Malaysia PEO And Employer Of Record (EOR)

  • Post category:Malaysia

Understanding the technicalities and intricacies of a Malaysia PEO and Employer of Record (EOR) is crucial to ensure the growth and success of your company. Refer to our guide below for further details.


Professional Employer Organisation (PEO)

PEO is an abbreviation for Professional Employer Organization, and it refers to services designed for businesses with a legal entity in Malaysia that desire to outsource their payroll.

Because payroll processing is complicated and can result in losses, hiring the services of a PEO can significantly decrease your company’s risks and expenditures.

Among the benefits of a Professional Employer Organisation (PEO) are as follows. 

  • Able to concentrate only on the advancement of the firm.
  • Improved service to workers.
  • Compliance is ensured.

Employer on Record (EOR)

Employer of Record (EOR) services are provided to companies who do not have a legal company in Malaysia but wish to recruit in the country. An Employer of Record is also responsible for employee benefits, payroll, workers’ compensation, and recruitment.

The employer of record becomes the legal employer, and the corporation retains responsibility for the day-to-day administration of personnel.

Among the benefits for Employer on Record (EOR) are as follows –

  • Able to manage HR and administration effectively.
  • Cost-effective strategy.
  • Maintain market competitiveness while increasing corporate productivity.

By utilizing PEO/EOR services, business owners could find and hire staff without the need for a local corporation in Malaysia, allowing the company to continue to grow.

Malaysia PEO and Employer of Record


  • A foreign company that intends to start a business in Malaysia without incorporating a local entity.
  • Intends to reduce the cost of doing business in Malaysia
  • Planning to hire/place workers for a short-term project 
  • Intends to wind down a Malaysian company without laying off workers


If your company does not have a legal entity in Malaysia but you want to hire employees there, you can use the services of an Employer of Record (EOR). 

Relin Consultants is a company that offers EOR services and takes on the employment and full liability responsibilities for your employees in Malaysia.

The process of using Relin Consultants EOR services involves selecting and interviewing the candidates you want to hire. 

Once you have made your decision, our team will arrange a local labor contract with the new employee and a service contract between your organization and our firm.

On a monthly basis, Relin Consultants will handle all payroll processing in Malaysia, ensuring that it complies with local employment laws. You can maintain a normal working relationship with your team while Relin Consultants manages payroll and HR liabilities.



Individual income tax rates in Malaysia are calculated using a progressive tax bracket system. Incomes of less than RM5,000 per year are not taxed. We have summarized the tax bracket, which can be seen below.

Rate Income
0% RM0 – 5,000
1% RM5,000 – 20,000
3% RM20,000 – 35,000
8% RM35,000 – 50,000
14% RM50,000 – 70,000
21% RM70,000 – 100,000
24% RM100,000 – 250,000
24.5% RM250,000 – 400,000
25% RM400,000 – 600,000
26% RM600,000 – 1,000,000
28% RM1,000,000 – 2,000,000
30% RM2,000,000 and above

The Malaysian Social Security System (SOCSO), will give monetary support to an employee and their family in the case of an employee’s accidental death, disability, or sickness in Malaysia.

The Employment Provident Fund (EPF) protects pensions and allows employees to withdraw money for specific reasons. Among these reasons could be the purchase of a home or the treatment of a serious medical condition.

These contributions are not required if the employee is a foreign national. Contributions are, however, necessary for Malaysian citizens and permanent residents.


  • In Malaysia, the work week cannot exceed 48 hours per week.
  • Work should not exceed 8 hours per day or 48 hours per week on average.
  • Work can be done for a maximum of 12 hours each day.
  • Employees are entitled to a 30-minute break after 5 hours of continuous labor or a 45-minute break after 8 hours.

Employees at companies with less than ten employees who are not subject to the Malaysia Employment Act (EA) may freely negotiate their working hours.


Every Malaysian employee is entitled to at least 13 customary holidays each year. However, each state in Malaysia may be eligible for a certain holiday at a different date. Therefore, depending on the state that you are in, the public holiday that you are entitled to might differ from someone else. You can refer to the latest public holiday dates at the Prime Minister’s Office of Malaysia Official Website. If a public holiday occurs on a rest day, the working day immediately after the rest day is designated as a paid holiday in its place.


Sick leave

Most Malaysian employers are governed by the Employment Act when it comes to sick leave. To be covered under the local employment laws, the employee must have a contract, earn less than MYR 2,000 per month, and perform particular tasks, such as vehicle operations. Employees who satisfy these conditions will be granted sick leave based on the following criteria: 

  • Employees who have worked with the firm for less than two years are entitled to 14 days of sick leave every year.
  • Employees who have worked with a firm for more than two years but less than five years are entitled to 18 days of sick leave every year.
  • Employees who have been with a company for more than five years are entitled to 22 days of sick leave per year.

