Employer of Record (EOR) Arrangements in Malaysia

Employer of Record (EOR) arrangements are becoming an attractive option for businesses looking to expand into Malaysia without setting up a local entity. These arrangements allow companies to hire employees through a third-party service provider, which acts as the legal employer while the client company oversees the employees' tasks. Here's an overview of how these arrangements work in Malaysia:

Employment Laws

EOR arrangements in Malaysia need to align with the country's employment standards, such as those outlined in the Employment Act of 1955. This Act sets out rules regarding wages, working hours, and employee entitlements. However, businesses should note that the East Malaysian states, namely Sarawak and Sabah have their own Labour Ordinances, which differ from the laws in Peninsular Malaysia and may have different compliance requirements.

Immigration Considerations

If you require foreigners in Malaysia and intend to payroll them under an EOR arrangement, work permits are also required. Some EOR providers assist in managing these immigration requirements to ensure your workforce is legally employed. Additionally, it is important to note that the immigration rules in Sarawak and Sabah differ significantly from Peninsular Malaysia. Even West Malaysians need work permits to work in these states due to special provisions under the Malaysia Agreement. Complying with immigration rules are also an important aspect of employment compliance.

Industrial Relations

The Industrial Relations Act 1967 applies across all of Malaysia and regulates workplace relations, including matters related to trade unions, collective bargaining, and dispute resolution. This Act may influence how the employee-employer relationship is characterized in an EOR arrangement, making it a key consideration when employing staff under such an arrangement.

Key Benefits

Nonetheless, the key benefits can be summed up as follows:

1. Simplified entry into the Malaysian market.

2. Reduced administrative burden for employers.

3. Flexibility to scale operations based on business needs.

Final takeaways

Businesses engaging EOR providers should ensure these providers have a strong understanding of Malaysian laws, including employment, immigration, and industrial relations requirements. Adhering to both national and state-level regulations is essential for maintaining compliance.

This approach makes EOR arrangements a useful solution for businesses expanding in Malaysia, provided all employment and immigration requirements are met. Our website and its contents are provided for general information purposes only and nothing on this website or in its contents is intended to provide professional advice. Please contact us at info@migratesafe.org or +6082-295175 for more information.