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Malaysia Employer of Record

Malaysia Employer of Record (EOR)

Malaysia Employer of Record
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Key Takeaways

  • A Malaysia Employer of Record (EOR) enables you to hire and onboard employees quickly and more cost-effectively than setting up a local entity. 
  • On average hiring through a Malaysia EOR takes 2 weeks vs 3 to 6 months to set up your own subsidiary there. . 
  • Our pick for the best Malaysia EORs in 2024 are Horizons, Multiplier, GP Outsourcing Asia, Deel and Remote. 

What Is a Malaysia Employer of Record?

In Malaysia, an Employer of Record (EOR) is a third-party organization that serves as the legal employer for workers on behalf of other companies. The EOR handles various employment-related responsibilities, including payroll, benefits administration, tax compliance, and statutory requirements.

When a company wants to expand its operations into Malaysia but doesn’t want to establish a legal entity or deal with the complexities of local employment regulations, it can engage the services of an Employer of Record. The EOR becomes the official employer of the company’s workers in Malaysia, while the company retains full operational control and management of its employees.

The main purpose of an Employer of Record is to provide a compliant and efficient employment solution for companies operating in foreign jurisdictions. They ensure that the company’s workers are hired, onboarded, and managed per local labor laws and regulations. This includes handling employment contracts, work permits, social security contributions, and other legal requirements.

By partnering with an Employer of Record, companies can focus on their core business activities while offloading the administrative burdens and legal complexities associated with hiring employees in Malaysia. It offers flexibility, scalability, and cost-efficiency for businesses looking to expand their global presence without establishing a physical presence in every country.

It’s important to note that employment regulations and practices can vary between countries, so it’s advisable to consult with local experts or legal professionals to understand the specific requirements and implications of engaging an Employer of Record in Malaysia.

Top 5 Malaysia EORs

Here are the top 5 EORs operating in Malayisa:

  1. Horizons is an international EOR with extensive experience in providing HR solutions in Malaysia. Their services encompass recruitment, payroll, compliance and visa support alongside PEO and EOR solutions. For the strength of its platform and local expertise, Horizons is our pick for best Malaysia EOR. 

  2. Target is a global Employer of Record with a strong presence in Malaysia. Alongside Malaysia EOR services, Target also supports global companies with recruitment, HR outsourcing, and business process outsourcing in Malaysia. 

  3. GP Outsourcing Asia are Malaysia outsourcing and business expansion specialists offering EOR and payroll solutions in Malaysia with deep knowledge of the local marketplace and local legal rules. In addition to HR and payroll services, they also provide a full range of Malaysia business process outsourcing (BPO) solutions.

  4. Deel is a global HR platform that simplifies the process of hiring and managing teams in Malaysia. They handle everything from HR functions to payroll and benefits administration. 

  5. Remote offers global employment solutions, including full EOR and PEO solutions in Malaysia. The Remote platform enables businesses to manage international teams, taking care of legal compliance, payroll, and benefits.

What Services Does a Malaysia Employer of Record Provide?

A Malaysia Employer of Record (EOR) provides a range of services to assist companies in employing workers and ensuring compliance with local labor laws and regulations. The specific services offered may vary depending on the EOR provider, but generally, they include:

  1. Payroll management: The EOR handles payroll administration, including calculating and processing employee wages, tax deductions, social security contributions, and other statutory payments. They ensure timely and accurate payment disbursement to employees.
  2. Employee benefits administration: The EOR manages employee benefits such as healthcare coverage, retirement plans, insurance, and other perks or allowances as required by local regulations or company policies.
  3. Employment contracts and documentation: The EOR prepares and manages employment contracts, offer letters, and other necessary documentation required for hiring employees in compliance with local laws.
  4. Onboarding and offboarding: The EOR facilitates the onboarding process for new employees, including conducting background checks, verifying credentials, and coordinating orientation programs. Similarly, they manage the offboarding process when an employee leaves the company.
  5. Compliance with labor laws: The EOR ensures compliance with Malaysian labor laws and regulations. They stay up-to-date with changes in legislation, employment standards, and statutory requirements, relieving the company from the burden of keeping track of these updates.
  6. Statutory registrations and filings: The EOR assists in registering the company with relevant authorities, obtaining necessary permits, and making required filings related to employment, taxation, social security, and other statutory obligations.
  7. HR and personnel management: The EOR may provide HR support, including handling employee inquiries, managing leave and attendance records, coordinating performance evaluations, and addressing disciplinary matters following local regulations.
  8. Work permit and visa processing: If the company has expatriate employees, the EOR can assist with work permit applications, visa processing, and compliance with immigration regulations.
  9. Employee relations and dispute resolution: The EOR may act as a point of contact for employee relations matters, handling grievances, disputes, or conflicts following local labor laws and company policies.
  10. Reporting and analytics: The EOR may provide regular reports on employment-related metrics, such as headcount, turnover, and compliance data, to assist the company in monitoring and analyzing its workforce.

