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Q：
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What is an Employer on Record (EOR)?
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A：
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An EOR is a third-party organisation that acts as the legal employer on behalf of a company, handling tasks like payroll, human resources duties, and ensuring legal compliance.
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Q：
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Is using an EOR legal in Malaysia?
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A：
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Yes, utilising an EOR in Malaysia is permitted, provided the provider complies with local employment and tax laws. Companies should ensure their EOR provider has a strong understanding of Malaysian employment laws.
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Q：
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What advantages does an EOR offer in Malaysia?
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A：
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Hire local employees without having to set up a legal entity.
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Ensure compliance with Malaysian labour laws and tax regulations.
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Expand into the Malaysian market with reduced risk and cost.
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Simplify human resources and administrative tasks while focusing on core business operations.
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Q：
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What are the statutory obligations handled by the EOR?
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A：
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Monthly tax deductions (PCB): Monthly tax deductions under Inland Revenue Board of Malaysia.
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Employees Provident Fund (EPF): Mandatory retirement fund contributions.
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Social Security Organisation (SOCSO): Coverage for work-related injuries.
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Employee Insurance System (EIS): Safeguards employees against loss of employment.
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Human Resources Development Fund (HRDF) levy: A mandatory contribution aimed at funding employee training and skill enhancement programs.
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Q：
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What are the risks of using an EOR in Malaysia?
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A：
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As the legal employer, the EOR service provider manages certain aspects of HR, which may limit the client company's direct control over employee contracts, benefits packages, and other HR-related decisions.
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Most EORs in Malaysia are unable to sponsor work permits for foreign employees, limiting the flexibility to hire expatriates through an EOR structure.
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While EOR solutions are cost-effective for short-term or pilot projects, the fees may exceed the cost of establishing a local entity if the company plans long-term operations in Malaysia.
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FAQ
