Employer of Record (EOR): What It Is and How It Works in Malaysia

TL;DR

• An employer of record (EOR) becomes the legal employer of your staff where your company has no entity. You direct the work.
• In Malaysia, the EOR holds the contract and runs payroll, EPF, SOCSO and EIS, and carries the duties that come with employing people under the Employment Act 1955.
• You keep day-to-day management. The EOR keeps HR administration and compliance.
• Singapore is the exception. MOM has said EORs cannot sponsor work passes for foreigners who work for overseas companies with no local presence.

You’ve found the person you want in Kuala Lumpur, and your company has no Malaysian entity. An employer of record closes that gap. It’s a local company that becomes the legal employer of your hire, signs the contract, pays the salary and files the statutory contributions, while you assign the work and manage the person day to day.

It sounds tidy on paper. CFOs and CHROs still ask the same things. Who carries the risk? What stays with us? When does an EOR stop making sense? Malaysia comes first here, because that’s where most readers are hiring.

Some points get skipped elsewhere. EOR isn’t available everywhere on the same terms, and Singapore is the clearest case. A contractor label won’t protect you if the relationship looks like employment. And for many companies an EOR is a stage, not a permanent answer.

SummitNext runs EOR in Malaysia and the Philippines. Costing sits on a separate page, linked below.

What is an employer of record?

An employer of record (EOR) is a company that legally employs workers on behalf of another business, the client, so the client can have people working in a country where it has no registered entity. The EOR signs the employment contract, runs payroll, withholds and pays statutory contributions, and administers benefits. The client decides what the employee works on, sets targets and manages performance day to day. In Malaysia, employment is governed mainly by the Employment Act 1955, and the statutory contribution schemes are EPF, SOCSO and EIS. The EOR registers the employee under those schemes as the employer. That creates three parties: the client, the EOR and the employee. The EOR carries HR and compliance obligations, while the client keeps operational control. How far this arrangement is accepted differs by country, so the structure described here applies to Malaysia.

“Of record” means the EOR is the employer named in the paperwork. That covers the contract and the payslips, and it covers the statutory filings too. An EOR usually doesn’t find the candidate. You choose the person and agree the role, and the EOR employs them. A payroll vendor, by contrast, processes salaries for people a company already employs through its own entity. It can’t help if there’s no entity to hold the registrations. An EOR can.

How does an employer of record work in Malaysia?

You choose the hire and agree the role, and the EOR employs them and runs the administration around that employment.

The role. You and the EOR settle the title and reporting line. Work location and package follow. Seniority and function feed the pricing tier.

The contract. The EOR issues an employment contract under the Employment Act 1955, which governs most employment in Malaysia. Your company isn’t a party to it.

Registration. The EOR registers the employee for EPF, SOCSO and EIS as the employer.

Each month. The EOR runs payroll, makes the statutory deductions and contributions, issues payslips and keeps leave records.

Changes and exits. Pay reviews and role changes are agreed with you and processed by the EOR. Offboarding also runs through the EOR, because it is the employer. Tell it early and share the facts. Your service agreement should say how decisions and costs are shared, so read that clause before signing.

Take your first Malaysian hire to a free consultation. Book a free consultation with SummitNext and talk through the role, the headcount and the start date.

Who is responsible for what in an EOR arrangement?

In an EOR arrangement, responsibility splits by function. The EOR owns the HR responsibilities: the employment contract, payroll, statutory contributions to EPF, SOCSO and EIS, benefits administration and compliance with the Employment Act 1955. The client keeps operational management. It assigns tasks, sets goals and reviews performance. SummitNext applies this split in Malaysia and the Philippines. Decisions that touch the legal relationship, such as pay changes, disciplinary action and termination, run through the EOR because it is the employer on record, even though the client usually raises them. The employee still works inside your workflows, follows your direction and reports to your manager. That is why the arrangement is described as HR accountability on one side and operational accountability on the other. The division holds for Malaysian engagements under the terms of the service agreement.

Area	Employer of record	You, the client
Employment contract and statutory terms	Issues and maintains	Defines the role and reporting line
Payroll and payslips	Runs each cycle	Approves the package and sends changes
EPF, SOCSO and EIS	Registers and files as employer	Supplies accurate hire details
Daily tasks, targets, performance	Not involved	Owns
Disciplinary action or termination	Leads the process as legal employer	Raises concerns early and supplies facts

Finance and HR leaders like the split because nobody has to wonder who files the contributions. Operations leaders like it because the person takes their direction.

How is an employer of record different from a PEO?

An EOR is the sole legal employer of your staff. In a PEO arrangement, the provider shares employer duties with your own company, which usually has to exist locally already. That sharing is called co-employment.

For a company with no Malaysian entity, the PEO structure assumes something you don’t have. SummitNext’s page on how EOR, PEO and staffing agencies compare has the full comparison.

How does an EOR compare with setting up your own entity?

An EOR lets you employ people without owning a legal entity. Your own entity gives you full ownership of the employment platform and full responsibility for it.

Owning the entity means you hold the registrations, filings and compliance calendar yourself. You also get what an EOR can’t give you: the ability to contract locally in your company’s name, hold assets and build a permanent presence. The trade-off is fixed overhead that continues at any headcount.