It’s important to note that the specific services provided by a Malaysia Employer of Record may vary based on the agreement and scope of engagement with the company. It’s advisable to discuss the specific requirements and services with potential EOR providers to ensure they align with the company’s needs.

How to Engage a Malaysia Employer of Record

To engage a Malaysia Employer of Record (EOR), you can follow these general steps:

  1. Research and identify potential EOR providers: Conduct thorough research to identify reputable EOR providers in Malaysia. Look for providers with experience in the Malaysian market, a strong understanding of local labor laws, and a track record of reliable service.
  2. Assess your business needs: Determine your specific requirements for employing workers in Malaysia. Consider factors such as the number of employees, desired level of service, industry-specific compliance requirements, and budgetary considerations. This will help you evaluate and select the most suitable EOR provider for your needs.
  3. Request proposals or quotes: Reach out to the shortlisted EOR providers and request detailed proposals or quotes. Provide them with information about your business, the number of employees you plan to hire, the duration of engagement, and any specific services or support you require.
  4. Evaluate proposals and compare providers: Review the proposals received from different EOR providers. Assess factors such as the range of services offered, pricing structure, contractual terms, reputation, and client testimonials. This evaluation process will help you select the provider that best aligns with your needs.
  5. Conduct due diligence: Before finalizing an agreement, perform due diligence on the selected EOR provider. Verify their credentials, licenses, and certifications. You may also want to check references or seek recommendations from other companies that have engaged their services.
  6. Negotiate and finalize the agreement: Once you have chosen an EOR provider, engage in negotiations to finalize the agreement. Pay attention to key terms such as the scope of services, service-level agreements, pricing, termination clauses, confidentiality, and data security.
  7. Sign the agreement: When both parties are satisfied with the terms, sign the agreement with the EOR provider. Ensure that all agreed-upon terms and conditions are clearly documented in the contract.
  8. Provide necessary information: Collaborate with the EOR provider and provide them with the required information about your company, employees, and any specific employment details. This includes employee data, payroll information, benefits preferences, and relevant legal documentation.
  9. Commence engagement: Once the necessary information has been provided, the EOR will initiate the onboarding process for your employees. They will handle payroll, benefits administration, and other employment-related tasks as agreed upon in the contract.

It’s important to note that engaging an Employer of Record involves a legal and business relationship. It’s advisable to seek advice from legal professionals or consult with experts familiar with local labor laws to ensure compliance and mitigate any risks associated with employing workers in Malaysia.

What Are the Benefits of a Malaysia Employer of Record?

Engaging a Malaysia Employer of Record (EOR) offers several benefits for companies looking to expand their operations or employ workers in Malaysia. Here are some key advantages:

  1. Compliance with local labor laws: Malaysia has specific labor laws and regulations that companies must comply with when employing workers. EORs have in-depth knowledge of these laws and ensure that your employment practices align with the local legal requirements. This helps you mitigate compliance risks and avoid penalties or legal issues.
  2. Speed and efficiency: Partnering with an EOR enables you to establish a presence in Malaysia quickly without the need for setting up a legal entity or navigating complex administrative procedures. The EOR already has the necessary infrastructure and processes in place to efficiently manage employment-related tasks such as payroll, benefits administration, and statutory filings.
  3. Risk management: Employment-related risks, such as non-compliance with labor laws, tax regulations, or incorrect payroll calculations, can have serious consequences for businesses. By engaging an EOR, you transfer a significant portion of these risks to the EOR, as they take on the responsibility for ensuring compliance and managing associated risks.
  4. Cost-effectiveness: Establishing a legal entity in a foreign country can be expensive and time-consuming. Engaging an EOR eliminates the need for such investments and allows you to focus your resources on core business activities. EORs typically operate on a fee structure that is often more cost-effective than establishing and maintaining a legal entity.
  5. Local expertise and support: EORs have local knowledge and expertise in Malaysian employment practices, labor laws, and regulations. They can provide guidance and support on matters such as hiring practices, employment contracts, work permits, and benefits administration. This local expertise helps you navigate the complexities of the Malaysian business environment.
  6. Flexibility and scalability: An EOR enables you to scale your workforce up or down quickly, depending on your business needs. They can handle fluctuations in headcount, manage temporary workers, and adapt to changing labor market conditions, providing you with the flexibility to respond to market demands efficiently.
  7. Focus on core business activities: By offloading employment-related administrative tasks to an EOR, you can concentrate on your core business operations and strategic initiatives. This allows you to allocate your time and resources more effectively, enhancing productivity and business growth.
  8. Employee management and support: EORs often offer HR support services, including onboarding, payroll assistance, benefits management, and employee query handling. This ensures that your employees receive reliable and efficient support, contributing to their overall job satisfaction and well-being.

