Employer of Record (EOR) in Malaysia

An EOR in Malaysia allows businesses to enter the market quickly and help maintain compliance with local laws, all while reducing the overhead costs of establishing a local entity. Atlas HXM offers a seamless EOR service that handles all aspects of employment for workers who already have valid authorization to work in Malaysia from payroll processing to compliant administration.

Partner with Atlas HXM for a cost-effective, compliant solution to hire and manage your workforce in Malaysia.

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Country InsightsMalaysiaEmployer of Record

Quick Overview of EOR in Malaysia

Expanding into Malaysia doesn't have to mean drowning in paperwork or hefty setup costs. With an Employer of Record (EOR), you can bypass the complexities of local regulations and quickly hire employees, all while maintaining compliance with Malaysia's labor laws. From payroll processing and tax compliance to benefits management, an EOR takes care of the legal nitty-gritty like EPF contributions, so you can focus on growing your business without the need to set up a costly local entity.

The EOR model offers a low-risk, cost-effective alternative to setting up a subsidiary. Establishing a local entity in Malaysia can cost anywhere from USD 11,500 to USD 23,000 (MYR 50,000 to MYR 100,000) plus the cost of maintaining human resources (HR), legal assistance, accountants and more. It can also become highly administrative. By partnering with an EOR, you can avoid these setup costs and enter the market faster, avoiding the overhead of a physical office. This is especially beneficial for startups, SMEs, and businesses testing new markets, who need to act quickly and comply with complex local regulations.

Disclaimer: The contents of this article is not legal advice and should be used for reference only. If in doubt, please seek independent legal advice from a lawyer in the relevant jurisdiction.

What You'll Learn

  • Looking to hire in Malaysia without the hassle and administrative burden of setting up a local entity? An EOR helps you onboard employees while maintaining compliance with payroll and local labor laws.

  • With a Direct EOR, you gain control, faster onboarding, and stronger compliance. It is ideal for businesses aiming to scale quickly.

  • On the other hand, an Indirect EOR may be more cost-effective but comes with slower processes and added complexity.

  • EOR service fees typically range from USD 300 to USD 600 (MYR 1,350 to MYR 2,700) per employee per month.

  • Atlas HXM offers a robust Direct EOR solution, providing smooth market entry, compliance, and seamless employee management: all in one platform.

How an EOR Works

At Atlas HXM, we provide EOR services that ensure your business remains compliant with Malaysia's labor laws while you focus on growing your operations, free from administrative and legal burdens.

Candidate Selection

Atlas HXM does not recruit candidates, but will check the employment setup for compliance around new hires like validating right-to-work, reviewing contract terms against Malaysian rules, and configuring payroll and statutory obligations correctly. EOR providers in Malaysia, including Atlas HXM, do not sponsor work passes. Anyone hired via EOR must already hold valid work authorization or be sponsored by the client's own entity.

Employment Contracts

Atlas HXM drafts and administers employment contracts in compliance with the Malaysian Employment Act 1955. In the contract, we clearly outline Key Employment Terms to reduce risk of future disputes, such as:

  • Probationary period

  • Salary, benefits, and working hours

  • Leave entitlements and notice periods

Payroll & Benefits Management

Payroll is processed in Malaysian ringgit (MYR), including:

  • Accurate tax withholdings and EPF contributions

  • Statutory benefits such as SOCSO and EIS coverage

The EOR also helps maintain compliance with mandatory benefits, so employees are protected under Malaysia's laws.

Work Permit Compliance

In Malaysia, EOR providers cannot apply for or sponsor work passes. Once a worker already has valid authorization, Atlas HXM manages compliant employment, payroll, EPF, and statutory obligations in alignment with Malaysian government regulations.

Ongoing HR Support

Provides HR support, including: Leave management, employee relations and regulatory updates throughout the employee's tenure. This allows businesses to focus on core operations, while Atlas HXM handles ongoing compliance.

