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12 min read

How to Hire Using an Employer of Record (EOR) in Malaysia (2025)

Employer of record

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Author

Jemima Owen-Jones

Last Update

June 27, 2025

Table of Contents

What is a Malaysia Employer of Record?

Top reasons to use an EOR for employment in Malaysia

How to hire in Malaysia: Step-by-step guide

Employment compliance tasks an Employer of Record manages in Malaysia

How much does it cost to hire through an EOR in Malaysia?

Choosing the best Malaysia EOR service provider

Is Deel Employer of Record a strong choice for hiring in Malaysia?

Hire employees in Malaysia confidently with Deel Employer of Record

Key takeaways
  1. Setting up a Malaysian entity to hire local talent can take months and cost over MYR 137,378 in initial legal, tax, and payroll setup.
  2. A Malaysian Employer of Record lets you engage talent through its local entity, bypassing setup delays, legal costs, and compliance headaches.
  3. Deel EOR owns its Malaysian entity for full control, supports hiring in Malaysia and 150+ other countries, offers transparent pricing, monitors compliance in real time, and has top G2 ratings.

Expanding your business and hiring in Malaysia is a powerful way to tap into Southeast Asia’s talent, attractive salary-to-skill ratios, and English-speaking workforce. However, the vibrant Malaysian economy and evolving labor regulations can create hurdles for foreign employers.

Setting up an entity in the country, opening bank accounts, managing payroll processes, and enrolling staff with the Employees Provident Fund (EPF) and Social Security Organization (SOCSO) can be time-consuming and costly, often taking months and substantial legal spend.

Employer of Record (EOR) services remove this friction. Instead of setting up your own entity in Malaysia, you simply partner with a licensed local legal employer—an EOR—who hires workers on your behalf. The EOR ensures compliance with local laws, handles payroll, statutory contributions, employment contracts, and HR administration, letting you focus on your product, culture, and global expansion.

Deel’s Malaysia EOR wraps these services into a single solution: hire, pay, grant equity, manage devices, administer employee benefits, and track compliance in real time in Malaysia and across 150+ other countries.

See also: What’s the Fastest Way to Enter Markets and Hire Globally?

What is a Malaysia Employer of Record?

A Malaysia Employer of Record is a locally incorporated organization that legally employs your workers while you retain operational control over their daily tasks and performance. This two-layer model streamlines employment in Malaysia:

Legal employer (EOR): The EOR signs the employment contracts, registers employees for EPF (12–13%), Social Security Organization SOCSO (1.75%), Employment Insurance System (EIS) (0.2%), and HR Development Fund (HRDF) (1% where applicable). It withholds Monthly Tax Deductions (PCB) and files all statutory returns, ensuring full compliance with Malaysian labor laws
Operational employer (you): You direct the employee’s projects, targets, and career trajectory

Because the EOR serves as the employees’ legal employer, liability for Employment Act breaches, late PCB filings, or miscalculated overtime rests with the EOR, not you. Deel EOR offers additional compliance assurance with its Compliance Hub, real-time law change alerts, and a robust payroll engine trusted by thousands of global organizations.

See also: Employer of Record (EOR): A Complete Guide

Deel Employer of Record
Hire employees globally with the #1 Employer of Record
Deel provides safe and secure EOR services in 100+ countries. We’ll quickly hire and onboard employees on your behalf—with payroll, tax, and compliance solutions built into the same, all-in-one platform.

Top reasons to use an EOR for employment in Malaysia

Partnering with a Malaysia EOR delivers four immediate advantages for global companies:

  1. Faster market entry: Skip the 4+ weeks needed for setting up a local entity and obtaining tax IDs
  2. Lower upfront spend: Avoid initial set-up costs, including capital deposit requirements, legal fees that can exceed MYR 137,378
  3. No PCB headaches: The EOR calculates and remits Monthly Tax Deductions (PCB) under LHDN’s rules
  4. Misclassification protection: Recent court rulings in Malaysia penalize companies for mislabeling workers as contractors—an EOR ensures compliant employment relationships

Choosing Deel was easy—they offer unmatched compliance and HR support that scales with fast-growing companies like ours. They’ve been the best partner for executing our global hiring strategy.

