Professional Employer Organization (PEO) in Malaysia

What is a PEO?

A professional employer organization (PEO) is a provider that can take care of HR responsibilities for companies and SMEs. This includes managing payroll, sourcing and distributing competitive employee benefits packages, and ensuring that your business complies with the relevant local legislation wherever your employees are based. 

PEOs assume the time-consuming burden of payroll and other important HR functions. This way, startups, and other businesses don’t have to take on these roles themselves or hire entire teams of people, which could be a huge expense. 

With the help of a PEO, you can build a global team with employees working remotely from any country in the world, including Malaysia. Your PEO provider will ensure that all of your international employees receive their pay stubs in the correct currency while fulfilling local statutory employer requirements. 

If you’re wondering whether PEO services would be right for your business, speak to a friendly member at Skuad who will be happy to answer your questions.

What are the benefits of using a PEO provider in Malaysia?

Working with a PEO in Malaysia opens up several doors for your small or medium-sized business. As you’ll find out below, a PEO is a valuable asset for ambitious companies.

Hire from the best of the Malaysian and global talent pool

You want the best for your business, but having to look within your immediate vicinity can be very restricting in terms of what talent. Remote working has allowed many businesses to employ in locations throughout their own country, but why stop there? 

Malaysia is one of Asia’s fastest-developing countries, ranking 12th on The World Bank’s 2020 Ease of Doing Business Report. Using a PEO means that you can access the thriving talent pool of Malaysian workers who would love to work for promising international companies like yours. 

Become a globally competitive employer

A sign of a successful business is when skilled workers from all over the world apply to work there.

A PEO that operates in Malaysia will know not only the statutory benefits that employees are legally entitled to but also what more your company should offer to attract the most qualified candidates.

Save on unnecessary costs

Hiring talent based in Malaysia without PEO services would be a significant expense. In fact, most larger corporations that do have the financial means to go at it alone wouldn’t, simply because using a PEO is a much cheaper alternative. 

Not only would you have to hire the in-house employees to manage HR, but you would also need the legal know-how for administering international payroll and complying with the specific associated local legislation in Malaysia. 

Gain in-depth insights into new global markets

If you’re considering entering the Malaysian market, using a PEO to hire employees within this region is a fantastic way to get started.

Not only will you gain valuable market insights through your new Malaysian employees, but you’ll eventually be better equipped to expand into the surrounding Asian markets.

Avoid setting up your own legal entity in Malaysia

If a company decided to not use a PEO to hire their Malaysian employees, then the alternative would be to incorporate a legal entity in Malaysia. This can take months of hard work and several teams of lawyers that specialize in Malaysian law. It’s so costly that you should be prepared to hire an entire team to make it a cost-effective business move.

The founder or CEO of your company should factor in additional unforeseen costs, such as frequent flights back and forth from Malaysia to ensure the smooth process of this new business registration. 

Using a PEO bypasses the need for your own Malaysian legal entity. Many PEOs in Malaysia will have their own legal entities already established, which can be used for your own business. They can act as an employer of record to hire employees in Malaysia on your behalf, empowering you to assign their job roles and daily duties at your company. 

Become culturally aware

One of the most important things for a company to understand is the impact of cultural differences when it comes to doing business abroad. As your partner organization, your PEO will be on hand to keep you informed on the various cultural practices as an employer in Malaysia. 

For instance, did you know that in Malaysia, employers don’t usually schedule meetings on Fridays? As a Muslim country, it’s the day of prayer. 

Ensure that your business complies with statutory requirements in Malaysia

Every country has its own legal requirements for what employers should provide to their employees. If you don’t comply with these laws, your business could face hefty fines or even business bans. 

This can span from payroll compliance and ensuring that you’re making the correct contributions to social security, to providing the correct minimum number of days off.

Here are some of the specifics that you should know when hiring in Malaysia:

Payroll  

• The currency that Malaysian employees are paid in is the Ringgit (RM). 
• The minimum wage is at RM 1,200 within the city or municipal council areas or RM 1,100 outside of these areas.
• While probation periods are not mandatory, it’s common to have them with a duration of three to six months.
• Malaysian employees are not legally entitled to receive bonuses from their employers, but many companies offer them. This could be paid as a 13th-month salary or spread evenly across monthly wages.
• When an employee is terminated, they must receive notice as well as severance pay. If the dismissal grounds are based on misconduct, then notice isn’t required.
• In a five-day workweek, employees must not work for more than nine hours per day. If they work for six days a week, they must not work for more than eight hours each day. 

Tax and employer contributions  

• Employees are taxed on their income (RM):

• 0 - 5,000 - 0%
• 5,001 - 20,000 - 1%
• 20,001 - 35,000 - 3%
• 35,001 - 50,000 - 8%
• 50,001 - 70,000 - 14%
• 70,001 - 100,000 - 21%
• 100,001 - 250,000 - 24%
• 250,001 - 400,000 - 24.5%
• 400,001 - 600,000 - 25%
• 600,001 - 1,000,000 - 26%
• 1,000,001 - 2,000,000 - 28%
• More than 2,000,001 - 30%

• Corporate tax rate is 24% as of 2021.
• Employers must contribute:

• 12-13% of an employee’s salary to the Employees Provident Fund
• 1.78% of an employee’s salary to Malaysian social security

Paid leave

• Women are granted a minimum of 60 days maternity leave, as long as they have worked at the company for at least 90 days within the last four months.
• Paternity leave is not stipulated, though many companies do offer this benefit.
• Paid leave is given at a minimum of:

• Fewer than two years of employment - 8 days holiday
• Two to five years of employment - 12 days holiday
• More than five years of employment - 16 days holiday

• Sick leave must be certified by a medical professional and is given at a minimum of: 

• Fewer than two years of employment - 14 days
• Two to five years of employment - 18 days
• More than five years of employment - 22 days
• Necessary hospitalization - 60 days

Learn more about how Skuad’s PEO services can help your business to grow by booking a demo today.

What does it cost to build a team in Malaysia?

Company Incorporation in Malaysia

The costs involved with foreign company registration in Malaysia may look affordable on paper: $15 to register the business, $1.20 for a branch name. But these outgoings can spiral quickly, as there’s much more required than meets the eye. You’ll also need comprehensive legal support to navigate Malaysia’s myriad business licenses and that on its own could cost hundreds if not thousands in legal fees. Plus then there’s the cost of banking, the office space you’re registering with, and so on.

Or… you could partner with PEO services in Malaysia instead.

PEO in Malaysia

Pricing for PEO services varies between providers and their packages. With Skuad, you can get started for free and cancel at any time. 

Our PEO services allow you to onboard and pay international employees, starting from $19 per month — a reasonable cost of doing business. And for our employer of record services, where we hire international employees on your behalf as well as manage payroll, benefits, and compliance, prices start from $199 per month.

If you’re an enterprise business, reach out to our sales team to work out a custom price today.

Want to book in for a demo?

If you’re ready to start onboarding and paying employees in Malaysia, book in for a demo of Skuad’s global PEO solution right away!