With a dynamic economy, growing sectors, highly skilled workers, and impressive cost savings, Malaysia is a hotspot for global business expansion. This is no surprise as the country has maintained its place as the third top country in the 2021 and 2023 Global Services Location Index (GSLI).
Despite favorable conditions, hiring international employees the traditional way can be logistically challenging. This includes setting up a subsidiary, registering the company, and complying with local laws can be burdensome.
Luckily, with an employer of record Malaysia, these tasks can be handled in an efficient and compliant manner. They act as your official employer for the Malaysian workforce, managing HR and payroll processes and ensuring country-specific tax and legal compliance.
Benefits of Using Employer of Record Malaysia
By understanding the benefits of an employer of record Malaysia, you can see what you stand to gain from them and determine if you should hire them.
Hire local talent
With an employer of record Malaysia, you can access a global talent pool that aligns with your business needs.
The EOR Malaysia writes and manages the employment contracts and handles the foreign worker recruitment process in Malaysia, removing the need for establishing a local entity in Malaysia and bringing you closer to your dream of global expansion.
Compliance
When you pass on the logistics of hiring Malaysian employees to an EOR, Malaysia holds them responsible for complying with complex Malaysian employment laws.
Think drafting contracts, employment conditions, termination procedures, immigration laws and regulations, and payroll and taxes (like filing the income tax returns with the IRBM by a specific deadline).
Risk mitigation
You don’t have to worry about breaching international labor laws when you hire an employer of record. Their knowledge of Malaysian law enables them to evade penalties, fines, and legal disputes.
Your Malaysian employees also enjoy fewer risks, working under a legal entity. They feel confident that the employer of record Malaysia provider will withhold the right taxes, plan insurance policies compliantly, issue employee benefits as required by the law, and compensate workers in cases of worksite accidents.
Cost effective
An employer of record Malaysia offers flexible, scalable, and tailored employment solutions. With this, you get access to the Malaysian labor market while keeping costs low. Plus, an EOR Malaysia helps you avoid unnecessary and costly penalties with legal compliance.
Focus on core business
By hiring an employer of record Malaysia, you outsource time-consuming administrative tasks such as onboarding, training, and payroll management.
With the EOR Malaysia handling these responsibilities and providing resources for the employees they recruit, your company can expand its workforce without being burdened by paperwork. This allows you to focus on your core business operations while benefiting from the EOR’s continuous HR support.
How does Malaysia EOR work?
To understand how the arrangement of an employer of record Malaysia works, we’ll go over the process so that you can make an informed decision.
1. Hiring Process
An employer of record Malaysia streamlines the hiring process by acting as the legal employer for the employees you wish to hire. The EOR Malaysia manages all administrative and compliance-related tasks, including recruitment, onboarding, and contract management, while ensuring that Malaysia labor laws and regulations are met.
Once the candidates are selected, the EOR Malaysia handles payroll, taxes, benefits, and statutory contributions, simplifying the process for businesses. This allows companies to quickly expand their workforce in Malaysia without needing to establish a local entity, while maintaining full operational control over their employees’ day-to-day tasks.
Learn more: Global Hiring Guide: Malaysia
2. Employment contract
When you hire an employer of record, Malaysia requires a written employment contract, which they draft. They ensure its terms comply with Malaysian labor laws, which vary according to the types of employment contract in Malaysia.
After all, one employment type in Malaysia might have different working hours, conditions, or benefits regulations from another, and the EOR must mind that. The contract must comply with all its regulations concerning:
- Job titles and descriptions
- Compensation and benefits
- Start date and work locations
- Termination
- Resignation
- Confidentiality agreements
- Death and disability
- Dispute resolution policies
- Intellectual property ownership
- Non-compete clauses
3. Payroll and Benefits
With an employer of record, Malaysia businesses delegate them to handle payroll and benefits, allowing them to run the monthly payroll and provide local and global benefits. To illustrate, they add allowances to basic salaries, withhold salary contributions, and issue payslips.
As done by the employer of record, Malaysia mandates certain mandatory benefits to the employees, which are the Employees Provident Fund (EPF), Social Security Organization (SOCSO), and Employment Insurance System (EIS). Optional ones include health insurance and voluntary time off.
4. Compliance
The employer of record complies with Malaysian labor laws (like the Employment Act, which is the main law overseeing employment in Malaysia, and the Industrial Relations, which regulates the relations between employers and employees and trade unions in Malaysia).
Additionally, the EOR ensures compliance when it comes to local taxes, benefits regulations, and termination procedures.
5. HR administration
An employer of record provides local, continuous HR support and conducts global HR processes for outsourced Malaysian hires, including recruitment, onboarding, and performance management.
Things to Consider When Choosing EOR Malaysia
When it’s time to pick an employer of record Malaysia, you can make the most out of EOR services and boost employee satisfaction with the following features:
Local expertise
To an employer of record, Malaysia laws and regulations should be known like the back of their hands. This way, they can follow them in their implementation of HR and payroll processes, immigration procedures, benefits administration, and tax filing.
Also, EORs should typically have established networks that can connect you with Malaysian talents. Not to mention, they’re expected to be familiar with local customs, culture, and business practices, which help them navigate cultural nuances.
Compliance track record
How is the EOR’s compliance track record looking? Are they responsive enough to keep you updated about their HR and payroll duties, experienced enough to run their services smoothly, and transparent about their processes? Verify their social proof, and ensure that there aren’t legal issues, compliance breaches, or negative reviews about them.
