based on the employee's tenure. Add public holidays for the relevant state, which may be higher than the federal floor. Reserve for sick leave and hospitalisation leave as event-driven costs.
5. Remit EPF, SOCSO, EIS and PCB by the deadline each month All statutory contributions share the same remittance deadline. Build it into every payroll calendar from the first payroll run. Late remittance carries penalties across each fund.

## EPF: Malaysia's biggest employer cost line

EPF (the Employees Provident Fund, known in Malay as KWSP) is Malaysia's mandatory retirement savings scheme. The employer pays 13% of monthly salary for employees earning RM5,000 or less. The rate falls to 12% above RM5,000.

The employee also contributes 11%. Together, the combined rate is 24% at the lower salary band and 23% above RM5,000. This is one of the highest combined pension contribution rates in the region.

EPF is not optional. Every employer in Malaysia must register new employees with the EPF within seven days of employment. Both employer and employee contributions must be paid by the 15th of the following month. Late payment attracts a dividend penalty calculated at EPF's declared dividend rate.

### The salary threshold and what it means for your budget

The salary threshold of RM5,000 is checked against the employee's monthly wage each period. An employee earning exactly RM5,000 a month attracts 13% from the employer. At RM5,001 the rate falls to 12% on the full RM5,001, not just the marginal ringgit. For most professional hires above RM5,000, the employer rate is 12%. Budget from the correct band at the offer stage.

### Age and residency affect EPF rates

The 13% and 12% rates apply to Malaysian citizens and permanent residents below age 60. Reduced rates apply for employees aged 60 and above. Foreign workers are subject to a separate EPF regime: from October 2025 both the employer and employee contribute 2% each. If your Malaysia hire is a foreign national, confirm the applicable EPF category at the offer stage.

### What EPF covers

EPF is a defined-contribution fund. The balance belongs to the employee and is portable. Employees can withdraw for housing, medical, and education during their working life. The full balance is accessible at age 55 (Account 1, which holds the majority) or at age 50 for partial withdrawals. For the employer, EPF is a cost line with no ongoing liability beyond the monthly contribution. There is no funding risk of the kind that defined-benefit pension schemes carry in other markets.

## SOCSO and EIS: the second and third employer lines

SOCSO (the Social Security Organisation, or PERKESO) provides workplace injury and invalidity cover. The employer pays 1.75% of monthly wages up to a ceiling of RM6,000. The employee pays 0.5% on the same capped base.

EIS (Employment Insurance System) also applies. Both employer and employee contribute a small percentage of wages. The EIS rate was not confirmed to full verification standard in the compliance cache and is described here qualitatively. Verify the current rate with PERKESO before payroll setup.

SOCSO has two schemes. The first covers employees aged below 60 under the Employment Injury Scheme and Invalidity Scheme. The employer pays 1.75% and the employee pays 0.5%. Workers aged 60 and above are covered only under the Employment Injury Scheme, at a reduced employer rate. The SOCSO wage ceiling was raised to RM6,000 per month from October 2024. Above the ceiling, no additional SOCSO contributions apply.

### EIS (Employment Insurance System)

EIS was introduced in 2018 to provide income replacement for workers who lose their jobs. Both the employer and employee contribute. The combined contribution rate is small relative to EPF and SOCSO, but it is mandatory for employees aged 18 to 60 in the private sector. The exact rate for 2026 was not confirmed to the required verification standard in the compliance cache for this guide. Check the current EIS rate directly on the PERKESO website or via your payroll provider before each remittance cycle.

### Remittance deadline

EPF, SOCSO, and EIS contributions all share the same deadline. Employers must remit by the 15 daysth of the month following the salary payment month. A single combined remittance cycle covers all three. Late remittance carries penalties across all three funds. Build the 15 daysth into every payroll calendar from day one.

## Leave and sick pay: the entitlements inside every salary

Annual leave starts at 8 days days in the first two years of service. It rises to 12 days days from year two. These are minimums. Most professional roles in Malaysia offer more.

Paid sick leave is 14 days days a year in the first two years, 18 days days from year two, and 22 days days after five years of service. There is also hospitalisation leave of up to 60 days a year on top of ordinary sick leave.

All leave entitlements below come from [the Employment Act 1955](https://jtksm.mohr.gov.my/sites/default/files/2023-11/Akta%20Kerja%201955%20(Akta%20265).pdf) as amended by the 2022 Employment Amendment Act (effective 1 January 2023). The 2022 reform expanded coverage to all employees regardless of salary level, meaning the Act now protects more workers than before the amendment.

