Hiring Malaysian Talent: Employer of Record Malaysia Guide

In recent years, Malaysian talent has become a popular choice for Australian companies that want to expand their workforce without the overhead costs of establishing a local entity. The rise of remote work has made it easier to tap into global talent pools and with its cost-effective compensation and skilled labor abilities, Malaysia has become an attractive solution for Australian businesses. However, hiring talent in Malaysia requires navigating local labor laws, tax requirements and employee benefits which can be complex for companies that are unfamiliar with the country’s rules and regulations. This is where an Employer of Record (EOR) becomes essential for companies to serve as the official employer for Malaysian talent while allowing businesses to maintain full authority. 

The guide will deep dive into the concept of EOR in Malaysia and how it can simplify the hiring process for Australian businesses. 

What Is an Employer of Record (EOR) and How Does It Work? 

An Employer of Record (EOR) is a third-party service provider that acts as the legal employer for your remote employees. It means that Employer of Record (EOR) operates in Malaysia to fulfill all legal obligations for employment agreements, payroll, taxes, employee benefits and local labor regulations.

How EOR Works for Australian Companies

When an Australian company works with an EOR in Malaysia, the EOR becomes the employer on the record for your Malaysian employees. The EOR  takes full responsibility for the administration duties and legal aspects of the employment including: 

• Payroll management: Ensuring employees are paid on time including statutory obligations and benefits contributions. 
• Tax compliance:  Handling income tax deductions and other statutory requirements. 

• Employment contracts: Ensuring that all contracts adhere to Malaysian labor laws.
• Employee benefits: Administering mandatory benefits like healthcare, insurance and retirement savings plans. 

The Australian company maintains operational control and can manage day-to-day tasks, performance and reporting while the EOR maintains complete compliance with Malaysian employment law. 

How Does An EOR Work for Australian Companies Hiring in Malaysia?

Through an Employee of Record in Malaysia, Australian businesses can set up new teams without establishing offices in the country.. Here’s how it works:

Legal Employer, Operational Control

EOR becomes the legal employer of your employee in Malaysia. However, the Australian company has absolute authority over employee responsibilities and job functions as well as work process management. Your employees based in Malaysia report directly to you just as they would if they were in your office in Australia. 

Ensuring Compliance

The EOR ensures that all contractual and payment obligations for Malaysian employees remain within the scope of Malaysian labor law. The EOR also handles full responsibility to manage legal risks that may arise due to differences between Australian and Malaysian labor laws. 

Efficient Onboarding

The onboarding process can become faster and smoother by partnering with an EOR. The EOR handles employee registration, benefits setup and all administrative tasks necessary to start employees up and running. 

Advantages of Using an Employer of Record in Malaysia for Australian Companies

Using an EOR service can gain several advantages. Let’s explore some of the advantages: 

1. Quick and Hassle-Free Market Entry

Companies do not need to establish legal entities in Malaysia and they can easily hire Malaysian talent through EOR. This enables a fast onboarding and streamlined hiring process that saves both time and financial resources.

2. Cost Savings and Operational Efficiency

Local entity establishment in Malaysia requires substantial investments that include expenses such as legal fees and costs associated with office space as well as HR functions. An EOR eliminates these costs offering a cost-effective alternative while allowing you to maintain operational control. 

3. Full Compliance with Malaysian Labor Laws

An EOR ensures compliance of employment contracts, employment tax obligations, annual leave and company policy, and payroll administration according to Malaysian labor laws. By partnering with a legitimate EOR service, you can reduce the risk of facing legal or tax penalties.

4. Simplified Payroll and Tax Management

An EOR handles payroll management, salary compensation and tax reduction procedures along with mandatory payments such as Employees Provident Fund, Social Security and Employment Insurance System. The system enables payroll processing with no delays streamlining your operations. 

5. Access to Skilled Talent in Malaysia

Malaysia is home to a growing talent pool in different sectors such as IT, finance, marketing and customer support. Through an EOR, Australian businesses can tap into this diverse Malaysian talent pool without the expenses of handling local HR processes. 

6. HR and Administrative Support

An EOR offers comprehensive HR and administrative support. This includes managing employee onboarding, benefits enrollment and handling documentation which allow you to focus on business growth. 

7. Workforce Scalability and Flexibility

With an EOR, scaling your workforce up or down can become seamless. Businesses don’t have to worry about long-term liabilities or additional legal responsibilities that come with hiring through a local entity.

Cost of Hiring In Malaysia 

The official currency of Malaysia is the Malaysian Ringgit (MYR, RM). In Malaysia, the national official minimum wage is 1,500 RM per month and the standard working hours is 45 hours per week. 

Read Malaysia Salary Guide 2025

Hiring in Malaysia involves various costs depending on whether a company sets up a local entity or partners with an Employer of Record (EOR). While Malaysia offers a skilled workforce and a stable business environment, companies should account for setup expenses, payroll, taxes and compliance costs. Here is the breakdown for the costs between establishing a local entity and partnering with an Employer of Record (EOR). 

