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Malaysia PEO

VERDICT: The best Malaysia PEO in 2024 is Horizons. Horizons stands apart from other PEO providers in Malaysia with its user-friendly SaaS platform and extensive Malaysia hiring 

Article summary

  • PEOs in Malaysia provide comprehensive HR services to help businesses streamline payroll administration, automate processing and maintain compliance with local laws.
  • Comparing PEO and EOR services requires understanding of their respective roles in relation to the workforce as well as employee management involvement.
  • The top 5 Malaysia PEOs in 2023 are Horizons, Skuad, Multiplier, Deel and Remote. 

Are you interested in expanding your global team into Malaysia? Incorporating a local Malaysian subsidiary is one option. Another option is to engage a Malaysia Professional Employer Organization (PEO). 

Here we explain how Malaysia PEOs work, and who the top 5 Malaysia PEO services are in 2024. 

What Is a Malaysia PEO?

In Malaysia’s vibrant business environment, professional employer organizations (PEOs) have a significant role. A Malaysia PEO is a local co-employer for your Malaysia-based team. The PEO takes care of HR and payroll tasks, while you remain the operational employer for your team in Malaysia. 

While the key role of PEOs in Malaysia is to handle payroll and HR, they often offer a range of additional services, including:

  • Recruiting and onboarding employees

  • Setting vacation leave

  • Handling work visas

  • Managing employee benefits

  • Maintaining tax and payroll compliance

These services help businesses enter the market faster, minimize HR errors, and comply with the law.

From a broader perspective, employers in Malaysia are expected to adhere to the following:

  • Individual income tax rates and brackets

  • Provident fund and social security contributions

  • Healthcare insurance

  • Other benefits as per local employment laws.

A PEO service in Malaysia can serve as a seasoned guide, helping businesses navigate these legal complexities and maintain compliance to avoid penalties.

 

Top 5 Malaysia PEO Companies

  1. Horizons is a leading international PEO with a strong reputation for Malaysia PEO solutions. As well as traditional PEO, they can support your company with recruitment, payroll, and Malaysia visas. For the strength of their complete Malaysia hiring solutions, Horizons is our choice for No. 1. Malaysia PEO. 

  2. Skuad is known for its modern PEO platform which simplifies hiring and paying teams in Malaysia and elsewhere. Skuad acts as your Malaysia co-employer processing payroll, managing benefits and ensuring full compliance with Malaysia labor laws. 

  3. Multiplier is a global PEO, well-known for supporting tech hiring both in Malaysia and throughout South-East Asia. Read more about their offerings in our 2024 Multiplier Review.

  4. Deel is a global HR platform supporting employee hire and payment in Malaysia. Deel simplifies payroll and HR, ensuring that your Malaysia-based team is paid quickly and accurately. Deel is distinct from other PEOs in its extensive integrations allowing you to seamlessly switch between different HR and payment solutions. 

  5. Remote offers global employment solutions, including comprehensive PEO support in Malaysia. The Remote platform enables businesses to hire and pay employees virtually anywhere in the world. And by only hiring through their own entities, they ensure the maximal degree of compliance assurance. 

Key Benefits of Using a PEO

Imagine being able to expand your business in a new market swiftly and smoothly, without the constant worry of HR errors or non-compliance with local laws. This is the advantage of employing a PEO in Malaysia. It offers a faster market entry, minimizes HR mistakes, and guarantees legal adherence. But how does a PEO accomplish these feats?

The secret lies in providing comprehensive HR services. PEO services can help businesses in the following ways:

  • Streamline payroll administration

  • Automate processing

  • Maintain accurate record-keeping

  • Ensure tax compliance

  • Reduce the risk of HR errors

  • Stay current with local laws and regulations

  • Prevent fines and legal issues

  • Ensure businesses meet local work requirements

By utilizing PEO services, businesses can effectively manage their human resources services needs and minimize potential risks.

Comparing PEO and Employer of Record (EOR) Services

While both PEO and EOR services assist businesses in managing HR functions, the key difference lies in their roles. While a PEO shares employment liabilities, an EOR takes on the legal responsibility of employing staff.

Generally speaking, terms Employer of Record and PEO are used interchangeably in Malaysia. 

Navigating Employment Laws and Regulations in Malaysia

Navigating through the maze of employment laws and regulations in a foreign market like Malaysia is not a simple task. It’s like trying to find your way through a dense jungle without a compass. However, the good news is – with a clear comprehension of local employment laws, you can maintain compliance and evade penalties.

At the heart of Malaysia’s labor law is Malaysia’s Employment Act of 1955, a key legislation that governs labor issues in the country. Employees under this act are entitled to various benefits such as paid annual leave and maternity leave.

1. Employment contracts and minimum wage requirements

Navigating through the legal aspects of an employment contract in Malaysia is like steering a ship through tumultuous seas. The Employment Act of 1955 serves as the compass, setting out the minimum terms and conditions, including minimum wage requirements for employment contracts in the country.

While the legislation provides a firm foundation, it’s important to remember that any local labor contract that offers less favorable benefits than those stipulated in the Employment Act is considered void. Hence, it’s important to verify that the benefits offered meet or exceed those outlined in the Employment Act.

2. Working hours, overtime, and rest periods

Just as a well-maintained machine requires regular rest periods for optimal function, the Employment Act entitles employees in Malaysia to specific working hours and rest periods. Employees cannot work for more than 5 hours in succession. They must have a rest period of at least 30 minutes after 5 hours. Additionally, employees should not work more than 8 hours in a day..