Maternity and paternity leave

Expectant mothers in Malaysia are entitled to up to 60 days of uninterrupted leave. During their pregnancy, female employees may be eligible for maternity payments, which count against their leave benefits. Expectant fathers can begin to leave up to 30 days before the due date. However, they are unable to begin this type of leave following the birth of their child.

Vacation leave

Employees in Malaysia are entitled to paid leave on a yearly basis. The length of time an employee has been with a firm determines the quantity of total leave. Vacation leave is calculated based on an employee’s length of service with a firm and is as follows:

  • Employees who have worked with the firm for less than two years are entitled to eight vacation days each year.
  • Employees who have worked with the firm for more than two years but less than five years are entitled to 12 vacation days each year.
  • Employees who have worked with a firm for over five years are entitled to 16 vacation days each year.


In Malaysia, probationary periods typically last between one and three months. The first probationary term might be extended for an additional 1-3 months. The employee must be notified in writing of the extension before the end of the first period. An employer may also fire an employee by providing written notice of termination. According to the employment contract, the duration of notice is the same in both cases. Where no notice time is provided in the employment contract, the notice period shall be:

  • Less than two years of service: at least four weeks
  • Two years or more of service but less than five years: a minimum of six weeks
  • Five years of service or more: eight weeks’ minimum

Either the employer or the employee has the option of terminating the employment contract without giving notice by paying the other party an indemnification in place of notice. Employees are not entitled to termination or layoff benefits in the following situations: 

  • On the termination date, the employee had been with the company for less than a year.
  • The service contract is extended, or the employee is re-engaged under terms and conditions that are not less beneficial than his prior contract.
  • Seven days before the contract’s termination date, the employer offered to extend it on no less advantageous conditions.
  • After obtaining proper notice of contract termination, the employee quits service without the employer’s prior approval or without paying the indemnification stipulated in the service contract.


What are the advantages of PEO services for my company?

  • Business growth to Malaysia without the establishment of a local company
  • Business consulting and assistance
  • Common service centre 
  • Reduced risk and upkeep
  • Adherence to Malaysia employment legislation and compliance.

In Malaysia, what are the employer contributions?

Employers must make contributions depending on their employees’ salaries: 

12% – 13%

Provident Fund for employees under the age of 60

4% – 6.5%

Provident Fund for employees over the age of 60

1.25% – 1.75%

Social Security


Employment Insurance


HR Development Fund for companies with more than ten workers

What are the Immigration Laws in Malaysia?

The immigration laws in Malaysia are governed by the Immigration Act 1959/63 and its regulations. The main purpose of these laws is to regulate the entry, stay, and exit of foreign nationals in Malaysia, and to ensure the security and well-being of the country.

Here are some of the key provisions of the Immigration Act and its regulations:

  • Visa and Entry Requirements: Foreign nationals entering Malaysia are required to obtain a valid visa or other travel documents, depending on their nationality and the purpose of their visit.
  • Passes and Permits: Foreign nationals who wish to stay and work in Malaysia must obtain the appropriate pass or permit, such as the Employment Pass, Professional Visit Pass, or Social Visit Pass.
  • Passports and Travel Documents: Foreign nationals must have a valid passport or other travel documents when entering or leaving Malaysia.
  • Reporting and Notification: Foreign nationals are required to report to the immigration authorities within a specified time after their arrival in Malaysia, and to notify the authorities of any changes to their personal information or employment status.
  • Deportation and Detention: Foreign nationals who violate immigration laws may be detained and deported, and may also be subject to fines and other penalties.
  • Immigration Offences: A range of offences are outlined in the Immigration Act, including offences related to illegal entry, overstaying, and working without a valid permit.

It’s important to note that immigration laws and regulations in Malaysia are subject to change, and foreign nationals should consult the immigration authorities or seek legal advice if they have any questions or concerns about their immigration status in Malaysia.

What is the requirement to apply for an employment Pass?

To apply for an Employment Pass in Malaysia, you must meet the following requirements:

  • Job Offer: You must have a valid job offer from a company registered in Malaysia.
  • Minimum Salary: The minimum monthly salary requirement for an Employment Pass is RM3,000 for positions in the Information and Communication Technology (ICT) sector and RM5,000 for all other sectors.
  • Qualification: You must have a degree from a recognized institution or relevant work experience in the field of the job you are applying for.
  • Age: There is no age limit to apply for an Employment Pass.
  • Health Requirements: You must be in good health and free from any contagious diseases.
  • Security Requirements: You must not have any criminal record and must not pose a threat to the national security of Malaysia.
  • Valid Passport: You must have a valid passport with at least six months of validity.
  • Application Form and Fees: You must complete the Employment Pass application form and pay the required fees.

It’s important to note that the Immigration Department of Malaysia has the right to approve or reject any Employment Pass application based on their discretion and assessment of the applicant’s qualifications and background.