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Hiring in Malaysia through an Employer of Record (EOR)

Malaysia

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Discover an employer’s guide to employment laws, regulations, and Employer of Record (EOR) services in Malaysia.

Ready to hire in Malaysia? An EOR can help

Want to expand your business into Malaysia? An Employer of Record (EOR) service can help.

An EOR becomes the legal employer of your Malaysian team, handling hiring, payroll, benefits, and compliance. This means you don’t have to set up a whole new entity there.

EORs take care of the complicated Malaysian employment laws, so you can focus on growing your business.

How to hire in Malaysia 

Step 1: Decide between an entity and an EOR

When staffing in Malaysia, you can either establish a local entity or take advantage of an Employer of Record (EOR) service.

Creating a local office involves a significant investment of time, money, and effort. The process includes registering your business with the Malaysian authorities, appointing directors, and managing complex tax regulations. This can extend over several weeks or even months, potentially delaying your hiring schedule.

Though setting up a local entity gives you extra control over your HR function, you will be directly responsible for adhering to all local employment laws and regulations.

Using an EOR service can help you circumvent the complexities of Malaysian labor laws. This approach enables you to quickly bring new employees on board and automate key HR tasks. You’ll still retain control of your operations.

If your goal is to hire a substantial number of employees and establish a robust presence in Malaysia, creating a local entity might be more beneficial. Conversely, if you want a faster and more straightforward hiring process, an EOR offers a more efficient solution.

Step 2: Finding an EOR

A poor choice of EOR can lead to compliance issues, unnecessary costs, and a subpar experience for your new employees. Here’s what you should consider:

  • Legal compliance. Make sure the EOR has a thorough understanding of Malaysia’s labor laws, employee protections, tax regulations, and local benefits. Review their track record and inquire about their experience with industry-specific cases.
  • Customer service. Evaluate whether the EOR offers continuous support and provides dedicated account managers for each client. For example, Multiplier offers 24/7 personalized support and assigns dedicated managers to each account.
  • Transparent pricing. Be cautious of EOR services that advertise low initial costs but have hidden fees or complicated pricing structures. Ensure you understand all associated costs upfront before making a decision.
  • Total cost of ownership. Opting for the lowest price isn’t always the best strategy as inexpensive solutions can end up being more costly if they are ineffective. When choosing an EOR, ensure you are investing in a quality service that fits your budget without sacrificing essential features.

Step 3: Employing and onboarding in Malaysia

Send over a contract

Once you have selected the ideal candidate, you need to send a locally compliant employment contract. Multiplier can draft these contracts in line with Malaysian law within minutes. You can customize the terms to include job duties, working hours, salary, and termination conditions.
After the contract is finalized, the EOR will securely send it to the candidate and ensure all necessary signatures are obtained.

Enhance compensation with competitive benefits

An EOR can help you offer an attractive benefits package. Instead of dealing with local vendors yourself, it can provide various locally managed benefits options. Multiplier also ensures that employees receive the necessary IT equipment to start working effectively.

Get all your documentation in order

Gathering the new hire’s tax and banking information is essential. If you’re using an EOR like Multiplier, this data will be automatically collected to set up payroll. The EOR will manage all required documentation, making the process smooth and free of paperwork hassles.
Onboarding employees in Malaysia might seem challenging at first, but with the assistance of an EOR, the process can be straightforward and stress-free.
Step 4: Run payroll for employees based in Malaysia

Managing payroll for employees in Malaysia requires attention to local tax regulations and mandatory contributions. The Malaysian tax system is progressive, with rates ranging from 0% to 30% based on income levels.

Employers also need to handle several obligatory contributions, such as the Employees Provident Fund (EPF) and the Social Security Organization (SOCSO).

The EPF is Malaysia’s primary retirement savings scheme. It’s designed to ensure that employees have financial security for their retirement years. Employers must contribute a specified percentage of each employee’s salary to their EPF account, helping them prepare for future financial needs.

SOCSO provides coverage for work-related injuries and diseases. Employers contribute to this fund, which assists with medical expenses and compensates employees who suffer from work-related health issues.

Using an EOR like Multiplier simplifies payroll management. We ensure timely and accurate salary payments while managing all local taxes and contributions.

With Multiplier’s global payroll solution, you can handle payroll for all your international employees from a single platform, eliminating the hassle of coordinating with multiple local providers.

Employment laws and regulations in Malaysia

Malaysia’s employment laws are structured to safeguard employee rights and establish a fair labor environment. Key aspects include:

  • Employment contracts. Employers in Malaysia can utilize both fixed-term and indefinite-term contracts. Although written contracts are not mandatory, they are highly recommended to avoid legal disputes. These contracts should clearly specify job duties, salary, working hours, and conditions for termination.
  • Working hours and overtime pay. The standard workweek in Malaysia is set at 48 hours, with overtime pay required for hours worked beyond this limit. Employees are entitled to a minimum of one hour of rest after every five consecutive hours of work.
  • Termination of employment. Termination procedures must adhere to legal requirements, including providing adequate notice and, in some cases, severance pay, depending on the length of employment. Employees have the right to claim compensation for wrongful dismissal.
  • Employees Provident Fund (EPF). Employers are required to contribute to the EPF, which provides retirement savings for employees. Both employers and employees contribute a fixed percentage of monthly salaries to the EPF.

