Planning to set up a business in Malaysia? Here’s what you should know

By Manish Mehta Co-founder of Propay Partners

With the novel coronavirus ravaging economies and fueling the onset of a recession, many companies are looking for faster ways to bolster revenue and gain massive customer reach. Businesses are also looking for greater turnarounds in less expensive hubs like South East Asia, Latin America and Africa. Overseas markets offer them a chance to gain access to cost-effective manufacturing as well as tap into surplus labour.

Malaysia, a country widely known for its technologically-advanced and diverse talent pool, has often been the first choice of many global multinationals seeking visible footprint in South East Asia. The country’s abundant resources, availability of real estate space, proximity to larger trading hubs like Singapore & Hong Kong, burgeoning consumer base and flexible work culture make it an attractive destination for global expansion.

Although it looks easier from the outside, company formation rules in Malaysia are guarded by stringent business partnerships norms that substantially promote local proprietorship and domestic entrepreneurship. Any foreign entity that comes into the country needs a comprehensive understanding of how companies are registered here, what tax rules will be applicable, how talents have to be hired, in what ratio and how their employment contracts need to be done.

It’s not just the registration that covers the expenses. Once the business is set up, it can only be functional after employees are hired, bank accounts opened, auditors appointed and getting operations vetted on a timely basis through employment law firms and corporate tax consultants. The constant battles of bureaucracy are the other turn offs which can affect the way the foreign entity places itself within the country’s local customs and business framework.

One of the ways global ventures can make a smooth transition into the country is through an established Professional Employer Organisation (PEO) or an Employer of Record (EOR). These terms are commonly used to denote those organisations that aid foreign companies to enter new markets by acting as their legal entity. In simple terms, this means that these organisations act as legal employers on behalf of MNCs for their employees on paper to reduce documentation hassles and registration complexities.

A collaboration with a PEO/EOR also acts like a gateway for global ventures to access HR support, payroll continuum, employment laws, labour regulation and timely compliance. As the local registration partner, the PEO will help global companies access markets by helping them establish contacts, hire talent and dodge unnecessary documentation & red tape as they spring up. One of the advantages of having a PEO is that there is no delay in setting up the business which would otherwise take many months or even years.

Being a single window platform, a PEO ensures that all liabilities affecting employee recruitment, payroll and retention are met with perfection. Whether it’s an M&A in Malaysia or establishing a new entity, PEOs ensure that talents from home countries are relocated as per national labour regulations, with work permits and support to their dependents. They also make sure employees meet statutory and compliance guidelines in Malaysia upon recruitment as well as departure.

Having a PEO manage internal HR and payroll systems also alleviates risk and constant surveillance. It also helps the employer focus on their business strategies and expansion blueprint in the host country. PEOs also observe structured financial reporting that is communicated in a timely manner to the employer, making it worthwhile to consider it for your operations.

Matters concerning HR and payroll are always dictated by corporate policies which tend to be uniform despite changes in business locations. Employee or team roles can also be different considering the business strategies the company is trying to achieve in those locations. Corporate policy and benefits schemes may also have a direct bearing on payroll, setting the brand apart from others in the market and PEOs can be trusted to toe this line as per company requirements.

If you are planning a foray into Malaysia, you would require a PEO experienced at handling global ventures and their payroll portfolio. Propay Partners is a payroll advisory and PEO firm that has been handling payroll systems for global ventures for the last two decades. Our payroll and employee mobility solutions can help MNCs leverage prime benefits while hiring and managing a workforce internationally.



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