Guide to Hiring Cybersecurity Talent in Malaysia

Payroll, Tax, and Compliance Explained

Malaysia is fast becoming a regional hub for cybersecurity talent in Southeast Asia. With its multilingual workforce, competitive salary ranges, and supportive regulatory framework, the country attracts global employers looking to scale operations in Asia. But hiring in Malaysia isn’t just about recruiting skilled professionals, it’s also about managing payroll, tax, and compliance correctly.

For international employers, especially those without a local entity, navigating Malaysia’s employment landscape can feel overwhelming. From employee contracts and tax deductions to mandatory contributions like EPF (Employees Provident Fund) and SOCSO (Social Security Organisation), compliance is a non-negotiable part of building a workforce.

This guide explains:

• How payroll works in Malaysia, including salary cycles and deductions
• The statutory contributions every employer must manage
• Key compliance requirements under Malaysian employment law
• Options for hiring without setting up a legal entity using Employer of Record (EOR) services

Whether you’re onboarding one cybersecurity analyst or building an entire digital security team, this guide will help you understand how to hire in Malaysia efficiently and compliantly.

Hiring Requirements in Malaysia – What Employers Need to Know

Legal Eligibility to Hire

To directly hire employees in Malaysia, a company must be registered with the Companies Commission of Malaysia (SSM). This means you’ll need to:

• Appoint at least one local director who is a resident of Malaysia.
  
• Register a Malaysian business address (cannot be a P.O. Box).
  
• Meet paid-up capital requirements (varies by business type, e.g., RM1 for private companies, higher for sectors like finance).

Also Read: Cloud Engineer Salary Guide 2025

Example: If a Singapore-based IT company wants to expand into Malaysia, they must first incorporate a Malaysian entity with SSM before they can legally hire staff.

Alternative: If you don’t want to go through the process of setting up a company, you can partner with an Employer of Record (EOR). With an EOR, the EOR company becomes the official employer on paper, handling compliance and payroll. You still manage the employee’s daily responsibilities.

• Example: A U.S. cybersecurity firm can quickly onboard a Malaysian analyst through an EOR without waiting months for entity registration.

Work Permits and Employment Passes

When hiring foreign professionals, such as overseas cybersecurity experts, you’ll need to apply for a valid work permit.

The most common is the Employment Pass (EP), issued by the Expatriate Services Division (ESD). To qualify, employers must meet criteria including:

• Role requirements: The job must require special skills, usually in technical or managerial positions.
  
• Minimum salary: RM5,000 per month (about USD 1,100).
  
• Qualifications: A degree or equivalent professional experience.

Example: If your company hires an Australian cybersecurity analyst for a Penetration Testing role with a salary of RM7,500/month, you’ll need to secure an Employment Pass from the ESD before they can begin work.

Statutory Registrations and Mandatory Contributions

All employers must register with the following bodies once they hire staff:

Statutory Body	Registration Requirement	Employer Contribution Rate
EPF (KWSP)	Mandatory for all employees	12%–13%
SOCSO	Mandatory for employees earning < RM5,000	~1.75%
EIS	Mandatory for all employees	0.2%
LHDN	Register for monthly tax deduction (PCB)	Based on salary bracket

Example: If you hire a local cybersecurity analyst with a salary of RM6,000/month:

• You must contribute RM780 (13%) to EPF.
• You will still contribute 0.2% to EIS.
• For SOCSO, since the salary is above RM5,000, it may not apply.
• Monthly tax deductions (PCB) must be submitted to LHDN.

Useful links:

• EPF official site
• SOCSO Assist Portal
• EIS details
• Inland Revenue Board Malaysia (LHDN)

Employment Contracts & Labour Law Compliance

All employees must be given a written employment contract, in line with the Employment Act 1955. The contract should cover:

• Salary and payment terms
• Working hours and overtime policies
• Annual leave and public holidays
• Termination and notice periods

Special protections apply to employees earning RM4,000 or less per month. These include:

• Maximum 48 working hours per week (e.g., 8 hours × 6 days).
• Overtime pay (usually 1.5× normal hourly rate).
• At least 11 paid public holidays annually.
• Annual leave: 8 days (1–2 years service), 12 days (2–5 years), 16 days (5+ years).

Example: If you hire a junior cybersecurity support staff at RM3,800/month, you must pay them overtime for work beyond 48 hours per week and provide at least 8 days of annual leave after their first year.

