Doing business with a Malaysian PEO/EOR

Malaysia’s ever-developing economy has been a promising enterprise for investors seeking to enter the Asian market. They have ranked 36^th in the International Monetary Fund (IMF) 2021 survey and are now the 4^th largest economy in Southeast Asia. 

The country’s merit is all due to its openness to trading. Their export services have provided jobs to its citizens, enabling their economy to follow an upward trajectory. As of March 2021, a total of 15.3 million Malaysians are employed and contributing to the country’s progressive workforce.

With a vast human resource and a progressive economy, a Professional Employer Organization or an Employer of Record service will be necessary to ensure that their working population is given the benefits they ought to have. Multiplier offers both to ensure a seamless HR transaction between employers and employees. Our solutions include effortless onboarding, employee contract disbursal in local languages, benefits and insurance administration, payroll processing and compliance.

Businesses seeking to expand operations in Malaysia traditionally will have to establish a subsidiary company in the country. They will have to comply with a long list of requirements that will take months to complete. Additionally, employees are protected through Malaysia’s Employment Act of 1995, which affords them minimum benefits.

Fortunately, Multiplier offers a much better option for any global company to tap into Malaysia’s talent market without having to set up a local entity. Our PEO services act as your intermediary to ensure that your employees get the best out of their work experience. 

PEO services may be charged in two ways: a flat fee per employee, per year and a calculated fee based on the company’s annual payroll. The former’s average cost will normally be between $900 to $1500 per employee in a year, while the calculated fee amounts to 3% to 10% of the overall payroll per year. 

Multiplier offers the same platform at a competitive price. Our costing ensures your company and its employees have the HR support they need to perform optimally. 

Malaysia has defined its employment regulations under the Employee Act of 1955. As mentioned earlier, this entitles each employee to have the salary and the benefits that their employers are bound to provide them. This ruling, however, only applies to the following applicable employee categories

• Employees whose monthly salary does not exceed to RM 2,000
• Employees who are engaged in manual labor, regardless of salary
• Employees engaged in the operation or maintenance of a mechanically propelled vehicle
• Employees who supervise or oversee other employees engaged in manual labor.
• Employees engaged in any capacity on a vessel (subject to certain other conditions).

For employees outside these categories, employers will have the option to provide them with statutory benefits provided that they specify it in their contracts upon hiring.

Overseas companies are given two options to seek out and employ Malaysians in their team: by setting up a local company within the country or having a third-party entity in charge of hiring in the country. 

Multiplier’s PEO can help businesses who are looking to expand in Malaysia by taking in great talents on their behalf. We will make sure that your company complies with the standards of employment in this region. 

But should you consider another route for taking in talents, here are some details you should look into.

Malaysia’s Employee Act has been a governing factor when creating contracts for employees. For those staff who fall under the categories mentioned above, their contracts will follow a tight regulation for leaves, statutory benefits, probation period and wage. 

For non-applicable employees, their employers will have the freedom to modify the contracts. But it has been a practice that they base the contract on the ruling, to provide their employees the security of their employment.

Malaysia has a very progressive tax policy. Annually, employees pay 0% to 30% of their income, based on their salary bracket. Below is a table to give you an idea:

Working Hours

Employees in Malaysia are required to work for 8 hours per day, 6 days a week. They must not, under any circumstances, be required to observe the following:

• More than 5 consecutive hours without a period of leisure of not less than 30 minutes duration;
• More than 8 hours in 1 day;
• In excess of a spread over a period of 10 hours in 1 day;
• More than 48 hours in 1 week.

There is no regulation under the Employee Act of 1955 that states bonuses as a requirement for each employee. Employers, however, have been including this in their company policy to give incentives to high-performing employees. They usually give employees a 13^th-month payment at the end of the year. 

The following are some of Malaysia’s non-working holidays:

Leaves

Annual Leave 

Employees in Malaysia are entitled to paid annual leaves, depending on their period of employment within the company:

• 8 days per year for employees who have worked 1-2 years,
• 12 days per year for those who have worked 2-5 years,
• 16 days per year for employees who have worked longer than 5 years.

Sick Leave 

In the same respect, the number of paid sick days will be based on the employee’s stay in the company: 

• 4 days per year if employed for 1-2 years,
• 18 days per year if employed 2-5 years,
• 22 days per year if employed longer than 5 years.      

For sick leaves that need hospitalization, an employee is entitled to 60 days of paid sick leaves, regardless of their period of stay with the company. 

Maternity Leave 

Female employees are entitled to 84 consecutive days of maternity leave. 

Paternity Leave

Male workers are entitled to 7 days of paid paternity leave. 

Bereavement leave 

Employees are usually granted 1-3 days for bereavement leave.

An Employer must specify the viable grounds for dismissing employees. They must issue a termination notice to which an employee will have the chance to explain. If necessary, an inquiry will be required to settle the matter and will be the basis for the company’s final decision. 

With Multiplier’s PEO/EOR solution, treading into a new market is faster and simplified.

Without the hassle of setting up a foreign branch or subsidiary, we can help you onboard your preferred candidate, handle HR issues and payroll, and ensure compliance with local laws.

Once you have chosen your desired talent, start generating and customizing employment contracts for them in a few clicks and manage the workforce from a single platform. You can also pay thousands of employees in Malaysian Ringgit with a single click.

Hire and expand in Malaysia using the best SaaS-based PEO service.  Contact us to grow your business today.