How to Hire Using EOR in Malaysia

Hiring in a new country can be complex especially when you’re navigating unfamiliar regulatory environments and workforce expectations. For businesses expanding into Malaysia, an Employer of Record (EOR) solution offers a strategic shortcut to employ local talent without the need for entity setup. In this guide, we will explore how to hire using EOR in Malaysia through FastLaneRecruit, with a deep dive into legal requirements, benefits, and considerations to make informed decisions.

Overview of Employer of Record (EOR) and Its Relevance in Malaysia

Defining EOR and Its Role in Global Employment

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of another company. While the client maintains day-to-day control over the employee’s work and responsibilities, the EOR manages all legal employment obligations such as payroll, tax contributions, employment contracts, and statutory compliance.

This model allows international companies to hire in Malaysia without registering a local legal entity offering a faster and legally compliant method to access Malaysian talent.

Also Read: Benefit of Outsourcing Accounting to Malaysia

The Growing Popularity of EOR Solutions in Southeast Asia

As Southeast Asia grows as a hub for talent and innovation, countries like Malaysia attract global businesses looking for skilled workers and cost-effective expansion. EOR services are increasingly favored for their agility, enabling companies to test new markets, scale rapidly, and remain compliant with local employment laws without the overhead of setting up branches or subsidiaries.

Also Read: 5 Team-Building Tips for Your Remote Team

Why Businesses Choose EOR for Hiring in Malaysia

Avoiding Entity Setup While Expanding into Malaysia

Setting up a company in Malaysia involves registration with the Companies Commission of Malaysia (SSM), capital investment, and months of administrative work. Using an EOR bypasses these steps entirely, allowing businesses to legally employ workers almost immediately.

Visit SSM’s official site for company registration info

Simplifying Regulatory and Tax Compliance

Malaysia has strict labor laws and requires contributions to national schemes like EPF, SOCSO, and EIS. An EOR provider ensures full compliance with these laws, reducing the risk of legal penalties.

Accelerating Time-to-Hire in a Competitive Talent Market

With EOR, the hiring process is streamlined. You can tap into Malaysian talent faster, keeping you competitive in industries where time-to-hire is a critical success factor.

Understanding the Legal Framework for Employment in Malaysia

Key Employment Laws and Worker Protections

Malaysia’s Employment Act 1955 governs employment terms, minimum wage, working hours, and termination protections. Employers must comply with legal standards around leave, overtime, and worker safety.

Learn more at Malaysia’s Ministry of Human Resources

Mandatory Contributions: EPF, SOCSO, and EIS

EORs must register and contribute to the following:

Scheme	Purpose	Employer Contribution	Employee Contribution
EPF (Employees Provident Fund)	Retirement Savings	12–13%	11%
SOCSO (Social Security Organization)	Work Injury & Disability	1.75%	0.5%
EIS (Employment Insurance System)	Unemployment Support	0.2%	0.2%

Work Permits and Hiring Foreign Talent

Foreign employees require valid work permits and must meet immigration requirements. An EOR can sponsor and manage permit applications to ease the burden on the client company.

View immigration rules from the Immigration Department of Malaysia

How EOR Services Work in Malaysia

The EOR Hiring Process Explained Step-by-Step

1. Client identifies the role and selects the candidate.
2. EOR provider drafts the employment contract according to Malaysian law.
3. Candidate signs with the EOR, who becomes the legal employer.
4. EOR handles onboarding, payroll, and statutory contributions.
5. Client manages the employee’s daily tasks and performance.

EOR vs. Traditional Recruitment: What’s the Difference?

Feature	EOR Hiring	Traditional Hiring
Entity Setup	Not required	Required
Employment Compliance	Managed by EOR	Managed by Client
Time to Hire	1–2 weeks	Several months
Payroll & Tax	Handled by EOR	Handled internally
Legal Employer	EOR	Client

Contractual Relationship Between the Client, EOR, and Employee

The EOR is the legal employer, while the client is the operational supervisor. This tripartite relationship enables flexibility while ensuring all employment obligations are fulfilled legally and ethically.

Also Read: How to Build Your Own Remote Team

When to Consider Using an EOR in Malaysia

Expanding Without Incorporation

Ideal for testing the Malaysian market without the long-term commitment or cost of setting up a local entity.

Hiring Remote Malaysian Talent

Tap into the country’s skilled remote workforce, especially in sectors like IT, digital marketing, and finance.

Short-Term Projects or Market Testing

EOR is a viable solution for pilot projects, freelance alternatives, and interim staffing needs with full legal compliance.

Key Benefits of Hiring via EOR in Malaysia

• Risk Mitigation and Legal Compliance
  EOR providers shield businesses from penalties and lawsuits by ensuring all labor laws are followed.
  
• Simplified Payroll and Tax Administration
  Monthly payroll, income tax deductions, and reporting are managed end-to-end.
  
• Access to Local HR Expertise and Talent Pool
  Gain recruitment support and HR advisory services to attract top Malaysian talent.
  
• Scalability and Cost Efficiency
  Scale your team up or down easily based on project needs or business cycles without long-term commitments.

Challenges and Limitations of EOR Hiring

• Limited Control Over Employment Terms
  Since the EOR is the legal employer, direct control over employment contracts and benefits may be restricted.
  
• Restriction in Certain Industry Types or Senior Roles
  Some industries may require licensing or specific legal structures that EORs cannot support.
  
• Dependency on Third-Party HR Infrastructure
  Service quality is tied to the capability and technology of the EOR provider.

Choosing the Right EOR Provider in Malaysia

When selecting an EOR, consider the following:

• Experience and Market Knowledge
  Look for providers with a proven track record in Malaysia’s labor market.
  
• Compliance Track Record and Local Expertise
  Ensure the provider is familiar with Malaysian labor laws and tax regulations.
  
• Technology Integration and Service Offerings
  Cloud-based payroll systems, automated reporting, and digital onboarding tools enhance efficiency.
  
• Transparency in Pricing and SLAs
  Clear Service Level Agreements (SLAs) and pricing models help avoid hidden costs.

Understanding Tax Implications for EOR Hiring

Corporate Tax vs. EOR Employment Costs

Unlike traditional hiring, EOR costs are typically treated as operational expenses, not taxable corporate income in Malaysia.

Withholding Taxes and Double Taxation Treaties

Malaysia has double taxation agreements (DTAs) with over 70 countries to avoid duplicate taxes. EORs must ensure proper documentation to claim benefits.

List of DTAs by Inland Revenue Board Malaysia (LHDN)

Tax Reporting Responsibilities of EOR Providers

EORs are responsible for issuing EA Forms, reporting income tax to LHDN, and handling monthly PCB (Potongan Cukai Bulanan) contributions.

Conclusion

For global businesses, EOR hiring in Malaysia offers a cost-effective, compliant, and time-efficient alternative to setting up a local entity. It bridges the gap between opportunity and execution, empowering organizations to build local teams quickly and effectively. Whether you’re entering the Malaysian market for the first time or expanding a regional hub, EOR solutions help de-risk your hiring strategy. While EOR is a perfect short- to medium-term strategy, it can complement long-term business goals by helping you scale responsibly before committing to full incorporation.

How FastLaneRecruit Can Help

At FastLaneRecruit, we offer end-to-end EOR services in Malaysia, ensuring compliance, speed, and operational ease. Whether you’re hiring one remote employee or building an entire local team, our experts will support:

• Onboarding and contract generation
• Payroll and statutory contributions
• Visa and work permit management
• HR advisory and local market insights

Let us handle the complexity so you can focus on growing your business.

Contact FastLaneRecruit today to explore EOR hiring solutions tailored to your business needs.