Costs & Pricing

EOR services in Malaysia are typically billed as a platform/service fee in the range of USD 300–600 (EUR 270–540 / MYR 1,350–2,700) per employee per month. This fee covers administration such as compliant contracts, payroll processing, statutory filings, and HR administration for workers who already hold valid work authorization. This service fee is separate from the employee's salary, benefits, taxes, and pass-related costs, which vary by role and jurisdiction. By using an EOR, companies avoid the cost and overhead of setting up a Malaysian entity, which can require USD 11,500–23,000 (MYR 50,000–100,000) upfront before any operational spend.

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What to Choose: EOR vs PEO

EOR

Employer of Record

An EOR becomes the legal employer for your talent in a country where you do not have an entity. The EOR handles compliant contracts, payroll, statutory benefits, tax filings, and labour-law adherence. You still direct the employee's work. This model suits companies expanding into Malaysia without wanting to form a local entity or take on compliance risk.

PEO

Professional Employer Organization

A PEO provides outsourced HR services like payroll, benefits, HR admin, but only when you already have a local entity. You remain the legal employer, and the PEO shares administrative tasks without taking on employer liability. This model is suitable when you are already established in the country and are only looking to offload HR administration.

What’s Best for You?

  • Choose an EOR when you want to hire in Malaysia without setting up an entity and want a partner who can take on contracts, payroll and compliance.

  • Choose a PEO when you already operate locally and just want HR support.

Work Life in Malaysia

Malaysia's employment framework is designed to balance operational needs with employee protections. Here's what you need to know:

Employment Types:

  • Permanent: Ongoing employment with full statutory benefits.

  • Fixed-Term: Hired for a specific project or defined duration with no maximum limit on renewals.

  • Casual: Flexible work basis and typically paid by the hour, with less employment law protection.

Probation Periods: There is no explicit legal requirement but probation periods are typically 3 months to 6 months and must be outlined in the employment contract. These periods allow employers to assess employee suitability before offering permanent employment. Notice periods during probation are typically shorter, and the EOR ensures that all terms are compliant with the Employment Act 1955.

Working Hours & Overtime: In Malaysia, the standard workweek is 45 hours (effective January 2023), with a maximum of 10 hours per day depending on business needs. Employees must receive a break after working continuously. For eligible employees covered by the Employment Act, overtime is paid at 150% of the basic hourly rate, limited to 2 hours per day, and the EOR ensures that all overtime is calculated correctly and that employee work hours comply with local regulations.

Leave Entitlements

Leave Type

Eligibility / Duration

Payment / Notes

Annual Leave

8 days (first 2 years), 12 days (2-5 years), 16 days (5+ years)

Paid by employer; based on service length

Maternity Leave

98 days

Paid by employer; effective January 2023

Paternity Leave

7 days

Paid leave for married employees (effective January 2023)

Sick Leave

14-22 days based on service length

Plus 60 days hospitalization; certified by registered medical practitioner

Public Holidays

All statutory holidays

Paid; handled by Atlas HXM

Vacation Leave (in addition to statutory annual leave)

As per company policy

Paid; unused leave typically paid out upon termination, subject to employment contract

Payroll & Benefits: Wages must meet the minimum wage of MYR 1,700 per month (fully effective nationwide from August 1, 2025), with progressive wage models applied in specific sectors. Atlas HXM manages payroll in MYR, EPF contributions (employer and employee), SOCSO and EIS contributions, statutory benefits, bonuses, and private health insurance. Supplemental benefits can include dental, vision, wellness programs, and professional development options.

Atlas HXM can help you manage these aspects and can help ensure that employees are supported and compliant with Malaysia's labor laws while businesses can focus on operations without administrative burdens.

More Reading

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What to Choose: Indirect vs Direct EOR

Direct EOR

The EOR owns the legal entities in the target country, coordinating all employment-related tasks directly. It offers faster onboarding, better compliance, and more control.

Best for: Businesses looking to scale quickly, expand long-term, or enter Malaysia with compliance.

Indirect EOR

The EOR provider acts as an intermediary between the business and a third-party local entity. While it can be cheaper, it may result in delays and compliance complexity.

Best for: Small teams or short-term hires with less urgent compliance needs.

