How Employer of Record in Malaysia Help to Save Hiring Costs

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Today’s global markets and industries have evolved: more and more businesses strive to create new conveniences and value for their customers while at the same time capturing increased revenues and profits.

With the rise of digital technology, international borders are becoming less relevant, and global companies are always on the pivotal lookout to expand their businesses beyond their national shores. 

At a glance, Malaysia is an attractive destination for global companies. With an estimated population of 32,730,000 people1 and a GDP growth of 3.9% in 20242 , Malaysia’s economy is a robust landscape for employers and working professionals alike. Favourable aspects such as the recovery of the global electronic cycle and the revival of global tourism today - which are some of the key contributors to Malaysia’s growth3  - help to boost the country as a bustling hub for highly-skilled talents. These talents comprise of Millennials and Gen Zs (which are projected to make up 70% of the global workforce by 2025) - and professionals who are competent in data analytics and cloud migration make up another portion of the talents that aligns with both technical and physical considerations for server infrastructure in the country.4

With these current hiring trends and needs, global businesses will find Malaysia is an attractive destination to hire talents, and to expand their businesses to.

Opening a foreign business entity in Malaysia

Starting a business in Malaysia requires careful financial planning due to various initial outlays. 

First and foremost, the minimum paid-up capital to establish a company is RM1. However, it's essential to note that different government agencies, banks, and other entities may impose their own minimum capital requirements for specific purposes - such as loan applications, licensing, or business transactions. Businesses need to ensure that paid-up capital declared reflects the actual funds available, as overstating this amount is illegal. For businesses involving foreign employees, specific commitments are necessary to issue work permits. Advisory and import/export businesses typically need a paid-up capital of RM1 million (US$210,000), while joint ventures with Malaysian partners require RM350,000 to RM500,000 (US$73,500 to US$105,000). 

Additionally, understanding the tax implications is crucial for foreign business entities in Malaysia. The standard corporate tax rate is 24%, but small and medium enterprises (SMEs) with a paid-up capital of RM2.5 million (US$533,000) or less benefit from a reduced tax rate of 17% on their initial RM600,000 (US$127,000) earnings. Proper financial planning and compliance with these regulations or labour law Malaysia can significantly ease the process of establishing a successful business in Malaysia.5

When it comes to registering a company in Malaysia, the process typically ranges from 3 to 5 business days for the initial business registration. However, this is just the first step. Before any business can commence operations, companies will need to undertake several other essential tasks, including applying for the necessary business licences and opening a business bank account. This timeline also assumes that employers have already secured their business premises. Considering these additional requirements, companies should expect the entire process to take anywhere from 30 to 60 working days if everything proceeds smoothly.6

Using Employer of Record Malaysia

Understanding an Employer of Record cost is crucial for managing business expenses effectively. First, many Employer of Record providers charge a one-off setup fee for new employees, which covers:

  • Contract setup
  • Onboarding
  • Payroll enrollment

The exact fee can vary by provider. Additionally, Employer of Record providers typically require a deposit for each employee, either as a lump sum or a percentage of their salary, to protect against any potential payment issues, such as company insolvency. This deposit is refundable upon termination of the employment contract if it remains unused.

While the Employer of Record handles payroll processing, companies must still cover the employee's salary and any local employer costs, also known as contributions. To remain competitive, companies may consider offering supplementary benefits like health insurance or higher pension contributions, which the Employer of Record can manage for an additional fee. The ongoing service fee is another cost, recurring monthly per employee - and can range from a few hundred to over a thousand dollars depending on the provider. Lastly, companies may encounter a foreign exchange (FX) fee if you choose to pay invoices in a different currency than that of the employee’s jurisdiction.7

How Employer of Record help to save costs - the key benefits

An Employer of Record offers significant cost-saving benefits, especially if global expansion is part of your business plan. 

Navigating the complexities of establishing a presence in a new country can be daunting without local expertise, but outsourcing to an Employer of Record simplifies this process. An Employer of Record acts as an on-the-ground staffing agency, streamlining your global growth objectives. From the initial research phase, an Employer of Record aids in exploring new markets by hiring local workers, allowing you to begin operations quickly and efficiently - without significant upfront investment.

Additionally, having a legal employer locally shields you from potential compliance issues related to independent contractors, reducing the risk of employment and tax violations. An Employer of Record ensures all local requirements are met by hiring contractors on your behalf. Moreover, a global Employer of Record allows you to pay new staff compliantly without needing to establish local legal business entities. This not only saves you the hassle of setting up an in-country entity but also expedites your project timelines, making your global expansion efforts more efficient and cost-effective.8

If you are looking for EOR Malaysia, AYP is your trusted partner that can help you with your hiring and business expansion process. Book a demo with us or talk to our HR experts here today!

  1. Employer of Record (EOR) Malaysia ↩︎
  2. Malaysia's economy likely grew 3.9% in Q1 of 2024: Advance estimate ↩︎
  3. A Guide On Malaysia’s Job Market Trends In 2024 ↩︎
  4. 7 Trends Employees and Employers in Malaysia Should Know in 2024 ↩︎
  5. The Complete Foreigner’s Guide to Starting a Business in Malaysia ↩︎
  6. 12 FAQs On Company Registration In Malaysia For Foreigners ↩︎
  7. How much does an EOR cost? A guide for global employers ↩︎
  8. Employer of Record (EOR): The Ultimate Guide ↩︎
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