Employer of Record Malaysia
Malaysia is chiefly described as one of the most prosperous countries in Southeast Asia. In the past few years, its economy has shown vigorous growth and the businesses are proceeding towards innovation and technology. Malaysia is known to be the most rapidly developing country in Asia. The country offers a sound financial and governmental structure as compared to other markets. The ethnic diversities, English proficiency, and the fact that it is home to many big companies make Malaysia an attractive business space. Moreover, the regulatory and budgetary background promises fewer taxes globally.
Our Malaysia employer of record would give you insights into the compensation, benefits, and facilities required for your employees in Malaysia. Here are some of the important factors you need to know before you start hiring in Malaysia:
Table of Contents
Hiring in Malaysia
Before hiring an employee in the country, you need to understand the process well. It depends on employers to present specific criteria about the qualifications and attributes for the job’s relevancy. However, employers should avoid unfair discrimination.
Unlike other jurisdictions, Malaysia has no particular restrictions for conducting background checks on employees by accessing the information available on social media platforms. Employers should explain the scope of the job role to the applicants during the interview and all the basic information should be communicated. This information will establish a clear understanding right from the start. Once an employer has decided to hire an individual, a letter of employment should be ready. An employee should accept this letter. This simple letter should have all the basic information like job position, remuneration, leave, and termination.
Another way is to have a full commercial contract for senior roles. It usually includes additional details like employee benefits, bonus terms, and confidentiality clauses. Larger corporations prefer an employee handbook with all-inclusive terms and conditions. It can be comprehensive and talk about corporate work culture. However, it is not recommended for employers who have different employment terms and conditions for their staff members.
Employers must document the employment terms and conditions in detail to avoid legal hassles. The terms of employment may vary for different employees depending on varied factors like job role, scope, and industry. But most common details should be there in the contracts for employees like a job description, basic salary, deductions, leave entitlements, performance reviews, and employee benefits.
The employment compliance system in Malaysia is governed as per the provisions of the Employment Act 1955. It outlines the setting of minimum and maximum criteria for various aspects of a business and procedures to be followed. Any clause provided in a given employment contract between an employer and an employee offering fewer benefits to the latter is considered void.
For any business looking forward to the growing opportunities in Malaysia, the process to comply with these employment laws may seem a little hard in the initial stage. Hence, it is recommended to partner with a credible Employer of Record Malaysia while expanding your business
Working Hours – According to the provisions of the Malaysian Employment Act, the maximum limit for working hours per day is 8 hours & 6 working days per week. The total workweek should not exceed 48 hours. However, the law puts several restrictions on certain categories of employees such as women in the industrial or agricultural sector. The law does not allow them to work between 10 p.m. and 5 a.m in the applicable cases.
Compensation – As per the amendment passed in February 2020, the minimum revised wage in Malaysia is 1200 MYR every month. Additionally, an employer is also expected to include the same in a written and duly signed employment contract. The law also governs overtime pay. The employees are entitled to get 1.5 times more than their regular salary if they work for more than 48 hours per week. Given the complexities of the business environment, managing wages and compensation is not always an easy task. Hence, getting help from a trusted Employer of Record Malaysia can enable you to carry out your business expansion effortlessly.
Probation Period – There is no law that governs the duration of the probationary period in Malaysia. The length of the probationary period entirely depends on the employment contract between an employer and the employee. However, it usually lasts for 3 to 12 months in most industries.
Bonus – Under Malaysian law, the employer doesn’t mandatorily need to offer a bonus to their employees. While an employer can prefer to offer a bonus, it is not a mandatory requirement from the legal perspective.
Termination and Severance – As far as the case of termination of employment in Malaysia is concerned, an employer can terminate any employee provided that they have a reasonable cause. They must also inform the employee of their termination and the reason for it. The law provides that the employer must also issue a termination letter highlighting the reason for an employee’s termination from the employment.
On the other hand, severance is payable if the termination is due to retrenchment or closing of the business. As per the law, the employees are entitled to fair and reasonable benefits if the financial position of the employer permits. Currently, the favorable amount for the same is equivalent to the employee’s one-month salary for each year. The employee is entitled to 10 days of wages for or every year if they have been employed for less than 2 years. It can go up to 15 days, and 20 days in case the employment duration lasts for or more than 2 years and 5 years respectively. An Employer of Record Malaysia can be of immense help in managing these tasks effortlessly.
