Expanding your team into Malaysia opens up a world of talented professionals. But the thought of navigating foreign legal systems, setting up a local company, and managing payroll can be daunting. This is where a specialized service comes in. Using an EOR Malaysia provider is a smart, efficient way to hire Malaysian talent without the traditional overhead.

Think of an Employer of Record, or EOR, as your local HR partner. They handle all the legal and administrative heavy lifting, allowing you to focus on what matters most: managing your new employee and growing your business. Let’s break down how it works.

What Exactly is an Employer of Record in Malaysia?

An Employer of Record (EOR) in Malaysia is a third party company that legally hires employees on your behalf. While you manage the employee’s day to day tasks, projects, and career growth, the EOR acts as the legal employer on paper.

This means the EOR takes full responsibility for:

• Drafting and signing a locally compliant employment contract.
• Running payroll and withholding taxes correctly.
• Managing all mandatory benefits and social contributions.
• Ensuring every aspect of the employment relationship adheres to Malaysian labor laws.

Essentially, the EOR provides a legal “umbrella” for your employee, letting you tap into the Malaysian talent pool quickly and without risk.

The Big Decision: Incorporation vs. an EOR in Malaysia

When you want to hire in Malaysia, you have two main paths: set up your own local company (incorporation) or use an EOR service.

Incorporation gives you a full legal presence, but it’s a slow and expensive process. You’re looking at significant upfront investment and a long waiting period. In fact, establishing a legal entity in Malaysia can take months and cost over MYR 137,000 (around $30,000 USD) just to get started.

Using an EOR in Malaysia, on the other hand, lets you bypass this entire process. The EOR already has a registered local entity ready to go. This approach offers several huge advantages:

• Speed to Market: You can hire and onboard new team members in days, not months.
• Lower Costs: You avoid the steep legal fees, setup costs, and capital investments required for incorporation.
• Reduced Risk: The EOR’s local experts manage compliance, protecting you from costly mistakes related to unfamiliar labor laws and tax regulations.

For companies looking to test the market or hire a small team, an eor malaysia service is almost always the more practical and cost effective choice. If you’re comparing vendors, see our EOR service providers guide.

How to Hire Your Malaysian Team with an EOR

The hiring process with an EOR provider is surprisingly straightforward. It boils down to a few simple steps:

1. Choose a Reputable EOR: Find a provider with its own legal entity in Malaysia. This ensures they can directly handle compliance and payroll without middlemen.
2. You Find the Talent: You conduct the interviews and select the perfect candidate for your team.
3. Define the Offer: You determine the salary, role, and start date, just like any other hire.
4. The EOR Takes Over: The EOR prepares a locally compliant employment contract, gets it signed, and officially hires the employee onto its books.
5. Onboarding Begins: The EOR handles all the administrative onboarding, like registering the employee for tax and social security programs. Meanwhile, you focus on job specific orientation and integrating them into your team.

With a platform like Bolto, much of this process is digitized and automated, making it incredibly fast and seamless. Your new hire can be ready to contribute in a matter of days.

Navigating Malaysian Work Permits for Foreign Talent

If your ideal candidate is a foreign national, they’ll need a proper work permit to be employed legally in Malaysia. An eor malaysia service is invaluable here.

The primary permit for skilled professionals is the Employment Pass. To qualify, the candidate needs a job offer from a Malaysian company and must meet specific salary and qualification criteria. For shorter projects, a Temporary Employment Pass might be more appropriate, which is typically valid for up to 12 months.

In either case, a registered local entity must sponsor the application. Your EOR serves as this local sponsor, managing the entire immigration process on your behalf. This saves you the immense hassle of setting up a company just to sponsor a single visa.

Managing Payroll and Taxes with an EOR in Malaysia

One of the biggest headaches of global expansion is payroll and tax compliance. For a deeper overview of workflows and best practices, see our global payroll processing guide. An EOR handles this completely. In Malaysia, employees are paid monthly, and employers must withhold income tax through a system called PCB (Potongan Cukai Bulanan).

Your EOR will calculate and remit these monthly tax deductions to the Malaysian Inland Revenue Board (LHDN) for you. They also handle all mandatory employer contributions. These statutory costs typically add up to around 19% to 22% on top of an employee’s gross salary.

The EOR consolidates all costs (salary, taxes, contributions, and their service fee) into a single monthly invoice. This simplifies your accounting and ensures your team is paid accurately and on time in Malaysian Ringgit (MYR).

Understanding Mandatory Contributions: EPF, SOCSO, EIS, and HRDF

Beyond taxes, Malaysian employment law requires contributions to several social funds. An eor malaysia provider manages these for you:

• EPF (Employees Provident Fund): This is the national retirement savings plan. Employers contribute 12% to 13% of an employee’s salary, depending on the wage level.
• SOCSO (Social Security Organization): This is for workers’ compensation and disability insurance. The employer contribution is about 1.75% of the employee’s wages.
• EIS (Employment Insurance System): This fund provides financial support to workers who have lost their jobs. Both the employer and employee contribute 0.2% of the employee’s salary.
• HRDF (Human Resources Development Fund): This is a training levy applicable to employers in certain sectors with 10 or more employees. The contribution is 1% of an employee’s monthly wage.

These contributions are non negotiable, and your EOR will ensure every payment is calculated correctly and submitted on time to the proper government agencies. If you’re hiring in multiple countries, explore our multi-country payroll solutions guide.

Essential Labor Law and Compliance in Malaysia

Staying compliant with Malaysia’s Employment Act 1955 is critical. An EOR acts as your compliance shield, ensuring every aspect of employment is handled by the book.