It’s important to assess your specific business requirements and conduct due diligence when selecting an EOR provider to ensure they align with your needs and goals.

What are the Disadvantages of a Malaysia Employer of Record?

While engaging a Malaysia Employer of Record (EOR) can provide numerous benefits, there are also some potential disadvantages that should be considered:

  1. Limited control over HR operations: When you engage an EOR, you are essentially outsourcing your HR operations to a third-party provider. This means you may have limited control over certain aspects of employee management, such as hiring decisions, performance evaluations, and disciplinary actions. You need to carefully assess whether the level of control relinquished aligns with your organizational needs and management style.
  2. Potential communication challenges: Depending on the EOR provider’s setup and communication protocols, there may be potential challenges in communication and coordination, particularly if there are language barriers or time zone differences. Effective communication is crucial for successful collaboration and ensuring that your specific requirements are met.
  3. Dependency on the EOR provider: Engaging an EOR involves relying on their services and expertise. If the EOR provider encounters financial difficulties, undergoes significant operational changes, or fails to meet contractual obligations, it could impact your employment operations and create disruptions. Thoroughly researching and selecting a reputable and reliable EOR provider is important to mitigate this risk.
  4. Additional costs: While engaging an EOR can be cost-effective compared to setting up a legal entity, it still involves additional costs. EOR services typically come with fees, which can vary based on the scope of services provided and the number of employees. It’s important to carefully evaluate and compare the costs associated with different EOR providers to ensure they fit within your budget.
  5. Potential information security risks: When engaging an EOR, you will be sharing sensitive employee and company data with the provider. It’s important to assess the EOR’s data security measures and protocols to ensure the protection of confidential information. Consider factors such as data encryption, access controls, and compliance with data protection regulations.
  6. Limited customization and flexibility: EORs generally offer standardized solutions and services to cater to various clients. This means that customization options for specific requirements may be limited. If your business requires highly tailored or unique HR practices, an EOR’s standardized approach may not fully align with your needs.

It’s crucial to thoroughly assess your business requirements, conduct due diligence on potential EOR providers, and carefully review contractual terms and service-level agreements to mitigate the potential disadvantages and ensure that the engagement aligns with your organizational goals.

Joining Forces with a Malaysia EOR

Engaging a Malaysia Employer of Record (EOR) can be a beneficial solution for companies seeking to expand their operations or employ workers in Malaysia. The EOR takes on the responsibility of managing employment-related tasks, ensuring compliance with local labor laws, and providing HR support, which allows businesses to focus on their core operations. 

When choosing an EOR provider in Malaysia it is crucial that you choose a company with an excellent reputation for hiring, onboarding and paying employees in Malaysia. 

Malaysia Business Guides

FAQs

Engaging a Malaysia Employer of Record (EOR) allows a company to employ workers in Malaysia without the need to establish a legal entity. With an EOR, the company transfers the legal employment responsibility to the EOR, who becomes the official employer of record. The EOR manages employment-related tasks such as payroll, benefits administration, tax compliance, and statutory obligations on behalf of the company. This provides a faster and more cost-effective entry into the Malaysian market compared to setting up a legal entity, which requires establishing a separate corporate entity, complying with local regulations, and managing all employment responsibilities directly.

Yes, a Malaysia Employer of Record (EOR) can support companies with both local and expatriate employees. EORs are experienced in managing a diverse workforce and are well-versed in the legal and administrative requirements for employing both local and foreign workers. They can assist with work permit and visa processing, compliance with immigration regulations, and ensuring proper documentation for expatriate employees. Additionally, EORs handle payroll, benefits administration, and statutory obligations for all employees, regardless of their nationality or employment status. Engaging an EOR streamlines the process of managing both local and expatriate employees, ensuring compliance with local labor laws and regulations for a seamless employment experience.

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