Guide for Australian Companies to Hire Malaysian Employees

Expanding your business operations to Malaysia can be a strategic move for Australian companies looking to tap into Southeast Asia’s thriving market. With its skilled workforce, multilingual capabilities, and business-friendly environment, Malaysia is an attractive destination for hiring talent. However, navigating the legal and logistical aspects of hiring and paying employees in Malaysia can be complex.

In this blog, we will walk you through everything you need to know about hiring and paying Malaysian employees as an Australian company, including legal requirements, employment laws, and practical steps to get started.

Can a Foreign Company Hire Employees in Malaysia?

Yes, foreign companies can hire employees in Malaysia, but they must comply with local labor laws. A company registered outside Malaysia cannot directly hire and pay employees without establishing a legal presence or partnering with a local entity. There are three primary ways for Australian companies to employ talent in Malaysia:

1. Setting up a legal entity – Establishing a local entity in Malaysia.
2. Using an Employer of Record (EOR) – Partnering with a local Employer of Record (EOR) provider like FastLaneRecruit to handle employment.
3. Engaging contractors – Hiring independent professionals or contractors without direct employment obligations.

Each option has its own advantages, depending on business needs, budget, and long-term goals.

How Do I Employ Someone in Malaysia?

To legally employ Malaysian workers, Australian companies must choose the most suitable employment model.

1. Set Up a Legal Entity

Establishing a local entity allows an Australian business to directly hire Malaysian employees and manage payroll, benefits, and compliance. The most common business structures include:

• Private Limited Company (Sdn Bhd) – The most popular choice for foreign businesses.
• Representative Office – For market research and liaison activities, but cannot hire local employees.
• Branch Office – Extension of an Australian parent company but subject to local taxation.

Setting up a company in Malaysia involves registering with the Companies Commission of Malaysia (SSM) and complying with tax and labor laws.

2. Use an Employer of Record (EOR) in Malaysia

An Employer of Record (EOR) is a third-party provider that legally employs workers on behalf of your company. This solution allows Australian businesses to:

• Hire employees in Malaysia without setting up a local entity.
• Ensure compliance with labor laws, payroll taxes, and benefits.
• Scale hiring quickly without administrative burdens.

This is the fastest and most hassle-free way for foreign companies to hire in Malaysia.

3. Engage Contractors in Malaysia

If your business requires short-term or project-based workers, hiring independent contractors can be a flexible and cost-effective solution. However, misclassification risks exist if a contractor is found to be an employee, the company may be liable for employment taxes and benefits.

Comparison Table: Hiring Options for Australian Companies

Hiring Option	Pros	Cons
Set Up a Legal Entity	Full control over hiring, payroll, and compliance	High setup costs, complex registration process
Use an Employer of Record (EOR)	Fast, compliant, and no local entity required	Service fees apply
Hire Independent Contractors	Cost-effective and flexible	Risk of misclassification and lack of control

Employment Laws to Know Before You Hire in Malaysia

Before hiring employees in Malaysia, it’s essential to understand the country’s employment laws to ensure compliance and avoid legal issues. Key areas to consider include:

• Employment Contracts: Written contracts are mandatory and must outline terms such as job role, salary, working hours, and termination conditions.
• Working Hours: The standard workweek is 48 hours, with a maximum of 8 hours per day.
• Minimum Wage: The minimum wage in Malaysia varies by region, with higher rates in urban areas like Kuala Lumpur.
• Employee Benefits: Employers must provide benefits such as sick leave, annual leave, and maternity/paternity leave.

Quick Guide to Hiring in Malaysia

Basic Salary and Tax

• Salary Structure: Malaysian employees typically receive a basic salary, allowances, and bonuses.
• Income Tax: Employers are responsible for deducting income tax (PCB) from employees’ salaries and remitting it to the Inland Revenue Board of Malaysia (LHDN).

Leave Policy

• Annual Leave: Employees are entitled to a minimum of 8 days of annual leave, increasing with years of service.
• Sick Leave: Employees can take up to 14 days of paid sick leave per year with a medical certificate.
• Maternity Leave: Female employees are entitled to 98 days of paid maternity leave.

Termination

Termination must follow the guidelines outlined in the Employment Act 1955. Employers must provide notice or payment in lieu of notice, depending on the length of service.

Statutory Time Off

Employees are entitled to public holidays (11 days) and rest days (1 day per week).

Employee Provident Funds

Employers must contribute to the Employees Provident Fund (EPF), a retirement savings scheme. The current contribution rate is 12-13% of the employee’s salary.

Conclusion

Hiring and paying employees in Malaysia offers Australian companies access to a talented and cost-effective workforce. However, it’s crucial to understand the legal requirements, employment laws, and hiring options to ensure compliance and smooth operations.

Whether you choose to set up a legal entity, use an Employer of Record, or engage contractors, each option has its own benefits and considerations. By following this guide, you’ll be well-equipped to make informed decisions and successfully expand your business in Malaysia.

How FastLaneRecruit Can Help in Hiring Malaysian Employees for Australian Companies

Navigating the complexities of hiring and paying employees in Malaysia can be challenging, especially for foreign companies. At FastLaneRecruit, we specialize in helping Australian businesses hire top-tier talent in Malaysia seamlessly.

Our services include:

• Employer of Record (EOR) Solutions: We handle payroll, taxes, and compliance, so you can focus on growing your business.
• Recruitment Services: We connect you with skilled professionals tailored to your business needs.
• Compliance Support: We ensure your hiring practices align with Malaysian labor laws.

Let FastLaneRecruit simplify your hiring process and help you unlock the full potential of Malaysia’s workforce. Contact us today to get started!