See Malaysia’s Employment Act.

Payroll, Taxation & Statutory Benefits in Malaysia

Employer Registration

Employers must register with EPF, SOCSO, EIS, and LHDN within 7 days of hiring the first employee. Missing deadlines results in fines and backdated contributions.

Also Read: BI Analyst Salary Guide 2025

Example: A foreign tech firm delayed SOCSO registration and was fined RM200 per employee monthly until contributions were regularized.

Monthly Statutory Contributions

Employers must calculate and remit contributions monthly:

• EPF: 12%–13% employer + 11% employee
• SOCSO: ~1.75% employer + 0.5% employee
• EIS: 0.2% employer + 0.2% employee

Employers in training-intensive sectors may also need to pay HRDF (Human Resources Development Fund) levies at 1% of payroll.

Income Tax Deduction at Source (PCB)

Malaysia uses a PAYE system. Employers must deduct income tax monthly (PCB) and remit it to LHDN by the 15th of the following month. The PCB calculator on LHDN’s site ensures accuracy.

Example: A company hiring cybersecurity analysts forgot to apply PCB deductions to bonuses, resulting in a tax audit and six-figure penalties.

Payroll Cycles and Payslip Requirements

• Salaries must be paid monthly, no later than the 7th day after the wage period ends.
• Payslips must clearly state gross pay, allowances, deductions, and net pay.
• Records must be retained for at least six years.

Payroll Setup and Ongoing Compliance in Malaysia

Setting up payroll in Malaysia is not just about paying salaries, it involves ensuring compliance with statutory deadlines, employee entitlements, and tax regulations. Employers must be diligent in meeting obligations to avoid fines, penalties, and legal disputes.

Key Deadlines

Employers are responsible for making timely submissions of statutory contributions and tax deductions. Missing deadlines can result in heavy penalties.

• EPF (Employees Provident Fund), SOCSO (Social Security), EIS (Employment Insurance System), and PCB (Monthly Tax Deduction):
  Contributions must be submitted by the 15th of the following month.
  Example: Salary paid in January requires EPF, SOCSO, EIS, and PCB submissions by February 15.
  
• Form E (Employer Declaration):
  Annual submission that summarizes all employees’ earnings and tax deductions. It must be filed with the Inland Revenue Board (LHDN) by March 31 each year.
  
• Form EA (Employee Statement):
  A statement of an employee’s annual income and deductions. Employers must issue this form to each employee for their personal tax filing, usually by end of February each year.

Staying on top of these deadlines ensures smooth audits and avoids disruptions during the tax season.

Also Read: How to Hire the Best BI Analysts in Malaysia

Payroll for Foreign Employees

Employers hiring foreign employees must also navigate tax and statutory rules that differ from those for Malaysian citizens.

• Non-resident employees (those who stay in Malaysia for less than 182 days in a calendar year) are taxed at a flat rate of 30% of their income, regardless of salary level.
  Example: If a cybersecurity consultant works in Malaysia for four months earning RM20,000, they will be taxed RM6,000 (30%), with no personal reliefs or deductions.
  
• Resident foreign employees (more than 182 days in Malaysia) are taxed progressively, similar to local employees, based on income brackets ranging from 0% to 30%.
  
• SOCSO and EIS contributions: Foreign employees are generally exempt, unless they are permanent residents. However, employers must still check if exemptions apply to their case.
  
• Work permit compliance: Payroll processing must align with the conditions stated in the employee’s work permit or Employment Pass, including role, salary, and duration. Non-compliance may result in penalties or revocation of permits.

Common Mistakes to Avoid

Even well-structured payroll systems can run into compliance problems if employers are not careful. Below are frequent mistakes and their consequences:

• Late EPF contributions:
  Failure to contribute on time can result in fines of up to RM10,000 or imprisonment for the employer.
  
• Incorrect PCB deductions:
  Miscalculating or under-deducting Monthly Tax Deductions may trigger penalties of up to 100% of the unpaid tax amount.
  
• Missing payslips:
  Malaysian labour law requires employers to provide payslips. Failure to do so may lead to employee disputes and findings of legal non-compliance.
  
• Misclassification of contractors:
  Treating employees as independent contractors to avoid contributions is a common error. If discovered, this leads to backdated tax and statutory contribution liabilities, plus potential penalties.