### Annual leave

Annual leave tiers by tenure. Under two years of service: 8 days days. Two to five years: 12 days days. Over five years: 16 days (not held as a cache figure; the tier structure is confirmed in the cache notes). Budget on the correct band for each employee. Unused leave that is not taken by agreement carries over and becomes a liability on exit.

### Public holidays

There are 11 gazetted federal public holidays. States add between 3 and 5 further state-specific holidays. Practical annual totals run to 14 to 16 paid public holidays depending on the employee's work state. If your team is based in Selangor or Kuala Lumpur, budget for those state holidays specifically.

### Sick leave tiers

Paid sick leave is 14 days days per year under two years of service. From two to five years it is 18 days days. Over five years it is 22 days days. On top of ordinary sick leave, employees are entitled to up to 60 days of hospitalisation leave per year where a hospital stay is required. The hospitalisation entitlement is separate from ordinary sick leave and sits alongside it. A medical certificate is required to access either entitlement.

### Maternity and paternity leave

Maternity leave is 98 days paid days (14 weeks) for the first five qualifying children. The employer pays at full salary. Paternity leave of 7 days consecutive paid days was introduced for private-sector male employees from 1 January 2023. Both costs are paid by the employer and are not reimbursed by the government.

## Minimum wage and working time: the floor below the cost stack

The national minimum wage is MYR 1,700/month from 1 August 2025, with no remaining employer exemptions. Micro-enterprises with fewer than five staff joined the universal rate from that date.

The standard working week is 45 hours, reduced from 48 by the 2022 Employment Amendment Act. The standard day is 8 hours. Overtime beyond those limits attracts premium pay.

The MYR 1,700/month national minimum wage applies to all employers and all states from 1 August 2025. There are no longer any sector or employer-size exemptions. This is the floor for any Malaysia hire. The hourly equivalent is 8.72 ringgit per hour based on the prescribed calculation.

### Working time limits and overtime

Section 60A of the Employment Act caps ordinary hours at 45 hours a week and 8 hours a day. Overtime is capped at 104 hours per month. The Act's working time provisions apply to employees earning RM4,000 a month or below. Higher earners covered by the Act since January 2023 have separate overtime terms. If your Malaysia hire is in a managerial role above RM4,000, confirm the applicable overtime terms at the contract stage.

### Income tax: the employee-side picture

Malaysia's income tax is progressive, starting at 0% on the first RM5,000 of chargeable income and reaching 30% on income above RM2,000,000. The employer withholds Potongan Cukai Bulanan (PCB, the monthly tax deduction) and remits by the 15 daysth of the following month. The employee declares and reconciles tax annually via a self-assessment return. Employers do not bear the income tax cost, but the PCB cycle is a payroll compliance obligation that runs every month.

| Annual chargeable income band (MYR) | Tax rate |
| --- | --- |
| Up to 5,000 | 0% |
| 5,001 to 20,000 | 1% |
| 20,001 to 35,000 | 3% |
| 35,001 to 50,000 | 6% |
| 50,001 to 70,000 | 11% |
| 70,001 to 100,000 | 19% |
| 100,001 to 400,000 | 25% |
| 400,001 to 600,000 | 26% |
| 600,001 to 2,000,000 | 28% |
| Above 2,000,001 | 30% |

Source: [Inland Revenue Board of Malaysia (LHDN): Individual income tax rates](https://www.hasil.gov.my/en/individual/individual-life-cycle/income-declaration/tax-rate/). Rates are for Assessment Year 2026. No changes announced from the 2023 scale.

## How Teamed handles Malaysia employment costs for you

Teamed becomes your legal [employer of record](/lp/employer-of-record) in Malaysia for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency.

EPF registration, SOCSO and EIS contributions, PCB withholding, and the full Malaysia Employment Act compliance stack run on **one platform**.

**Real HR and legal experts** handle your Malaysia hires from the first offer letter through every EPF remittance, SOCSO filing, and annual EA form. **An actual person**, not a chatbot or a pooled queue. There is **no setup fee** and **no exit fee**. Every employer cost **passes through at cost, itemised** on every invoice. You see the EPF line, the SOCSO line, and the EIS line. Nothing is hidden inside the management fee.