The honest question is how long you’ll stay and how many people you’ll hire. A short horizon and a small team tend to favour an EOR. A long horizon and a growing team tend to favour an entity. Some companies later move hires from an EOR to their own entity, which needs careful handling. The entity route in Malaysia has its own page, and hiring in Malaysia without an entity goes deeper on the EOR side.

When does an employer of record fit, and when doesn’t it?

An EOR fits when you need named people working in a country where you don’t plan to hold an entity soon. It doesn’t fit when you already have one, or when you need a legal presence for other reasons.

It fits a market test with one or two hires, a single senior hire, or a project team with a fixed horizon.

It doesn’t fit when you already operate a Malaysian entity, because you can employ through it directly, or when the business needs a local legal presence to sign contracts or tender for work. It also doesn’t settle your own tax position. You’ll still need advice on how your company is treated locally.

If you want a managed team rather than named individual hires, a dedicated remote team model is the closer fit. If the work is a process rather than a role, what business process outsourcing means for your operations sets out that separate path.

Is a contractor a safe alternative to an EOR?

Not when the relationship works like employment. The label in the agreement doesn’t decide the question. The facts do.

Regulators and courts in many countries look at how the relationship runs. Who controls the hours and methods? Does the person work only for you? A person who works to your schedule, under your manager, for one client, looks like an employee whatever the paperwork says.

Treating an employee as a contractor can lead to claims for unpaid statutory contributions and entitlements, and it can raise tax questions. Confirm how this applies with Malaysian counsel before using a contractor structure for a role that looks like a job.

Where is employer of record restricted? The Singapore example

On 9 July 2024 the Ministry of Manpower (MOM) said that employers of record may not apply for work passes for foreigners based in Singapore who work for overseas companies with no local presence. The Singapore Law Gazette reports MOM’s wording, including that doing so would be an offence, and notes that MOM didn’t name the statutory provision it relied on.

SummitNext doesn’t offer EOR in Singapore for overseas companies that have no local presence. Its separate article on employer of record in Singapore covers the detail.

The point holds for any country. EOR isn’t accepted on identical terms everywhere, and rules can change by clarification as well as by statute. Check each country with local advice before you plan a hire.

How SummitNext runs employer of record

SummitNext employs your people through its registered local employer entity in Malaysia and the Philippines. That’s the full list, and this page makes no claim for any other country.

Here’s how it works in practice:

• No minimum headcount. An engagement can be a single hire.
• Work at your premises. SummitNext staff can work at your office, unlike remote-only models.
• A clear accountability split. SummitNext owns payroll, compliance and benefits. You keep operational management of the employee.
• Four pricing tiers. EOR is priced in four tiers by seniority and function. Amounts depend on the role, so they sit with a quote and the what employer of record services cost page, not here.

For the service scope, read what SummitNext’s EOR service covers. The client results from SummitNext partnerships show how engagements have run.

Frequently asked questions

What does an employer of record do?

An employer of record legally employs your staff in a country where you have no entity. It issues the contract, runs payroll, registers the employee for statutory schemes, pays contributions and administers benefits. You keep control of the daily work, targets and performance. The EOR handles the HR and compliance side.

How is an employer of record different from a PEO?

An employer of record is the sole legal employer of your staff. A PEO shares employer duties with your own company through co-employment, so your company usually needs a local entity already. A business with no entity in Malaysia typically needs the EOR structure, because the PEO model assumes an entity exists.

Can I hire a single person through an employer of record in Malaysia?

Yes, with SummitNext. There is no minimum headcount, so an engagement can start with a single hire. You choose the person and agree the role, and SummitNext employs them in Malaysia while you manage the work. Pricing depends on seniority and function, so ask for a quote for your role.

Can an employer of record employee work from my office?

Yes, with SummitNext. Staff employed through its EOR can work at your premises in Malaysia as well as remotely. You manage their daily work either way, and SummitNext stays the legal employer. Workspace arrangements are set in the service agreement, so agree them before the start date.

Can an employer of record hire in Singapore for an overseas company?

No. On 9 July 2024 the Ministry of Manpower said employers of record may not apply for work passes for foreigners who work for overseas companies with no local presence in Singapore. SummitNext doesn’t offer Singapore EOR on that basis. Other countries have their own rules, so check each one.

How much does an employer of record cost?

It depends on the role. SummitNext prices EOR in four tiers by seniority and function, and the amount for your hire depends on which tier it falls into. Read the cost page for how the model works, or contact SummitNext for a custom quote based on your role and headcount.

Conclusion

An employer of record gives you a legal employer in Malaysia without an entity of your own, and it leaves you in charge of the work. The EOR owns the contract, payroll, EPF, SOCSO, EIS and compliance. You own the tasks, targets and performance. Check that split against any provider’s service agreement before you sign.

It suits small teams and early market tests, and it stops suiting you when your plans outgrow it.

If you’re planning a first hire or a small team in Malaysia or the Philippines, speak with the SummitNext team about your roles and start date, and ask for a custom quote for your role mix.