Contract without  EPF,  Socso,  EIS - not completely illegal.  It depends on the terms and conditions stated in the contract. It is like freelancing. You can have your choice of forming a sole proprietor to lower your tax or just operate like an individual. For the party that handle your contract,  they reduce their payroll workload because they don't have to process your PCB and statutory contribution. The pro - you get 100% of your wage and file your tax return as business income. The con - the rest of the forum members will tell you.  However,  if your wage is less than 10,000 a month,  then it is no point to operate as business or freelance. Go through the EPF,  Socso,  EIS. At least,  after one year,  if your contract is not renewed, you can apply for the EIS benefit.

if the salary+epf is high enough, its ok.

then is not worth

employer contribution should be 12-13%
your effective increment is only 5%

If your wage is not subjected to EPF,  Socso and EIS,  legally you are not an employee and hence there will not be any PCB deduction. 

The party that signs the contract with you will not give EA form too.  Hence,  if your income is more than 3k per month,  you need to declare your income and fill in your wage as business income.

To leave a permanent job for a contract with merely 10% increment, frankly,  this may not be a good idea.  Wait for better opportunities.

To leave a permanent job for a contract with merely 10% increment, frankly,  this may not be a good idea.  Wait for better opportunities.

Whenever you change a job, look for minimum 15% to 20% increment. Whenever you leave a perm for contractor, take a risk premium of additional 15%. So, if I were you, without 30% increment for this one year contract, I will wait for next opportunity. Of course, if you are jobless, I would advise you to pick up.

Staying in a company that is slow in growth - does not necessarily bad idea. Sometimes, it is an opportunity for you to observe and learn other perspective you have not thought of.