The employee entitlements in Malaysia include various benefits, including maternity leaves, paternity leaves, bonus vacations, sick leaves, health benefits, and pension. A majority of these entitlements are governed by the employment law but the terms and conditions depend on the employment contract for other categories. If you wish to expand your business in Malaysia, you must consider getting assistance from a reputable Employer of Record to ease your business expansion.
Maternity Leaves – As per the latest amendments, the mandatory maternity leave period for private-sector employees is 60 consecutive days with full pay. However, the employer may prefer to extend the leave, but it will be unpaid. For public sector employees, the period for maternity leave is 90 days.
In addition to this, the employee must have worked under the same employer for at least 90 days in the last four months before starting the leave. The employees are also entitled to maternity allowance, which is equivalent to their regular monthly salary.
Vacations – As per the commonly adopted policies, employees are entitled to 13 vacation days if they are employed by the same employer for less than two years. However, the entitlement goes up to 22 vacation days per year if the employment exchange 15 years of service.
Sick Leaves – The employees are entitled to sick leave only under procedural examination by a professional medical practitioner, which is generally at the employer’s expense. Once the evaluation is completed, the employee is entitled to a sick leave of 14 days every year if they have been employed for less than two years. The duration for sick leave goes up to 18 days per year if the employment is up to 2 years but less than five years. Moreover, any employee that has been employed for at least five years or more is entitled to a second of 22 days every year. These sick leave entitlements are applicable only for illnesses excluding hospitalization. If there is a need to hospitalize an employee, the employer must provide a sick leave of a total of 60 days including the paid sick leave days.
Paternity Leaves – By company policy, employees are entitled to paternity leave depending on the employment contract. The leave is usually provided for three days concerning each confinement. However, the employer can restrict the paternity leave to five confinements depending on their employment agreement with the employee.
Health Benefits – Providing health benefits to the employees is optional in Malaysia. It means that there is no mandatory requirement for employers to provide any medical coverage or insurance as a benefit to their employees. However, it does not imply that there is zero protection for employees. The Social Security Organization offers two insurance schemes for eligible employees. According to the first scheme, the employees are entitled to protection against occupational diseases or accidents due to their employment. The employees can also avail of benefits under the invalidity scheme that provides 24-hour coverage to eligible candidates suffering from invalidity or death respective or whether it is associated with their job or not.
Pension – Pension regulations in Malaysia are governed by The Pensions Act 1980. In Malaysia, the employee provident fund is the national compulsory saving scheme for employees working in the private sector. It is fully funded and managed through contributions equivalent to 23% of an employee’s total payroll. Out of this, the employees must contribute 11% while the employers are expected to contribute a minimum of 12% or at a voluntarily higher rate.
Other Benefits – Other benefits include a monthly bonus that the employer can prefer to pay their employees. Many companies provide vehicle purchase interest subsidies up to 70% of the interest incurred per annum, car allowance to workers based on job grade, and a special discounted rate on applicable cases.
Types of Employment in Malaysia
Indigenous Employees – The terms of employment in the contracts could be either fixed or undetermined. If the fixed-term contract is extended, again and again, the court could perhaps identify that employee as permanent. The employees under the fixed-term contracts are eligible for statutory benefits.
Foreign Employees – If foreigners wish to work in Malaysia, they must obtain a work permit from the Immigration Department. The permit depends upon the employee and the kind of work they want to do. Skilled foreign employees must acquire an Employment Pass for the paid work. There are three types of Employment Passes determined by the employee’s salary and period of their contracts.
Employment passes in Malaysia – A 1-year service with any Mexican company provides the employees with an earned leave of 6 days, which should be used for the vacation only. It adds two days of additional leaves with every passing year of service. After five years, when the leaves amount to 14 days, employees are benefitted to avail two additional paid leaves.
- Category 1 Pass: This includes individuals holding key positions in a company, such as directors, CEO, project managers, etc.
- Category 2 pass: This includes individuals holding managerial positions in a company.
- Category 3 Pass: This included non-executive positions in a company, individuals having significant work experience, and specific technical skills.
Infotree global via their EOR services will take care of all such employee responsibilities in compliance with the employment laws for you and your company.
Payroll and Tax in Malaysia
The rules for payroll and taxation are quite different in Malaysia depending on whether a company has local or foreign employees. In some cases, businesses prefer to set up one segment of the business in one country while choosing another one for the rest of the subsidiaries. This can be easily managed with the help of Employee of Record Malaysia. For larger companies, an employer can provide local and remote payroll to their employees.