What’s Best for You?

  • For Small Teams or Contractors: Indirect EOR could work, especially for temporary hires or testing a market.

  • For Scaling and Compliance: Direct EOR is the best choice. With Atlas HXM, you'll have control, faster entry, and streamlined compliance.

Taxes & Compliance

Malaysia operates on a calendar-year tax system, running from January 1 to December 31. Employers must submit monthly tax deduction reports by the 15th of the following month, annual tax clearance forms for departing employees, and provide Form EA (Statement of Remuneration) by February 28. Corporate tax returns are due within seven months of the company's financial year-end, with installment payments during the year.

Category

Details

Employer Payroll Tax

EPF ER contributions: 12-13% of gross salary; 2% of gross salary for foreign employees

  • Employee EPF contribution is 11%, they may choose a higher rate

  • SOCSO contributions: ~1.75%

  • EIS contributions: ~0.2%

  • Monthly tax deduction and reporting to LHDN

Employee Payroll Tax

Residents: progressive income tax 0%–30%

  • Non-residents: 10-30% depending on income type.

Pension System (EPF)

Mandatory retirement savings scheme for amounts over MYR 10

  • Minimum retirement age: 60

  • Withdrawals at 55 as lump sum or annuity

Service Tax & EOR Costs: Malaysia applies service tax at 8% on professional services. EOR services may be subject to this tax, either included in quoted fees or added separately. Companies should factor these additional costs when budgeting for EOR services.

Atlas HXM handles tax compliance, including progressive income tax calculations, EPF contributions, year-end filings, and expatriate tax management, ensuring businesses remain compliant with local laws while minimizing administrative burden.

Termination

Employees must give written notice for termination, with statutory minimum notice periods ranging from 4 weeks to 8 weeks depending on length of service. Probationary employees typically have shorter notice periods. For employer-initiated terminations (except for dismissal due to employee’s own fault/misconduct), termination benefits/severance pay is required for employees with over 12 months of service, ranging from 10-20 days' wages per year of service. The EOR helps ensure proper handling of terminations, including notice periods, final wages, and required documentation.

5 Things to Look for in an EOR Provider in Malaysia

  1. Local expertise and knowledge of labor laws, EPF contributions, and Malaysian government requirements.

  2. Advanced technology for payroll, reporting, and HR system integration.

  3. Experience in your industry and handling work permit management.

  4. Strong compliance track record and relationships with government agencies and legal advisors.

  5. Global presence to support multi-country expansion, with verified security and compliance standards (ISO 27001/27017/27018, GDPR).

Speak to an Expert

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Atlas HXM provides direct EOR services, managing payroll, compliance and benefits efficiently. Our unified platform automates HR, payroll, and compliance tasks, while offering premium employee support, global benefits, and access to 9,000+ learning courses. Recognized by Everest Group PEAK Matrix 2025 and NelsonHall NEAT Assessment 2025, Atlas HXM combines compliance, technology, and global expertise.

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FAQs

Can an EOR in Malaysia manage employees who already have valid work authorization?

Yes. Once authorization is already in place, Atlas HXM can employ and manage the worker under the EOR model, including payroll, EPF, benefits and compliant administration.

What are the mandatory benefits I must provide to Malaysian employees?

Mandatory benefits include EPF contributions, SOCSO and EIS coverage, annual leave (8-16 days), sick leave (14-22 days), maternity leave (98 days), and paternity leave (7 days).

What is the minimum wage in Malaysia?

As of February 2025, the minimum wage is MYR 1,700 per month for businesses with 5+ employees or professional classifications.

How much notice is required for termination?

Notice depends on length of service: 4 weeks (<2 years), 6 weeks (2-5 years), 8 weeks (5+ years), unless a longer period is otherwise stated.

What are the EPF contribution rates for employers?

Employer EPF contributions typically range from 12-13% of gross salary for amounts over MYR 10.

Can employees work overtime without limits in Malaysia?

Overtime is regulated with specific payment requirements at 150% of basic rate, limited to 2 hours per day, and total weekly hours cannot exceed agreed maximums.

         

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