By confirming that their track record is clean, you can feel confident handing over your business’s compliance liability.
Service offerings
What range of services is available by the EOR in question? Each business has its specific EOR needs, so how well does each provider serve them? Think payroll, fringe benefits management, compliance requirements, HR integrations, streamlined databases for maintaining employee records, and financial packages.
Technology platform
Ideally, you should seek an employer of record that provides access to remote management tools and global payroll solutions, which adhere to local regulations and payroll deadlines.
This software may help with employee onboarding (like signing local employment contracts), payroll processing, and benefits administration. It may alert you to local regulation updates and ensure that your business remains fully compliant and error-free.
References and testimonials
To verify an employer of record Malaysia track record, you look at references, reviews, and testimonials. Looking at current and former clients’ reviews, ratings, and testimonials on unbiased sites tells you how satisfied they are with the EOR Malaysia services.
Challenges and Risks for Malaysia Employer of Record
Understanding the challenges for an employer of record Malaysia enables you to optimize the process, anticipate potential hurdles, and prepare for them so that hiring an EOR only benefits your business.
Complex Malaysia employment law
Malaysian labor laws and regulations are certainly complex. Mostly falling under the Employment Act of 1955, this legislation regulates payroll, tax filing, working hours, working arrangements, working conditions, time off, benefits, and overtime.
The complexity within any piece of legislation comes from minding different factors, such as economic growth, employee well-being, living costs, and social issues. It attempts to be fair to all employees while minding their different social, gender, religious, and economic backgrounds.
Along with that, it does so while ensuring that the rights of employees don’t present a burden on employers to the point where it impacts economic growth negatively.
As an employer, you don’t want to spend more time maneuvering the complexities of Malaysian employment law than on your business operations, which is where an employer of record Malaysia comes in.
Employer of record Malaysia selection
There is no shortage of EOR services, and you may find it challenging to pick the right one for your needs.
For one, you need to look for transparent, responsive, and flexible services. Additionally, you want to define your goals clearly, evaluate the EOR service provider’s global presence and level of expertise, assess the suitability of their offerings for your needs, determine if they’re right for your budget, and look into their software integrations.
After testing several EOR services based on these factors, you can select the ideal one for you.
Protecting employee data
When you hire an employer of record Malaysia, you’re relying on a third-party provider, so there are risks related to employee data protection.
An employer of record must protect employee data by complying with the Personal Data Protection Act 2010 and processing data security. For that, they need robust data protection and secure technology for the protection of corporate information and intellectual property.
Frequently Asked Questions for Employer of Record Malaysia
1. What is an EOR?
An employer of record is the registered employer of the workers you’re recruiting, taking on the legal responsibility of their hiring, recruitment, salaries, management, and HR processes and leaving you to oversee the day-to-day business operations.
2. How long does it take to hire an employee through an employer of record Malaysia?
With an employer of record, Malaysia hires can enter your workforce within days (compared to four to 12 weeks otherwise). This is due to the fact that an EOR has an entity in Malaysia and an on-call network of potential hires.
3. What are the costs associated with using an employer of record Malaysia?
When you hire an EOR, you pay a setup fee, deposit, ongoing EOR service fee (on a typically monthly basis), and FX fee (to cover currency exchanges if you’re paying in a different currency). Although the EOR administers them, you need to cover the cost of hiring foreign workers in Malaysia, their salaries, contributions, and supplementary employee benefits.
4. Can I terminate an employee through EOR Malaysia?
Yes, you can terminate employment agreements via an employee of record Malaysia. They follow the proper termination procedures, taking care of the payment in lieu, minding notice periods, severance pays, and exit formalities, and keeping records of the termination process.
5. Does an employer of record Malaysia provide benefits to employees?
Yes, an employer of record administers and provides local and global benefits to employees. Benefits include mandatory and optional benefits, the latter making your business competitive and attracting top hires.
6. Can an employer of record Malaysia help with visa and work permit applications?
Yes, an employer of record can help with obtaining work visas and permits for your Malaysian employees. They’re well-versed in local regulations, which facilitates compliance for these employees’ stays.
Maximize Your Business Potential with Employer of Record Malaysia
An employer of record Malaysia can be a valuable asset for businesses looking to expand into the Indonesian market. By partnering with a reliable and reputable EOR, you can streamline your HR processes, mitigate risks, access global top talents, reduce costs, and enhance your company’s reputation in Indonesia.
Omni makes it easy to support employees across multiple countries, time zones, and currencies.
Our centralized document management solution makes gathering the necessary data required to apply for employment visas and other country-specific initiatives seamlessly and timely. With customized workflows and automated reminders, HR can help empower employees to manage the deadlines and documentation requirements for applications. And centralized documents and real-time data makes it easy for employees to access salary information and produce reports and documents necessary for verification.
Omni offers a comprehensive payroll solution tailored to Malaysia specific requirements. With features like support for Malaysian ringgit and automated tax calculations, Omni can help HR teams simplify their payroll processing and ensure compliance with ease. Not only that, with secure document storage and straightforward data input, you can quickly access and submit essential information required for working in Malaysia.
Our dedicated local team of experts provides personalized support and ensures your business remains compliant with Malaysia’s labor laws. Book a demo with our team to learn more about how Omni can help maximize your business potential.