The standard corporate income tax rate for businesses in Malaysia is 24%. However, the criteria are different for domestic companies that start from 17% and can go up to 24%. Similarly, the personal income tax for a non-resident individual in Malaysia remains at a flat rate of 30% on the total taxable income. However, a qualified person as defined in the law working under an employer in Malaysia is liable to pay personal income tax at a rate of 15%. Concerning withholding taxes, every non-resident is exempted from the payment of income tax on the fees if the services are offered outside Malaysia. For employees working in Malaysia, it stands at a rate of 10% in case of contract payments as per the Income Tax Act, 1967. It is also mandatory to pay social contribution tax. Any employer employing one or more employees must make a certain fraction of contribution towards social tax. It should be paid within 15 days of the next month at a rate of 6% per annum for each day in case of late payments. Moreover, if you are thinking of taking your business to the next level, expanding it to new markets can be a great idea. You can do so by extending your business operations in Malaysia and hiring an Employer of Record to achieve your global growth goals!
Type of Visa and work permits in Malaysia
For any business owner looking forward to setting up or expanding their business operations in Malaysia, it is essential to know about the classes of visa and work permits. There are three main categories of work visas you must know while expanding your business operations in Malaysia. You can also consult an Employer of Record for assistance in obtaining work visas for your employees.
The first category of work visas is an employment pass, which is also one of the most common visas for foreign individuals. Employers are required to get approval to onboard an employee and get this particular visa. It allows the employees to last for or a maximum of 5 years depending on the given case all work duration. The process often gets complicated and hard to manage. Hence, we would recommend you get assistance from a reputed Malaysia Employer of Record.
The second category is a temporary employment pass that is further divided into foreign worker temporary employment pass and foreign domestic helper temporary employment pass. Both these categories of visas have a validity of 1 to 2 years, and the employees are required to meet certain qualification criteria to obtain them. Professional visit pass is another category of visa applications for foreign individuals looking for jobs in Malaysia. It holds the validity of 12 months which means that any foreign company employing these candidates will be temporary employment.
Challenges when Expanding into Malaysia
• While expanding your business in Malaysia, you might face a few challenges concerning various aspects of Malaysia as an economy. The first hurdle in your way can be the regulatory environment because obtaining licenses will need you to take state and federal approval. Malaysia has several foreign investment promotion agencies on various levels with different responsibilities. Hence, we would always suggest you work with a reputable Malaysia Employer of Record company for additional assistance. It will help you go through the local business practices and understand the local business environment.
• Apart from this, constantly changing government policies may also become a challenge with fluctuations in various categories. You will have to keep an eye on everything from the re-introduction of a new tax or a change in the minimum wages. Simultaneously, you might also have to comply with any expected fluctuation in potential cause factors to consider your business decision or financial planning. Hence, it’s essential to seek help from the best Malaysia Employer of Record to streamline your business operations!
• Going global with your business can be a tough decision when it comes to execution. However, an Employer of Record service can immensely benefit you in streamlining the entire management. So, if you are looking forward to diversifying your business scope and entering Malaysian markets, do not think twice. Get in touch with us for the best Employer of Record services and we promise to serve you with the best experience!
Benefits of Malaysia Employer of Record
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees distributing payroll or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
Market Access – Relying on the professional expertise of an Employer of Record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of Malaysian employees to work for its company. Besides quick access to the Malaysian market, the EOR also enables the client to ease off worries related to payroll and HR.
In Country Laws – It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in Malaysia, you need to be aware of the payroll and taxation rules. With Malaysia Employer of Record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expanse management, withholding charges, or business tax, an EOR company takes care of it all with total compliance.
Diverse Solutions – No matter whether you already have a company on international location or you are going to establish the one, an employer of record can help you significantly. The EOR Company can hire staff on your behalf without having the need of setting up a branch in Malaysia. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as they can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Global expansion is the ultimate step for every company. It is important and quite complex. We specialize in providing hiring services worldwide. If you are setting up a business in Malaysia, we are your go-to solution. Our experts are dealing with employment hassles forever. By letting them handle your employment tasks, companies can save a lot of money and effort. You can put all that effort into your business operations to progress further. Also, we help you incur profits from the rich opportunities of the Malaysian market. This way, you can save 60% of the time and energy that you would have otherwise invested in setting up a branch entity. We are ready to manage your company’s hiring responsibilities while ensuring employment compliance.
If you are seeking a professional employer of record service in Malaysia, do not waste your time searching for any other service provider, and contact us today. We are committed to providing the best result to our customers and will make your company’s task our priority.