Yunjung (Rina) Bae,

Director of People, MarqVision

How to hire in Malaysia: Step-by-step guide

Use this eight-step checklist to compliantly and confidently onboard your first Malaysian employee with an Employer of Record.

1. Choose an EOR with a wholly-owned Malaysian entity

Confirm the EOR fully owns its licensed Malaysian entity, not just partners with one. Full ownership lets the EOR manage statutory payments, sign contracts quickly, handle audits fast, and avoid extra middleman fees.

Deel EOR owns its own Malaysian entity and keeps payroll data on secure Malaysian servers to ensure compliance with the Personal Data Protection Act (PDPA).

Tip: Request the EOR’s Suruhanjaya Syarikat Malaysia (SSM) certificate and EPF registration letter as proof.

2. Book a demo and verify social proof

Get a live demo of EOR’s platform to see how it creates PCB files, tracks leave, and ensures compliance. Review client testimonials, G2 ratings, and Trustpilot reviews to confirm that existing customers are happy with payroll accuracy and customer support.

Tip: Deel EOR stands out with the highest user satisfaction score and largest market presence among Employer of Record products.

3. Request a transparent EOR quote

Request a clear cost breakdown: employee gross salary, all statutory employer contributions (EPF 12–13%, SOCSO 1.75%, EIS 0.2%, HRDF 1%), plus the flat EOR fee. Deel’s fixed monthly fee per employee ensures predictable budgeting.

Tip: Compare costs before you expand—read our article EOR vs. Entity Costs: What’s More Affordable?

4. Submit a 12–24-month hiring plan

Share your projected headcount, roles, and salary ranges. The EOR can pre-register for HRDF if you have 10+ employees and forecast cash needs for customary bonuses like the 13th month. Deel’s Workforce Planning tool models these costs in real time.

Tip: Use Deel Compensation benchmarking to access market-rate salary data by role and city.

5. Create the employment contract in the platform

Leverage the EOR’s contract generator, pre-loaded with clauses required by Malaysian labor laws: working hours (max 45/week), overtime (1.5× on weekdays, 2× on rest days), and statutory probation (3–6 months). Deel lets you easily add IP assignment and confidentiality clauses.

Tip: Include a probation termination clause with 14 days’ notice to avoid wrongful dismissal claims.

6. Confirm the candidate’s right to work

Malaysian citizens and permanent residents do not require special permits. Foreign talent must have valid Employment Passes; the EOR coordinates with the Expatriate Services Division. Deel Immigration provides visa sponsorship, renewals, and dependent visas and permits.

Tip: Run background, work authorization, and work permit eligibility checks at the offer stage to avoid last-minute surprises.

7. Run the onboarding workflow

The EOR creates EPF, SOCSO, and EIS accounts, issues offer letters, and collects tax forms (TP3, TP1). Deel provides the option to add background checks and arrange IT device logistics for day-one readiness.

Tip: Use Deel Engage to roll out training and performance goals, and Deel IT to provision equipment.

8. Maintain ongoing compliance

Malaysian labor laws evolve rapidly. In 2024, amendments raised the minimum wage to MYR 1,500 and reduced the workweek cap to 45 hours. Deel’s Compliance Hub flags such changes and automatically updates payroll processes.

Tip: Subscribe to Deel’s compliance newsletter to receive clear and concise summaries of relevant compliance changes.

Platform Tour
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See how easy it is to add and configure a brand-new employee contract through the Employer of Record service. Click to launch a platform demo.

Employment compliance tasks an Employer of Record manages in Malaysia

Below is a breakdown of the statutory tasks your Malaysia EOR covers to ensure compliance with local regulations.

