Expanding your business to a new country can be a daunting task, but it can also provide great benefits to your company. Malaysia, with its strong economy, favorable business environment, and strategic location in Southeast Asia, is a great choice for companies looking to expand their global footprint. In this article, we will guide you through the process of expanding your business to Malaysia, including the differences between Employer of Record and Professional Employer Organization, and how a Global PEO can help you.
Why you need to be interested in expanding into Malaysia
Malaysia is one of the fastest-growing economies in Southeast Asia, with a GDP growth rate of 6% in 2021. Its strategic location provides easy access to other countries in the region, making it a hub for international trade. Additionally, Malaysia offers a favorable business environment with tax incentives, infrastructure, and a highly-skilled workforce. All these factors make Malaysia a great destination for companies looking to expand their business globally.
Employer of Record Malaysia: What is an Employer of Record?
Employer of Record (EOR) is a service that helps companies expand to new countries without having to establish their own legal entity. EOR providers act as a local employer on behalf of the company, taking care of legal compliance, payroll, benefits, and other administrative tasks. The company retains control over the employees’ work, while the EOR takes care of the legal and administrative requirements.
Step by step of the EOR process
The EOR process in Malaysia typically involves the following steps:
- Consultation: The EOR provider will discuss the company’s requirements and provide a customized proposal that outlines the services, costs, and timelines.
- Legal setup: The EOR provider will establish a legal entity in Malaysia, such as a subsidiary or branch office, on behalf of the company.
- Recruitment: The EOR provider will source and recruit employees based on the company’s requirements and handle the onboarding process.
- Payroll and benefits: The EOR provider will manage the payroll and benefits for the employees, ensuring compliance with local laws and regulations.
- Legal compliance: The EOR provider will ensure compliance with all local laws and regulations related to employment, taxes, and other legal requirements.
- Termination: If required, the EOR provider will handle the termination process, including severance payments and other legal requirements.
Global PEO in Malaysia: how could you benefit?
A Global Professional Employer Organization (PEO) is a service that provides comprehensive HR solutions for companies expanding to new countries. A Global PEO can offer additional benefits compared to a local EOR provider, including access to a global network of HR experts, streamlined payroll and benefits management, and compliance with international laws and regulations.
With a Global PEO in Malaysia, companies can enjoy a range of benefits, including:
- Reduced risk: A Global PEO takes care of legal compliance, payroll, and other administrative tasks, reducing the risk of non-compliance with local laws and regulations.
- Access to a global network: A Global PEO has a network of HR experts in different countries, providing companies with valuable insights and support.
- Flexibility: A Global PEO can offer flexible HR solutions that can be customized to meet the company’s specific needs and requirements.
- Cost-effectiveness: A Global PEO can offer cost-effective HR solutions, as they can leverage their network and expertise to provide services at a lower cost compared to a local provider.
EOR vs PEO, their differences
While both EOR and PEO providers offer HR solutions for companies expanding to new countries, there are some key differences between the two:
- Legal entity: An EOR provider establishes a legal entity on behalf of the company, while a PEO provider acts as an employer of record.
- Control: With an EOR, the company retains control over the employees’ work, while the EOR takes care of the legal and administrative requirements. With a PEO, the PEO provider is responsible for all HR-related tasks, including recruitment, payroll, and benefits.
- Global network: A Global PEO has a network of HR experts in different countries, providing companies with valuable insights and support, while a local EOR provider may only have expertise in one country.
- Cost: EOR services tend to be more cost-effective for companies with a smaller number of employees, while a PEO may be more cost-effective for companies with a larger number of employees.
Choosing between an EOR and a PEO depends on the company’s specific needs and requirements. Companies with a larger number of employees and a global presence may benefit from a Global PEO, while companies with a smaller number of employees may find an EOR more cost-effective.
Incorporating a company
If a company chooses to establish its own legal entity in Malaysia, there are several steps involved in the process:
- Reserve a company name: The company must reserve a name with the Companies Commission of Malaysia (CCM).
- Prepare the incorporation documents: The company must prepare the necessary documents, such as the Memorandum and Articles of Association, and have them stamped and signed by a notary public.
- Submit the incorporation documents: The company must submit the incorporation documents to the CCM and pay the registration fees.
- Obtain necessary approvals: Depending on the nature of the business, the company may need to obtain approvals from relevant authorities, such as the Ministry of International Trade and Industry.
- Register for taxes: The company must register for taxes with the Inland Revenue Board of Malaysia.
Establishing a legal entity in Malaysia can be time-consuming and expensive, and companies may face challenges in navigating local laws and regulations. Employing an EOR provider or a Global PEO can be a cost-effective and efficient alternative.
Recruitment in Malaysia
When expanding to Malaysia, companies must navigate local labor laws and regulations. Employing a local EOR provider or a Global PEO can help companies with recruitment and compliance.
Malaysia has a highly-educated and skilled workforce, with a strong focus on technology and innovation. The most common industries in Malaysia include manufacturing, services, and agriculture.
When recruiting employees in Malaysia, companies must comply with local labor laws, which include minimum wage requirements, mandatory benefits, and restrictions on working hours. Employing an EOR provider or a Global PEO can help companies navigate these requirements and ensure compliance.
Expanding to Malaysia can provide great opportunities for companies looking to expand their global footprint. However, navigating local laws and regulations can be challenging. Employing an EOR provider or a Global PEO can be a cost-effective and efficient alternative to establishing a legal entity in Malaysia. By taking advantage of their local expertise, companies can navigate local labor laws and regulations, recruit top talent, and focus on growing their business in Malaysia.