Cost Category	Establishing a local entity	Partnering with an EOR
Initial Setup Costs	Significantly high due to company registration expenses, office setup and legal fees	Relatively low because EOR already has an operational presence in Malaysia.
Operational Overhead  Costs	Requires significant recurring expenses including human resources management and tax obligations.	The overhead is minimal  as the EOR provider takes care of HR duties and ensures regulatory compliance.
Regular Operating Expenses	Higher costs because businesses must handle payroll processing, tax reporting and HR functions independently.	More cost-efficient because the EOR takes full responsibility for HR, payroll and compliance.

Costs Associated With Using An EOR In Malaysia

1. Monthly Service Charges 

EOR service providers charge recurring fees based on the number of employees that they have to manage. This fee covers administration fees, regulatory compliance and other HR related tasks. 

2. Payroll-related Costs 

These costs include employee wages, bonuses and mandatory contributions such as the Employees Provident Fund (EPF) and Social Security Organization (SOCSO) payments. 

3. Onboarding Fees 

These fees are initial charges for integrating new employees which may involve drafting employment contracts and ensuring compliance with local regulations. 

4. Currency Exchange and Banking Fees 

For companies dealing with multiple currencies, forex mark-ups help manage fluctuations in exchange rates ensuring accurate salary disbursement. Additionally, bank processing fees may apply to international transactions.

Key Compliance Considerations For Companies Hiring In Malaysia Through EOR Service 

While hiring through an EOR service simplifies the process, there are still important compliance factors to consider: 

1. Employment Contracts And Legal Framework 

All employment contracts must comply with Malaysian labor laws. These laws include various aspects of employment relationships including terms of employment, benefits and termination procedures. It is crucial to ensure that contracts are drafted correctly to avoid disputes. 

2. Payroll and Tax Regulations 

Malaysian payroll is structured around mandatory contributions like EPF, SOCSO and EIS. The EOR ensures that tax obligations are met by deducting the correct amount from employee’s salaries and remitting these contributions to the government. 

3. Employee Benefits and Entitlements 

Employers must provide benefits such as paid leave, medical insurance and retirement contributions. The EOR handles these entitlements ensuring compliance with local laws regarding work hours, overtime and public holidays. 

4. Data Security and Confidentiality Compliance 

With data protection laws in Malaysia, it is essential that employee records and payroll data are securely managed. An EOR ensures compliance with data regulations keeping your employee’s personal information safe. 

Step-by-Step Guide To Hiring Malaysian Employees Through an Employer of Record

Step 1 –  Initial Consultation and Requirements Analysis

Discuss with an EOR service provider about your company’s hiring requirements. Job roles and salary remuneration along with employee benefits must be established by collaborating both entities.

Step 2- Drafting and Signing Employment Contracts

The EOR drafts employment agreements that follow all Malaysian labour laws and regulations. You will review and approve the employment contracts which the EOR has prepared before onboarding employees. 

Step 3 –  Onboarding and Payroll Setup

Employee onboarding takes place under the EOR’s entity. Payroll, tax deductions and employee benefits will be set up and processed on time. 

Step 4- Ongoing HR Support and Compliance Management

The EOR handles the responsibility for managing all essential HR responsibilities which include statutory contributions and leave management. Regular compliance checks ensure everything stays up to date. 

Step 5 – Employee Performance Monitoring and Reporting

All administrative and legal aspects fall under the EOR but the employees will report directly to you. 

Step 6 – Offboarding and Contract Termination (If Required)

In case you need to terminate an employee, the EOR takes responsibility for the offboarding procedures while following Malaysian legal requirements.

Common Misconceptions About Employer of Record (EOR) Services

“Employer of Record (EOR) means Losing Control over Employees” 

Many businesses believe that the implementation of an Employer of Record (EOR) service means losing control over their employees. In reality, you can retain full operational control while the EOR performs only the administrative and legal tasks.

“EOR is only for Large Corporations”

An EOR delivers business benefits to businesses of all sizes from startups to large corporations. Working with an EOR provides a cost-effective solution for managing international hires without the need for a local entity. 

“EOR Services Are Expensive” 

EOR services are often more cost-effective than setting up a local entity as they eliminate the need for expensive legal fees, office space and HR overhead. 

“EOR Employees Are Not Legally Protected” 

EOR employees are fully protected under Malaysian labor laws ensuring they receive all the legal benefits and protections that are entitled to local employees. 

Key Things To Consider When Choosing An EOR In Malaysia 

When choosing an EOR service provider, consider the following factors:

• Reputation and Experience: Choose a service provider with experience in handling Australian companies and knowledge of Malaysian labor laws. 
• Transparent Pricing: Make sure you understand the service fees upfront and avoid hidden costs. 
• Compliance and Risk Management: Ensure the EOR follows all local labor laws and manages risks effectively. 
• Employee Experience and Support: Look for an EOR provider that offers strong HR support to ensure a smooth experience for your Malaysian employees. 

Why Partner With FastLaneRecruit For Employer of Record (EOR) in Malaysia? 

FastLaneRecruit offers extensive experience in HR, payroll and compliance management in Malaysia. With our seamless hiring princess, dedicated HR support and cost-effective solutions, we help Australian companies expand their teams in Malaysia while staying fully compliant with local labor laws. Contact us today to streamline your hiring process and expand your workforce in Malaysia effortlessly.