As an economic powerhouse for raw goods, Malaysia is an excellent place to expand if you’re looking to grow your presence in Asia. Although the country’s employment laws may seem complicated, you’ll notice many similarities between Malaysia and other countries.
One area you may need help with is setting up your Malaysia payroll. G-P has the experience you need to stay compliant and grow in a new country.
Taxation rules in Malaysia
Malaysia has a comprehensive tax system for both employees and employers. Malaysia residents have to pay income tax at a rate between 0% and 30% on their gross worldwide income. Employees and employers also contribute to the Malaysia social security system (SOCSO), which helps in the event of death, disability, or illness. The amount contributed depends on the employee’s monthly earnings, while employers contribute 1.75% of their monthly payroll.
The Employment Provident Fund (EPF) deals with pension funds and also serves as a savings account for employees to withdraw money for everything from buying a home to medical reasons. Workers contribute 11% of their gross worldwide income to the EPF. Employers contribute 12% of their employees’ gross monthly wages if the employee earns above MYR 5,000 a month and 13% for employees who make less than MYR 5,000 a month.
Malaysia payroll options for companies
There are 3 main Malaysia payroll options:
- Internal payroll: Businesses committed to Malaysia may have the time and resources to run an internal payroll.
- Malaysia payroll outsourcing: Other companies may not have the time or resources to run their own payroll. Outsourcing with a local company in Malaysia ensures you don’t have to worry about payroll. However, you’ll still be liable for any compliance mistakes.
- Employer of Record: The easiest way to run a Malaysia payroll and stay compliant is partnering with an Employer of Record like G-P. With us, you can rest assured that all employees will be paid on time, freeing you to focus on other important aspects of your business.
How to establish a payroll in Malaysia
The first step in setting up Malaysia payroll is registering your company at the Companies Commission of Malaysia to reserve a company name. After you go through the setup process, you’ll need to open an in-country bank account to pay employees. Then you’ll have to register for income tax, PAYE, the EPF, and the SOCSO.
Entitlement/termination terms
It’s important to include clear entitlement and termination terms in an employment contract. Probationary periods ranging from 3 to 6 months are typical in Malaysia, so you’ll need to make sure you follow any additional terms that apply to probationary periods and termination procedures.
Streamline global payroll management with G-P.
G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.