Employment Contract Rules

For any employment lasting more than one month, a written employment contract is mandatory. The contract should clearly state key terms like job title, salary, working hours, leave entitlements, and notice periods for termination. An EOR provides a legally vetted contract template that protects both you and the employee.

Mandatory Employee Benefits

Malaysian law guarantees several minimum benefits for employees:

• Annual Leave: Starts at 8 days per year, increasing to 16 days after 5 years of service.
• Sick Leave: Employees get between 14 and 22 days of paid sick leave annually, depending on their tenure.
• Maternity and Paternity Leave: Mothers are entitled to 98 consecutive days of paid leave, while fathers receive 7 days of paid paternity leave.
• Public Holidays: Malaysia observes 11 official national public holidays each year.

Minimum Wage and Working Hours

As of May 2022, the national minimum wage is RM 1,500 per month. The standard work week was also updated and is now capped at a maximum of 45 hours. Any work beyond this must be paid as overtime, typically at 1.5 times the normal rate.

Protecting Your Business: IP, NDAs, and Data Privacy

When hiring talent anywhere, protecting your company’s assets is a top priority.

Intellectual Property and NDAs

Under Malaysian law, intellectual property created by an employee during their work belongs to the employer, as long as this is clearly stated in the employment contract. A good EOR will include a robust IP assignment clause to protect your interests. Additionally, using a Non Disclosure Agreement (NDA) is a common and enforceable way to safeguard confidential information.

PDPA Compliance (Personal Data Protection Act)

Malaysia’s Personal Data Protection Act 2010 (PDPA) governs how employee data is collected and managed. Employers must obtain consent to process personal data and be transparent about how it’s used. An EOR ensures compliance by building these consents into their onboarding process and storing employee data securely, protecting you from potential fines.

The End of the Employment Lifecycle: Termination and Severance

Terminating an employee in Malaysia requires care, as it is not an “at will” employment jurisdiction. You must have a “just cause or excuse” for dismissal, such as poor performance (after warnings) or proven misconduct.

The minimum required notice period is set by law, starting at 4 weeks for employees with less than two years of service. In cases of redundancy or retrenchment, employers are also required to pay severance benefits to eligible employees. An eor malaysia partner will guide you through this process to ensure any termination is handled legally and respectfully, minimizing your risk of an unfair dismissal claim.

The Financials and Strategy of Using an EOR

Making the right choice for your global expansion involves understanding the costs and strategic benefits.

What are the Costs of an EOR in Malaysia?

Hiring through an EOR is typically very cost effective. The pricing model usually consists of the employee’s gross salary, the mandatory employer contributions, and a fixed monthly management fee. This fee is your payment for the convenience, compliance, and peace of mind the EOR provides. When you compare this predictable cost to the MYR 300,000+ it can take to run your own entity for a single employee in the first year, the value is clear. Platforms like Bolto offer transparent, flat rate pricing for EOR services, so you always know what to expect.

How to Choose the Right EOR Malaysia Provider

When selecting a partner, look for these key criteria:

• Owns a Local Entity: This is non negotiable. It ensures direct accountability and faster processing.
• Transparent Pricing: Avoid providers with hidden fees. A flat monthly rate is the industry best practice.
• Comprehensive Services: Your EOR should handle everything from contracts and onboarding to payroll, benefits, and work permit sponsorship.
• Excellent Support: Look for responsive, expert support that can answer your questions about Malaysian labor law.

When to Graduate from an EOR to Your Own Entity

An EOR is perfect for entering a market and for small to medium sized teams. But when does it make sense to incorporate? Consider making the switch when:

• Your team becomes very large (e.g., 20+ employees), where the cumulative EOR fees might exceed the cost of running your own HR department.
• You have a long term, permanent commitment to the Malaysian market.
• Your business activities expand beyond just employing people, for example, if you need to sign local commercial contracts or hold physical inventory.

Many companies use an eor malaysia service as a bridge, starting fast and then transitioning to their own entity once they reach a critical mass. If you’re also evaluating PEOs as an alternative, read our global PEO providers comparison.

Ready to Hire in Malaysia?

Navigating a new country’s employment landscape can be complex, but it doesn’t have to be a barrier to growth. An EOR Malaysia service simplifies the entire process, removing the risk and administrative burden so you can build your global team with confidence.

By handling everything from compliant contracts and payroll to statutory contributions and benefits, an EOR like Bolto lets you access top Malaysian talent faster and more affordably than ever before. See how other teams have scaled with Bolto in our customer stories. Learn how Bolto’s all in one platform makes it easy to hire in Malaysia.

Frequently Asked Questions about EOR Malaysia Services

What is the main role of an EOR in Malaysia?

The main role of an EOR is to act as the legal employer for your chosen candidate. They handle all HR administrative tasks, including payroll, taxes, benefits, and compliance with the Malaysian Employment Act, while you manage the employee’s daily work.

How much does it cost to use an EOR in Malaysia?

The cost typically includes the employee’s gross salary, mandatory employer social contributions (around 19% to 22%), and a fixed monthly management fee. This is often far more cost effective than the high costs of setting up and maintaining a local legal entity.

How quickly can I hire someone with an EOR?

One of the biggest benefits is speed. Since the EOR already has a legal entity set up, you can often onboard a new employee in just a few days, compared to the months it would take to incorporate your own company.

Can an EOR in Malaysia hire foreign employees?

Yes. A reputable eor malaysia provider with its own local entity can sponsor the necessary Employment Pass or other work permits for your foreign hires, managing the entire immigration process for you.

Do I still control my employee if I use an EOR?

Absolutely. While the EOR is the legal employer for administrative purposes, you retain full control over your employee’s role, responsibilities, projects, and performance. The working relationship is between you and your team member.