Category Key requirements (2025)
Statutory Employer Costs Employers contribute 12% (gross > MYR 5,000) or 13% (≤ MYR 5,000) to EPF. SOCSO contributions (up to MYR 104.15/month) apply to salaries up to MYR 6,000. As of July 1, 2024, foreign workers must be covered under both the Employment Injury and Invalidity Schemes (1.75%). EIS contributions (up to MYR 11.90/month) also apply to salaries up to MYR 6,000. HRDF levy is 1% of gross salary for eligible employers. Total statutory costs range from 13%–14%, invoiced monthly.
Employment Contracts & Probation Rules Written contracts must be signed by both parties in English and issued within 30 days of starting work (mandatory for employees earning ≤ MYR 4,000; recommended for all). Backdating is not allowed. Probation periods typically range from 3 to 6 months.
Pay and Working Hours The national minimum wage is MYR 1,500/month (as of Jan 1, 2023). Standard hours are 8 per day, 40 per week, Monday to Friday. Overtime is capped at 104 hours/month and must be paid at 150% of the hourly rate; 200% for weekends; 300% for public holidays. Overtime pay is mandatory for employees earning ≤ MYR 2,000/month; above that, it must be contractually agreed.
Payroll & PAYE Compliance Gross salary includes base pay, bonuses, allowances, and reimbursable expenses. Net salary reflects deductions for taxes, overpayments, and statutory contributions. Taxable salary excludes non-taxable allowances and eligible reliefs. Employees contribute 11% to EPF (rounded per schedule), ~0.50% to SOCSO, and ~0.20% to EIS—capped at MYR 6,000/month for all three. Employers must remit PCB (monthly tax) by the 15th of the following month via e-PCB. Records must be kept for 7 years. PDPA-compliant employee consent is required for payroll data.
Vacation and Public Holiday Allowances Full-time employees are entitled to 8–16 days of paid annual leave based on tenure (accrued monthly from start date). Carryover of up to 3 unused days is allowed; they must be used by December 31 of the following year. Leave is paid out on termination. Half-day leave is permitted. Malaysia observes 11 public holidays annually—5 mandatory and 6 employer-selected. If a holiday falls on Sunday, Monday is observed. Employees required to work on public holidays receive 200% pay.
Income Taxes Malaysia uses a progressive tax system. Taxable income includes salary, bonuses, allowances, overtime, and commissions. Residents are taxed on income earned in Malaysia; foreign income is exempt. Non-residents pay a flat 30% and do not qualify for tax reliefs. Tax reliefs reduce taxable income and cover personal, EPF, SOCSO, spouse, and dependent children. Employers must deduct PCB monthly and remit to LHDN by the 15th of the following month. The tax year is calendar-based. All employees must file an annual return by April 30 using the EA (CP8A) form, available on the Deel platform each February.
Expenses, Allowances, and Bonuses Expenses must directly relate to business activities and be supported by valid tax invoices/receipts. Approved expenses are non-taxable. Missing documentation may result in tax. Deadline: 11:59 AM PT on the 20th of the month. Allowances are usually taxable unless specifically exempt. Must be included in the employment contract. Common examples: WFH, relocation, wellness. Employers may gross-up to cover taxes. Bonuses are taxable and subject to EPF. EPF rate is 13% for wages ≤ MYR 5,000, 12% for wages > MYR 5,000. Bonus payments may increase withholding in that pay period. No standard per diem or mileage rate. Petrol, tolls, and travel allowances are tax-free up to MYR 6,000/year.
Statutory Benefits & Pension Requirements Employee benefits include statutory government programs such as Social Security (covering Employment Injury, Invalidity, and Employment Insurance) with employer contributions of about 1.25% to 1.75%, Employment Insurance at around 0.20%, and Public Pension (EPF) requiring 12-13% employer and 11% employee contributions. A 1% Training Levy applies to all employees. Optional benefits include private health and life insurance plans from providers like Unisure and Allianz, as well as travel and kidnap insurance through Chubb. These optional benefits are offered at the employer’s discretion and, if provided, must be available to all employees equally.
Maternity, paternity, parental, adoption & foster leave In Malaysia, eligible employees receive 98 days of paid maternity leave and 7 days of paid paternity leave, fully funded by the employer. Adoption and surrogacy leave depend on the contract. Employees must have 90 days’ service, submit a birth certificate, and give 7 days’ notice.
Sick leave, bereavement leave, and carer’s leave Employees in Malaysia get paid sick leave based on tenure (14–22 days) plus 2 months of hospitalization leave, all requiring a doctor’s note. Bereavement leave grants 2 paid days for a spouse or relative’s death. The employer may offer marriage leave of 1–3 days. Part-time staff receive full sick leave entitlement. Proof and formal requests are required.
Terminations, Redundancy, Severance Terminations in Malaysia require 4–8 weeks’ notice based on length of service, with pay or garden leave allowed instead. Severance is typically half a month’s pay per year of service for redundancy cases. Employers must follow a fair disciplinary process before terminating for misconduct or poor performance. Redundancy termination is generally not allowed for employees under an Employer of Record; mutual termination is recommended.
Health & Safety Occupational Safety and Health (OSH) is mandatory in Malaysia under the Occupational Safety and Health Act (OSHA) 1994. This law sets the framework to ensure workplace safety, health, and welfare for all employees.
Misclassification Risk Malaysian law (Employment Act 1955) strictly enforces correct worker classification. Courts assess actual work conditions over contracts, focusing on employer control, the worker’s role in the business, and the worker’s financial dependence. Misclassification can lead to back pay, benefits, penalties, and tax liabilities. In 2023, a multinational was fined for failing to pay SOCSO contributions after misclassifying a worker.
Data & IP Protection Malaysia’s updated PDPA (effective June 2025) mandates appointing a qualified Data Protection Officer, requires reporting data breaches within 72 hours, and introduces data portability rights. Businesses must update policies, prepare breach responses, and ensure compliance to meet stricter data privacy standards aligned with global laws.
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How much does it cost to hire through an EOR in Malaysia?