EOR payroll, contractor onboarding, and entity setup all live on **one platform**. A Malaysia contractor who converts to direct employment keeps their record. That same employee can **graduate** from EOR to your own Malaysia entity without switching systems. EOR is the right structure for a first Malaysia hire, **until it isn't**. Teamed does not lock you in. Start from the Malaysia hiring overview or run the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to see the full picture.

## Frequently asked questions

What is the EPF employer contribution rate in Malaysia in 2026?

The employer EPF rate is 13% where the employee's monthly salary is RM5,000 or less. It drops to 12% where the monthly salary exceeds RM5,000. The employee contributes 11% at all salary levels (for Malaysian citizens and permanent residents below age 60). Both rates apply to the full monthly salary, not just the portion above or below the threshold. Foreign workers contribute 2% each from October 2025 under a separate EPF regime.

How much does a Malaysia hire really cost compared with the salary?

At a monthly salary of RM5,000 (RM60,000 a year), the illustrative total employer cost before EIS and the Teamed fee is around RM68,850. That is EPF at 13% adding RM7,800 plus SOCSO at 1.75% adding RM1,050. These figures are illustrative, computed from verified statutory rates. EIS adds a further modest amount. The Teamed fee from $599 per employee per month brings the total higher. Use the Employer Cost Calculator to model your specific salary.

What statutory leave must a Malaysia employer provide?

Annual leave is 8 days days a year in the first two years of service, 12 days days from year two to year five, and 16 days beyond five years under the Employment Act 1955. There are 11 federal public holidays plus between 3 and 5 additional state holidays. Paid sick leave is 14 days days a year in the first two years, rising to 18 days days and then 22 days days with tenure. Hospitalisation leave of up to 60 additional days a year is available on top of ordinary sick leave.

What is the national minimum wage in Malaysia in 2026?

The national minimum wage is MYR 1,700/month from 1 August 2025, with no remaining employer exemptions. Micro-enterprises with fewer than five staff joined the universal rate from that date. The hourly equivalent is 8.72 ringgit. No increase has been announced for 2026. The rate applies in all states; there is no separate regional minimum wage in Malaysia.

When must EPF, SOCSO, and EIS contributions be remitted in Malaysia?

All three statutory contributions share the same deadline. Employers must remit by the 15 daysth of the month following the salary payment month. The same 15th-of-the-following-month deadline applies to PCB income tax withholding. All four remittances can be made through their respective online portals. Late payment carries dividend penalties for EPF and financial penalties for SOCSO and EIS.

Teamed Legal Operations

The EPF dual rate is the line that catches clients out most often. At RM5,000 a month the employer pays 13%. At RM5,001 it drops to 12%. That is not a marginal-rate system; the entire salary changes rate. We see offer letters drafted at RM5,100 that were meant to sit below the threshold. The difference is small but the principle matters. Know your EPF band before you send the offer.

A note from Tom Price-Daniel

Malaysia EPF splits at RM5,000. Below that, the employer pays 13%. Above it, 12%. Most cost models treat it as a single rate.  
Add 1.75% SOCSO, EIS, 12 days days of leave rising with tenure, and 11 federal public holidays, and the full picture is wider than the salary line.  
Know every line before you send the offer.

Tom Price-Daniel · Co-founder, Teamed

## Related Malaysia guides

- Hiring in Malaysia, overviewparent
- [Malaysia tax and payroll](/country-hiring-guides/malaysia/tax-and-payroll)sibling
- [Malaysia termination and severance](/country-hiring-guides/malaysia/termination-and-severance)sibling
- [Singapore employer cost breakdown](/country-hiring-guides/singapore/cost-breakdown)neighbour
- [Indonesia employer cost breakdown](/country-hiring-guides/indonesia/cost-breakdown)neighbour
- [Employer of Record overview](/lp/employer-of-record)core
- [Pricing, Zero FX Fixed](/pricing)core
- [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with the Employees Provident Fund (KWSP), PERKESO, and the Inland Revenue Board of Malaysia (LHDN) before relying on any specific figure. Worked examples in this guide are illustrative only and computed from statutory rates. They are not statutory figures. EPF employer rates depend on the employee's monthly salary relative to the RM5,000 threshold and the employee's age and residency status. The SOCSO wage ceiling was raised to RM6,000 per month from October 2024. The EIS employer contribution rate was not confirmed to full verification standard in this guide; verify the current rate with PERKESO before payroll setup. The Employment Act 1955 was materially amended in January 2023; confirm that your employment contracts reflect the updated entitlements.