Example: A company classifies a full-time cybersecurity analyst as a freelancer to avoid EPF. During an audit, the employee’s work hours and control by the employer prove they should have been classified as an employee. The company becomes liable for unpaid EPF, SOCSO, and EIS contributions, along with penalties.

Also Read: Guide to Outsourcing BI Analytics Teams for Cost Efficiency

Payroll Compliance Checklist for Employers in Malaysia

Before Hiring

• Confirm company is registered with SSM and eligible to hire.
• Verify foreign employee work permits or Employment Pass approvals (if applicable).

Monthly Payroll Obligations

• Calculate and deduct EPF contributions (12–13%).
• Calculate and deduct SOCSO contributions (~1.75% for employees earning < RM5,000).
• Deduct EIS contributions (0.2%).
• Calculate and submit PCB (Monthly Tax Deduction) based on salary bracket.
• Issue itemized payslips to all employees.
• Submit EPF, SOCSO, EIS, and PCB payments to authorities by the 15th of the following month.

Annual Payroll Obligations

• File Form E (Employer Declaration) with LHDN by March 31.
• Provide Form EA (Employee Statement of Earnings) to all employees by end of February.
• Review and reconcile annual payroll records for accuracy.

Special Considerations for Foreign Employees

• Apply flat 30% tax rate for non-residents (less than 182 days in Malaysia).
• Apply progressive resident tax rates for employees residing more than 182 days.
• Confirm SOCSO/EIS exemptions (unless permanent resident).
• Ensure payroll matches Employment Pass conditions (role, salary, duration).

Avoiding Common Errors

• Double-check PCB deductions to prevent underpayment penalties.
• Never delay EPF contributions (risk of RM10,000 fine or imprisonment).
• Maintain proper records of payslips and contracts.
• Correctly classify employees vs. contractors to avoid backdated liabilities.

Summary and Best Practices for Hiring in Malaysia

Malaysia presents a strong opportunity for employers looking to hire, particularly in high-demand fields such as cybersecurity. The country offers a growing pool of skilled professionals at competitive salary levels compared to markets like Singapore or Australia. However, successful hiring in Malaysia goes beyond recruitment. Employers must also comply with statutory requirements, including payroll contributions, tax filings, and labour law obligations. Failure to do so can result in fines, penalties, or reputational risks.

By adopting structured practices and leveraging the right tools, companies can minimize compliance risks and focus on growing their business. Below are some best practices to follow when hiring in Malaysia.

Also Read: How to Hire and Manage a High-Performing Offshore Cloud Engineer Team in Malaysia

Best Practices for Employers

1. Use automation tools
Manual payroll processing often leads to calculation errors and missed deadlines. Employers should use payroll and HR software to automate statutory deductions such as EPF, SOCSO, EIS, and PCB. Automation also ensures payslips are generated accurately and in compliance with the Employment Act.

Example: A company with 20 employees can save hours each month by using cloud payroll software that automatically calculates EPF contributions and generates digital payslips.

2. Engage experts or Employer of Record (EOR) providers
For companies that do not have a legal entity in Malaysia, partnering with an EOR is the most efficient way to hire. The EOR becomes the official employer on record, taking care of payroll, contributions, and compliance while you manage the employee’s work. Even companies with a local entity may benefit from working with payroll experts who stay updated on the latest regulations.

Example: A U.S. cybersecurity firm can quickly hire Malaysian talent without setting up a local subsidiary by using an EOR provider.

3. Maintain a compliance calendar
Keeping track of deadlines is crucial. Employers must remember that statutory contributions are due by the 15th of the following month, while Form E and Form EA have strict annual deadlines. A compliance calendar or reminder system reduces the risk of missed filings.

Example: HR teams can set up recurring alerts to ensure EPF contributions are never delayed, preventing fines of up to RM10,000.

4. Train HR and payroll teams
Malaysia’s employment and tax regulations are updated regularly. Employers should invest in training HR staff to stay informed about changes to contribution rates, tax rules, or employment law. Training also helps prevent common mistakes such as misclassification of employees or errors in PCB deductions.

5. Retain records for at least six years
Under Malaysian law, employers must keep payroll and employment records for at least six years. These records may be requested during audits or inspections. Proper recordkeeping ensures transparency and reduces the risk of disputes with employees or authorities.

Example: Keeping digital archives of payslips, EPF receipts, and contracts ensures employers are prepared if LHDN conducts a compliance review.

