Last updated in April 2025.
Payslip Global Payroll Control Platform automates pre-payroll through to post-payroll delivering local flexibility within global standardization.
Malaysia is a Southeast Asian country with a rapidly developing economy, known for its robust manufacturing, services, and export sectors. It offers a competitive corporate tax rate, a structured social security system (EPF & SOCSO), and progressive personal income tax, making it an attractive destination for global businesses managing payroll operations.
Payroll in Malaysia - 2025 Updates
In 2025, Malaysia continues to offer attractive tax incentives for key industries like manufacturing, pharmaceuticals, and technology, supporting business growth and investment. The minimum wage remains at MYR 1,500 per month, and employers must comply with updated contribution rates to EPF (up to 13%) and SOCSO. Payroll is processed monthly, and foreign workers are taxed at a flat 30% unless tax residency status is met.
Malaysia Payroll - Basic Facts
Companies must register for tax, EPF, and SOCSO when hiring employees. Payroll is typically processed monthly, and wages must be paid by the 7th of each month. The Malaysian tax year follows the calendar year, and while there are no specific payroll data protection laws, companies are expected to uphold strong internal data security practices. Foreign workers need valid work permits and are generally not covered by SOCSO but are subject to most other labor regulations.
Tax and Social Security Considerations
Corporate Income Tax (CIT)
- Standard Rate: 24% for both resident and non-resident companies earning income within Malaysia.
- Small and Medium Enterprises (SMEs):
- 15% on the first RM150,000 of chargeable income.
- 17% on the next RM450,000.
- 24% on the remaining balance.
- Global Minimum Tax: Malaysia plans to implement the OECD's global minimum corporate tax rate of 15% for multinational companies with annual global turnover exceeding €750 million, starting in 2025.
Personal Income Tax (PIT)
- Resident Individuals: Subject to progressive tax rates ranging from 0% to 30%, depending on income brackets.
- Non-Residents: Taxed at a flat rate of 30% on all income earned in Malaysia.
- Dividend Income: Effective from the year of assessment 2025, a 2% tax is imposed on dividend income exceeding RM100,000 received by individual shareholders, including non-residents. This tax does not apply to distributions from the Employees Provident Fund (EPF), Amanah Saham National Bumiputera (ASNB), Lembaga Tabung Angkatan Tentera (LTAT), or unit trusts.
Social Security Contributions
- Employees' Provident Fund (EPF):
- Employer Contribution: 13% for employees earning RM5,000 or less; 12% for those earning above RM5,000.
- Employee Contribution: 11%.
- Social Security Organization (SOCSO/PERKESO):
- Wage Ceiling: Effective 1 October 2024, the wage ceiling for SOCSO contributions increased from RM5,000 to RM6,000 per month.
Other Types of Taxes in Malaysia:
In addition to personal and corporate income taxes, Malaysia imposes various other taxes:
Sales & Service Tax (SST)
- Sales Tax: 5% or 10% depending on goods. Applies to locally manufactured and imported goods
- Service Tax: 8% (increased from 6% as of March 2024). Applies to taxable services like hospitality, insurance, professional services, and telecommunications. Online services by foreign providers (e.g., Netflix, Zoom) are also subject to service tax.
Real Property Gains Tax (RPGT)
- Applies to profits from the sale of real property in Malaysia.
- Malaysian citizens & permanent residents:
- 0% if property is held more than 5 years
- 30% if sold within 3 years
- Companies & non-residents:
- 10% after 5 years
- Up to 30% if sold earlier
Stamp Duty
- Imposed on certain legal documents, such as property transfers, lease agreements, and share transfers.
- Property transfers: 1% to 4% based on property value (tiered)
- Share transfers: 0.3% of the transaction value
Digital Tax
A 6% digital service tax is levied on foreign digital service providers (e.g., Google, Spotify) offering services to Malaysian consumers.
Social Security Considerations
1. Employees’ Provident Fund (EPF) – Retirement Savings
- Employee Contribution: 11% of monthly salary (mandatory)
- Employer Contribution:
- 13% for employees earning ≤ RM5,000/month
- 12% for employees earning > RM5,000/month
2. Social Security Organisation (SOCSO) – Employment Injury & Invalidity Insurance: Covers medical benefits, disability, survivors’ benefits, and more.
- Employment Injury + Invalidity Scheme:
- Employee: 0.5% of monthly wages
- Employer: 1.75% of monthly wages
- Employment Insurance System (EIS):
- Employee: 0.2%
- Employer: 0.2%
Helps workers who lose jobs involuntarily (e.g., layoffs).
3. Zakat (Muslim employees only): Optional religious tax deducted from salary upon request. Can be used as a rebate in income tax.
4. PTPTN Repayments (Student Loans): Employers may facilitate salary deductions for repayment of government education loans.
Compensation and Benefits
Minimum wage
- Effective 1 February 2025: The national minimum wage increases to RM1,700 per month across all sectors.
- For employers with fewer than 5 employees: A grace period is provided, with the new wage rate becoming effective from 1 August 2025.
Working hours
The standard workweek is maximum of 45 hours per week, typically structured as 8 hours per day over 5 or 6 days. Many employers adopt a 40-hour workweek, operating from 9:00 AM to 5:00 PM, Monday through Friday.
Overtime:
- On Regular Working Days: Overtime is compensated at 1.5 times the employee's hourly rate for hours exceeding the standard daily or weekly limits.
- On Rest Days: Overtime is compensated at 2 times the hourly rate.
- On Public Holidays: Overtime is compensated at 3 times the hourly rate.
Public Holidays
Employees are entitled to paid leave on 11 gazetted public holidays, including:
- Labour Day – 1 May 2025
- Wesak Day – 12 May 2025
- Malaysia Day – 16 September 2025
- Deepavali – 20 October 2025 (except in Sarawak)
- Christmas Day – 25 December 2025
Additional holidays may be observed depending on the state.
Leave
1. Annual Leave: Employees in Malaysia are entitled to paid annual leave based on their length of service with the same employer:
- Less than 2 years: minimum of 8 days per year
- 2 to 5 years: minimum of 12 days per year
- More than 5 years: minimum of 16 days per year
2. Sick Leave: Paid sick leave entitlements (where hospitalization is not required) are as follows:
- Less than 2 years: 14 days per year
- 2 to 5 years: 18 days per year
- More than 5 years: 22 days per year
Where hospitalization is necessary, employees are entitled to up to 60 days of sick leave per year (inclusive of the above entitlements).
3. Maternity Leave: Female employees are entitled to 98 consecutive days of paid maternity leave. This applies to all female employees who have been employed for at least 90 days before the expected confinement.
4. Paternity Leave: As of 2023, male employees are entitled to 7 consecutive days of paid paternity leave per birth, applicable for up to 5 births during the employment period.
Foreign Workers in Malaysia
- Taxation: Non-resident foreign workers are taxed at a flat rate of 30% on income earned in Malaysia.
- Social Security: Generally not eligible for SOCSO coverage.
- Visas:
- Single Entry Visa: Valid for 3 months, primarily for social visits.
- Multiple Entry Visa: Valid for 3–12 months, primarily for business or government matters.
For more information about how our Global Payroll Control Platform integrates with local payroll providers in Malaysia, contact us today.