Three core factors shape Malaysian EOR pricing:

  1. Employee’s gross salary: The base wage, subject to minimum wage laws
  2. Mandatory statutory employer costs: EPF, SOCSO, EIS, HRDF, and insurance for foreign workers
  3. EOR management fee: Deel EOR charges a transparent, flat monthly rate covering payroll, filings, compliance, and support

Here’s a breakdown of the costs you’ll face when opening your own Malaysian entity compared to hiring through Deel’s EOR:

Factor Your Own Entity Deel EOR
One-off setup costs (incorporation, licensing, registrations) MYR 137,378 MYR 0
Annual, recurring costs (payroll, accounting, filings) MYR 165,206 MYR 0
Deel Employer of Record service fee N/A MYR 30,466 per employee
Estimated total annual cost MYR 302,192 MYR 30,466
Time to first hire 1 month 0 business day(s)

With Deel EOR, every expense is itemized in a single invoice, and you avoid surprise back-tax bills. Calculate your cost per hire instantly using the Deel Employee Cost Calculator.

Global Hiring Toolkit
EOR vs. Entity Calculator
Looking for the most cost-effective way to expand your team abroad? Discover the best option for your business with our calculator.

Choosing the best Malaysia EOR service provider

Evaluate EOR providers against these four criteria before signing:

  1. Entity ownership: Choose an EOR that fully owns its Malaysian entity for direct accountability, faster onboarding, and zero middleman fees
  2. Compliance expertise: Ensure deep knowledge of Malaysian labor laws, PCB calculations, and employment contracts to reduce risk. Deel’s team of local labor law experts reviews every contract for compliance
  3. Platform breadth: Look for EOR services that include background checks, equity management, device logistics, and AI-powered compensation benchmarking. Deel’s platform integrates all HR workflows
  4. Global coverage: If Malaysia is part of your global expansion, choose an EOR with presence in your future markets. Deel operates in 150+ countries

See also: Owned Entity vs. In-Country Partner: The Best Choice for Global Hiring

Discover how Lloyd’s List Intelligence expanded to new markets with Deel

Lloyd's List Intelligence provides business intelligence, data, and analysis on maritime trade and operations.

