An Employer of Record (EOR) is a Malaysian company that becomes the legal employer of your staff while you remain the manager of their work. The EOR appears on the employment contract, the EPF and SOCSO registrations, the PCB tax filings and the Employment Pass sponsorship. You decide who to hire, what they do, how they are measured and what they earn. In Malaysia the arrangement is often called payroll parking, and it is the fastest legal way to have people working for you in Kuala Lumpur, Penang or Johor Bahru without first setting up your own Sendirian Berhad.
The problem an EOR solves in Malaysia
Incorporating a Sdn Bhd through the Companies Commission of Malaysia is quick. What takes time is everything that follows: appointing a resident director and company secretary, opening a corporate bank account, registering as an employer with EPF, SOCSO, EIS, LHDN and HRD Corp, and, if you intend to bring in foreign staff, registering with the Expatriate Services Division and securing an approved expatriate position before any Employment Pass can be filed. Realistically that is two to four months before the first compliant payslip.
An EOR already has all of that. Your first hire can start within a week or two of signing, on a compliant Malaysian contract, with the statutory registrations and, where needed, Employment Pass sponsorship handled by an entity that has done it many times before.
EOR, staffing agency or your own entity: which is which
These three are often confused, and the differences matter for control, cost and compliance.
A staffing or recruitment agency finds candidates. Once you hire them, they are your employees on your payroll, or, for temporary staff, on the agency’s payroll for a short assignment. The agency’s job ends at placement.
An Employer of Record employs the people you have chosen, on an ongoing basis, and carries the full set of employer obligations under Malaysian law: the Employment Act 1955, the EPF Act, the Employees’ Social Security Act, the Employment Insurance System Act and the Income Tax Act. You direct the work; the EOR is the employer.
Your own Sdn Bhd gives you full control and is the right long-term home for a large or regulated operation, but you carry every registration, filing and legal change yourself.
Many companies use all three in sequence: an agency to find the country manager, an EOR to employ the first team, and a Sdn Bhd once the business justifies it, with the team transferring across.
What the EOR handles in Malaysia
- Contracts. Written in line with the Employment Act as amended in 2023, including the 45-hour week, overtime at 1.5, 2 and 3 times for working days, rest days and public holidays, annual leave of 8 to 16 days by service, 98 days of paid maternity leave and 7 days of paternity leave.
- Statutory contributions. EPF at 13% employer (12% above RM5,000) and 11% employee for Malaysians, 2% and 2% for foreign employees since October 2025, SOCSO at 1.75% and 0.5%, EIS at 0.2% each, all on the current ceilings and deadlines.
- Tax. Monthly PCB deductions to LHDN and the annual EA form for each employee.
- Minimum wage and pay compliance. Every role checked against the RM1,700 national minimum wage, which has applied to all employers since 1 August 2025.
- Employment Passes. Sponsorship through the EOR’s ESD registration, priced against the June 2026 thresholds of RM20,000 for Category I, RM10,000 for Category II and RM5,000 for Category III, with succession planning documented where required.
- Benefits and administration. Medical insurance, leave, claims and payslips through a self-service portal, and a Malaysian HR contact for the employee.
- Exit. Notice, final settlement and any retrenchment benefits calculated correctly, so that ending a role does not become an Industrial Court matter.
The benefits, honestly stated
Speed is the obvious one: weeks instead of months to the first hire. Compliance is the more valuable one: Malaysia has changed its wage floor, its EPF rules for foreigners, its Employment Act coverage and its expatriate salary policy within about eighteen months, and an EOR absorbs those changes as part of the service. Cost is the third: for a team of up to fifteen or twenty people, a monthly EOR fee is usually less than a payroll officer, HR software, company secretary and the management time a Sdn Bhd consumes.
The trade-offs are real too. An EOR is not the right vehicle for a large workforce, for a business that needs a Malaysian entity to hold licences or bid for government work, or for a company that wants to apply for Malaysia Digital or MIDA incentives in its own name. In those cases, incorporate early and use the EOR as the bridge.
What is different about People Profilers’ EOR in Malaysia
People Profilers has operated in Malaysia for more than twenty years and runs EOR, payroll parking, recruitment and Employment Pass services from Kuala Lumpur, alongside our offices in Singapore, Thailand, Vietnam and Indonesia. Employees sit under our Malaysian headcount with full EPF, SOCSO, EIS and medical coverage, are paid through our cloud payroll platform with self-service payslips, leave and claims, and have a local HR contact. Because the same group operates in all five markets, a client hiring in Malaysia and Singapore, or Malaysia and Indonesia, gets one contract, one monthly cycle and one invoice.
Read more about our Employer of Record services in Malaysia, or contact People Profilers Malaysia to talk through a specific hire.
