Malaysia’s Government is accelerating the shift towards digital processes, introducing reforms that affect employment compliance and foreign worker welfare contributions. Employers and HR teams need to focus on two key initiatives: the online employment contract stamping process and mandatory Employees Provident Fund (EPF/KWSP) registration for foreign employees.
Legal Basis and Scope
Under the Stamp Act 1949, all written employment contracts, including offers, addendums, fixed-term agreements, and contracts for foreign workers, are considered instruments and are subject to stamp duty. The employer, as the first executing party, is responsible for stamping and paying the associated duty.
Timing, Exemptions and Penalties
Stamp duty requirements depend on the date of execution:
|
Period |
Stamp Duty |
Penalty |
| Before 1 January 2025 | Not required | Waived |
| 1 January to 31 December 2025 | RM 10 | Waived if stamped by year-end |
| From 1 January 2026 onwards | RM 10 | 31 days to 3 months late: RM 50 or 10 per cent; more than 3 months late: RM 100 or 20 per cent |
The December 2025 grace period allows employers to catch up on stamping without penalty, simplifying compliance before full enforcement in 2026.
Contracts must first be signed and then stamped within 30 days using the Lembaga Hasil Dalam Negeri Malaysia (LHDN) STAMPS (Stamping of Employment Contracts System) online platform, which calculates the RM 10 duty and issues a digital certificate. Employers must retain a copy for record keeping, and employees may obtain a copy at their own cost. Late stamping triggers automatic system flags, although appeals are possible for certain 2025 handovers.
From 2025, the STAMPS platform is fully operational and part of an active audit framework. Full enforcement with penalties begins in 2026. All foreign worker contracts must be stamped without exemption.
Employers should audit contracts from 2022 to 2025 and use the 2025 amnesty to catch up. Onboarding procedures should incorporate stamping within a 30-day deadline supported by automated reminders. HR and hiring managers must be trained on digital stamping procedures, penalties, and retention requirements. Stamped contracts should be retained for seven years, in line with the Employment Act.
Unstamped contracts cannot be used as evidence in court. National audits by LHDN began in 2025.
EPF Registration for Malaysian and Permanent Resident Employees
Employers must register Malaysian and permanent resident (PR) employees with the Employees Provident Fund (EPF/KWSP) within seven days of hire. Registration can be completed through i-Akaun, Form A (auto-registration), or Form 3 via EPF counters or mail. An active i-Akaun account with a reference number, company documentation including SSM Form 49, director MyKad, and business registration certificate are required.
Foreign Worker EPF Contributions from 1 October 2025
Foreign employees with valid work passes, excluding domestic helpers, are now subject to mandatory EPF contributions. Both the employer and the employee contribute 2 per cent each. Payments are due by the 15th of the month following payment of salaries. Late or non-payment may result in fines, legal action, or restrictions on company directors.
Registration and Compliance Steps
Employers must register foreign employees through i-Akaun using the employee’s passport and work permit. Employees activate i-Akaun using a passport scan and selfie verification. Contributions are tracked monthly using e-Caruman, and employers should monitor work pass expiry dates to maintain compliance.
HR Process Flow
Employers should register the company via Form KWSP 1 and activate i-Akaun, then register Malaysian and PR employees within seven days. Foreign employees must be registered at the start of employment, with contributions applied from 1 October 2025. Monthly payments are monitored through e-Caruman, and all records should be maintained to avoid penalties.
Best Practices
Onboarding checklists should clearly outline EPF registration steps for both Malaysian and foreign employees. Automated reminders can support seven-day registration and 15th-monthly contribution deadlines. Pre-recorded guides or PDFs can help employees with setup and activation, while regular monitoring of foreign work pass expiry ensures uninterrupted compliance.
For further detailed guidance on payroll, employment law and compliance in Malaysia, visit our Malaysia Global Insights on the activpayroll website.
For more information on Malaysia’s digital employment compliance initiatives and foreign worker EPF registration, please get in touch. Complete our Contact Us form and a member of our expert team will be happy to assist with your queries.