Employee benefits and compensation

In Malaysia, labor laws mandate several standard worker advantages , including:

  • Annual leave. Employees are entitled to a minimum of eight days of paid annual leave after completing one year of service. This leave entitlement increases with longer tenure.
  • Sick leave. Employees are entitled to up to 14 days of paid sick leave per year. For absences exceeding 14 days, employers are required to provide sick leave if shown a medical certificate.
  • Parental leave. Malaysia provides 90 days of paid maternity leave, which is fully covered by the employer. Paternity leave is available for up to seven days, though it is generally unpaid.
  • Public holidays. Employees are entitled to paid leave on national public holidays, which are observed throughout Malaysia.
  • Retirement benefits and workplace security. Employers must contribute to the EPF, a retirement savings plan, and SOCSO, which provides coverage for work-related injuries and diseases.

Employers often go beyond these statutory requirements by offering additional perks to attract and retain top talent. For tailored and competitive benefits solutions, consider leveraging services like Multiplier’s Global Benefits Administration which ensures compliance and provides a comprehensive benefits package for your international employees.

Employ top talent in Malaysia through an EOR

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Termination and offboarding procedures

When terminating employment in Malaysia, it’s essential to follow regulations related to notice periods and severance pay. 

The required notice period is based on the employee’s length of service and is defined under the Employment Act 1955: 4 weeks for employees with less than 2 years of service; 6 weeks for employees with 2 to less than 5 years of service; 8 weeks for employees with 5 years or more of service.

If the employment contract specifies a different notice period, that contract takes precedence. Employers can also opt to provide payment in lieu of notice, provided both parties agree.

Severance pay in Malaysia is determined by the Employment (Termination and Lay-Off Benefits) Regulations 1980. The standard severance pay structure is as follows:

  • 10 days’ wages for each year of service if employed for less than 2 years
  • 15 days’ wages for each year of service if employed for 2 to less than 5 years
  • 20 days’ wages for each year of service if employed for 5 years or more

These guidelines apply primarily to employees covered under the Employment Act. For those not covered by the Act, severance pay is dictated by the terms of the employment contract.

For redundancy cases, employers must follow specific procedures, which may include notifying the Labour Department if applicable. Employers can choose to provide notice pay instead of requiring the employee to work through the notice period, but this must be clearly outlined in the employment contract.

Managing these procedures can be intricate and time-consuming, especially for international employers unfamiliar with Malaysia’s labor laws. An EOR like Multiplier can streamline this process.

By handling the offboarding procedures, an EOR ensures that all termination activities comply with local regulations and facilitate a smooth transition for both the employer and the departing employee.

Visa and work permit assistance

Hiring foreign workers in Malaysia involves obtaining the correct visas and work permits. The type of visa required depends on factors such as the job nature, employment duration, and the employee’s nationality.


Here are the primary visa categories for working professionals:

  • Employment Pass (EP): This visa is intended for foreign nationals working in Malaysia in managerial, executive, or specialized roles. It is suitable for skilled workers and professionals in various fields such as IT, engineering, and finance.
  • Temporary Employment Pass (TEP): Designed for foreign workers employed in non-skilled or semi-skilled roles, this visa is valid for shorter-term employment and typically for a period of up to two years.
  • Professional Visit Pass (PVP): This pass is for foreign nationals entering Malaysia for short-term professional work, such as training or consultancy, typically for less than 12 months.
  • Work Permit: In addition to the appropriate visa, foreign workers must secure a work visa to legally work in Malaysia. Candidates need to provide various documents, including the employment contract, a medical certificate, and proof of the employer’s business registration.

Navigating the visa and work permit application process can be complex so seeking expert assistance is advisable. Multiplier offers comprehensive visa and work permit support as part of its Employer of Record (EOR) services. For more details on how we handle global immigration challenges, please visit our Global Immigration page.

Get started with Multiplier’s EOR services

Multiplier’s Employer of Record (EOR) services offer a comprehensive solution for expanding your workforce in Malaysia. By partnering with Multiplier, you can hire employees without needing to set up a local entity, streamline HR functions, and deliver an outstanding employee experience.

Our EOR services ensure a smooth process for hiring, onboarding, and managing employees. We take care of every aspect of employment, including creating contracts that comply with Malaysian regulations, managing payroll and taxes, and providing a range of customizable benefits that meet local standards. This approach removes compliance issues and administrative hassles from your plate.

Schedule a demo to learn how Multiplier can simplify your HR operations and ensure compliance in Malaysia.

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