Also Read: Employment Guide for Hiring Cloud Engineers in Malaysia

Why Consider Employer of Record (EOR) in Malaysia?

Establishing a legal entity in Malaysia can be a lengthy and resource-heavy process. It requires company incorporation with the Companies Commission of Malaysia (SSM), appointment of at least one local director, a registered Malaysian office address, and ongoing statutory compliance with payroll, tax, and labour law. For companies that are new to the market or those looking to operate leanly, these requirements may delay market entry and add unnecessary overhead costs.

An Employer of Record (EOR) solution provides an alternative path. With an EOR, you can hire local employees legally without having to set up your own company in Malaysia. The EOR acts as the official employer on paper, handling compliance, payroll, and statutory contributions, while you manage the employee’s role and day-to-day work. This approach allows you to stay compliant and reduce risk while focusing on business operations and growth.

How FastLaneRecruit’s EOR Service Helps

FastLaneRecruit specializes in helping global businesses hire top talent in Malaysia quickly and compliantly. Through our EOR service, we simplify the process of building and managing your workforce.

With FastLaneRecruit’s Employer of Record service in Malaysia, you can:

• Hire cybersecurity and tech professionals without incorporating a company
  FastLaneRecruit takes care of the legal and administrative framework, enabling you to start hiring immediately.
  Example: A U.S.-based cybersecurity firm can onboard a Malaysian penetration tester in weeks instead of waiting months to register a local entity.
  
• Stay compliant with statutory contributions and regulations
  We manage EPF (retirement savings), SOCSO (social security), EIS (employment insurance), and LHDN (tax deductions), ensuring every employee is covered and all employer obligations are met.
  
• Run payroll seamlessly
  FastLaneRecruit’s integrated payroll solutions ensure employees are paid accurately and on time, with payslips that meet Malaysia’s labour law requirements. Employers can focus on strategy while we manage the complexities of compliance.
  
• Scale teams up or down with flexibility
  Whether you are starting with a single employee or expanding a cybersecurity team, FastLaneRecruit allows you to scale your workforce without long-term commitments. If business needs change, downsizing or transitioning staff is simple and compliant.

By using FastLaneRecruit’s EOR service, businesses can confidently test the Malaysian market, tap into its pool of skilled professionals, and expand operations with minimal risk and investment.

Also Read: How to Successfully Outsource a Cloud Engineering Team

Setting Up a Local Entity vs. Using FastLaneRecruit’s EOR in Malaysia

Factor	Setting Up a Local Entity	FastLaneRecruit EOR Service
Time to Hire	Incorporation process may take 3–6 months before you can legally employ staff	Hire employees in a few weeks without waiting for entity setup
Legal Requirements	Requires SSM registration, appointment of a local director, registered Malaysian address, and paid-up capital	FastLaneRecruit acts as the legal employer, no incorporation or local director required
Compliance	Employer responsible for managing EPF, SOCSO, EIS, LHDN, and labour law compliance	FastLaneRecruit ensures full compliance with statutory contributions and regulations
Payroll Management	Company must establish payroll systems, calculate deductions, and issue payslips	Payroll fully managed by FastLaneRecruit, with accurate payslips and timely contributions
Cost and Overhead	High setup and maintenance costs, including incorporation fees, audits, and tax filings	Low upfront cost, pay only for employees hired through FastLaneRecruit
Flexibility	Scaling up or down requires formal procedures and may incur additional costs	Flexible hiring—easily expand or downsize teams based on business needs
Risk Exposure	Higher exposure to compliance errors, penalties, and local employment disputes	Reduced risk as FastLaneRecruit takes responsibility for legal employer obligations

Conclusion

Cybersecurity analysts continue to play a vital role in protecting businesses against evolving digital threats. Salary trends in 2025 reflect not only the increasing demand for talent but also the regional differences shaped by market maturity, cost of living, and government initiatives. For HR and payroll professionals, understanding these variations is key to crafting competitive compensation packages, attracting top talent, and aligning workforce planning with business goals.

Ready to hire top cybersecurity talent in Malaysia without the hassle?

Looking to hire cybersecurity experts across Malaysia? FastLaneRecruit helps businesses streamline payroll, manage cross-border compliance, and attract the right talent with ease. Get in touch with our team today to future-proof your workforce strategy. 

Speak to FastLaneRecruit’s EOR experts today and get your team set up in days, not months.