The act also sets a maximum limit of 45 hours per week for regular working hours. It’s like a safety valve that ensures the employees are not overworked and their productivity remains high.

Managing Employee Benefits and Contributions in Malaysia

Managing employee benefits and contributions in Malaysia is like maintaining a well-balanced diet. It involves a mix of mandatory provident fund, social security, and healthcare insurance requirements.

Employers in Malaysia are required to make obligatory contributions to the Social Security Organization (SOCSO) and the Employees’ Provident Fund (EPF). It’s a two-way street, where both the employer and the employee contribute towards the employee’s retirement savings.

1. Provident fund and social security contributions

The Employees Provident Fund (EPF) in Malaysia functions as a safety net for employees, offering them pension benefits. It’s like a savings account where both the employer and employee contribute a monthly percentage of the employee’s salary.

A similar contribution system is in place for the Social Security Organization (SOCSO), where the contribution rate is determined by the employee’s age. For employees below 60 years old, the rate is 1.75% of their monthly wage, with both the employer and the employee contributing.

2. Healthcare insurance and other benefits

In terms of healthcare insurance in Malaysia, options exist in both public and private sectors. The public healthcare system, funded through payroll taxes and the general budget, offers high-quality patient care,.

Despite no legal obligation to provide healthcare insurance, many organizations in Malaysia do so as it can lead to improved efficiency and fewer absences. Some common benefits offered by employers in Malaysia include:

  • Medical and dental insurance

  • Maternity and paternity leave

  • Performance bonuses

  • Retirement savings plans

These benefits contribute to a comprehensive package that helps attract and retain talented employees.

Handling Taxation and Payroll Compliance in Malaysia

In the realm of business, dealing with taxes is a constant obligation. In Malaysia, handling taxation and payroll compliance involves a deep understanding of individual income tax rates, tax brackets, and employer responsibilities for payroll taxes.

The country adopts a progressive tax system, where individual income tax rates vary from 0% to 30% based on income level. As for payroll taxes, employers must:

  • Register for an employer’s number

  • Make monthly tax deductions from employee remuneration

  • Withhold remuneration until tax clearance is obtained

  • Comply with other requirements

1. Individual income tax rates and brackets

Malaysia’s individual income tax rates progressively increase with rising income, similar to a staircase. The system is progressive, with rates ranging from 0% to 30% depending on the income level.

Recent years have seen changes in the tax structure, with a decrease in the individual income tax rate by 2 percent for middle-income resident individuals in the 2023 budget. It’s worth noting that Malaysia’s individual income tax rates are generally lower than those of other ASEAN countries, making it an attractive destination for businesses,.

2. Employer responsibilities for payroll taxes

Employers in Malaysia have a specific set of obligations regarding payroll taxes. From registering an employer’s number to withholding the corresponding remuneration until tax clearance is obtained, employers must steer the ship of payroll tax compliance carefully.

The payroll taxes are based on the HRDF levy rate, a percentage of each employee’s total monthly wages. The maximum income tax rate stands at 30% for incomes earned above MYR 2,000,000 or for non-residents. Non-compliance with payroll tax responsibilities may lead to penalties, emphasizing the importance of adhering to these responsibilities.

Video: Malaysia Labor Law Compliance

Tips for Selecting the Best PEO Service Provider in Malaysia

Choosing the best PEO service provider in Malaysia resembles finding the ideal chef for your event – it necessitates consideration of their expertise, experience, pricing, and service offerings.

To evaluate the expertise and experience of a PEO service provider, consider factors like familiarity with local labor laws, understanding of local culture and customs, and capacity to provide the required services.

1. Evaluating expertise and experience

To get a measure of a PEO service provider’s expertise and experience, consider factors such as their track record, industry knowledge, and client testimonials. Their ability to yield positive results and sustain robust client relationships can serve as a good indicator of their experience.

Beyond just experience, industry-specific knowledge is also key when selecting a PEO service provider. A provider with industry-specific knowledge and experience can offer tailored solutions and strategic insights, helping your business stay compliant and innovative.

2. Comparing pricing and service offerings

When evaluating pricing and service offerings among different PEO providers in Malaysia, consider your specific needs and requirements. Here are some factors to consider:

  • Average costs of PEO services in Malaysia

  • Different pricing models used by PEO service providers

  • Variation in service offerings among leading PEO providers

A comprehensive comparison can assist you in finding the most suitable option for your business needs and budget.

While cost comparison is important, the quality of services should not be overlooked. A lower cost might mean reduced services or hidden charges. Therefore, always ensure you understand what the pricing includes and whether it meets your business needs.

Engaging a PEO in Malaysia — Our Take

PEO services in Malaysia are your trusted expansion ally when it comes to managing HR functions, ensuring legal compliance, and reducing hiring risks. 

Select the right PEO service provider, by evaluating their expertise, experience, pricing, and service offerings. Our pick for the best Malaysia PEOs in 2024 are Horizons, Skuad, Multiplier, Deel and Remote. 

Malaysia Business Guides

FAQ

Using a Malaysia PEO services allows an international company to employ workers in Malaysia without the need to establish a legal entity. With an EOR, the company transfers the legal employment responsibility to the EOR, who becomes the official employer of record. 

Yes. A Malaysia PEO that offers global mobility services can support expat employees through the work visa process in Malaysia. 

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