As a leader in a complex and regulated market, they faced challenges in expanding and managing teams across multiple locations. They explored different ways to set up entities but found it complicated, as each country had its own payroll regulations and tax requirements.

“We just didn’t have the economies of scale, time, and resources to be able to set up entities in each of those different locations. We went with Deel because they were able to provide us with everything we needed in one platform.”

Hetty Townsend, APAC People And Culture Business Partner, Lloyd's List Intelligence

Learn more

Is Deel Employer of Record a strong choice for hiring in Malaysia?

Yes, Deel is a market-leading Employer of Record EOR for hiring in Malaysia, offering unmatched compliance, speed, and reliability. Deel owns its Malaysian entity, eliminating the need for you to set up a local entity in the country. With Deel, you benefit from:

  • G2 leader: Rated #1 EOR for user satisfaction and market presence
  • Wholly-owned Malaysia entity: Faster onboarding, local payroll, and direct accountability
  • Global reach: Hire and pay employees or contractors in 150+ countries
  • Transparent, flat-rate pricing: All costs, including statutory contributions and EOR fee, are clear and predictable
  • Comprehensive statutory compliance: Deel handles EPF, SOCSO, EIS, HRDF, and PCB tax requirements
  • Speed-to-hire: Onboard in hours versus months for local entity setup
  • Real-time compliance monitoring: AI-powered alerts for Malaysia’s fast-changing labor rules
  • End-to-end HR stack: Contracts, background checks, payroll processing, equity, employee benefits, and device logistics
  • IP and data protection: All employment contracts assign copyright and IP to your company, with PDPA-compliant data handling
  • Proven support: Local HR experts, 24/7 help, and glowing client testimonials

With Deel EOR services, you avoid the headaches of setting up a local entity and can confidently scale your team in Malaysia while ensuring compliance with local laws and efficient benefits administration for your employees.

See also: More Than a Service: EOR as a Strategic Partner in Business Growth

Hire employees in Malaysia confidently with Deel Employer of Record

Ready to hire in Malaysia without the cost and hassle of establishing your own entity? Deel’s Employer of Record EOR lets you onboard, pay, and manage employees in days—not months—while ensuring full compliance with Malaysian labor laws, payroll processes, and statutory benefits. Our transparent, flat-rate pricing means no hidden charges.

Book a Deel demo today to see how easy it is to hire in Malaysia. Join thousands of global companies who trust Deel—the G2 leader in EOR services with wholly-owned entities and in-country experts—to keep you compliant, fast, and focused on growth.

FAQs

Most employees are fully onboarded within a day after paperwork submission.

No, Deel collects funds from your business account and pays Malaysian employees in local currency.

Deel provides locally compliant, bilingual employment contracts that include all mandatory clauses per Malaysian labor laws.

Deel registers employees with the Employees Provident Fund, Social Security Organization SOCSO, and EIS, and manages ongoing payroll contributions.

Yes, Deel calculates and remits PCB each month, ensuring compliance with local tax regulations.

Yes, Deel can process discretionary bonuses, including 13th-month pay, per your company policy and Malaysian custom.

Deel tracks and administers all statutory and company-specific leave, including annual, sick, maternity, and paternity leave.

Probation (3–6 months) is customary; Deel structures contracts with compliant probation terms and notice periods.

Deel manages termination notices, severance calculations, and ensures compliance with Malaysia’s redundancy and dismissal rules.

All employment contracts assign IP to your company, and Deel ensures PDPA-compliant data processing and secure document storage.

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About the author

Jemima is a nomadic writer, journalist, and digital marketer with a decade of experience crafting compelling B2B content for a global audience. She is a strong advocate for equal opportunities and is dedicated to shaping the future of work. At Deel, she specializes in thought-leadership content covering global mobility, cross-border compliance, and workplace culture topics.

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