One of the challenges faced by Chinese companies that are expanding globally is the navigating of local employment laws particularly in countries like Malaysia. The Professional Employer Organizations (PEOs) and Employers of Record (EORs) give valuable assistance to companies in China so as to penetrate into Malaysia’s talent pool legally and in compliance with the country’s laws. The article examines the services of PEO and EOR in Malaysia, their disparities as well as benefits of utilizing them by companies from China when extending to the country – Malaysia.
PEO and EOR in Malaysia
In Malaysia, PEO and EOR service providers refer to the same principle that involves hiring employees through a third party. This arrangement enables organizations to tap into local skills without setting up a legal entity in the country. The main difference between PEO and EOR services is structural.
Professional Employer Organization (PEO): A PEO is basically a third-party HR company that takes over all of your HR responsibilities, such as payroll, benefits, compliance, and including recruitment services.
Employer of Record (EOR): An EOR is a company that employs your employees on your behalf. This means that the EOR is the legal employer of your employees on paper, and they are responsible for all of the associated HR responsibilities, but not including recruitment services.
While both PEOs and EORs allow organizations in Malaysia to engage employees without the establishment of a legal entity, the extent of the intervention is however different. To learn more about PEOs and EOR see this insightful article: What is a PEO and an EOR & everything you need to know.
How PEO and EOR Services Benefit Chinese Companies
Having discussed PEOs and EORs, let us now discuss the benefits that these services can bring to Chinese companies desirous of expanding into Malaysia.
- Compliance with Local Laws: It is a challenge for foreign or Chinese companies to keep abreast with the complex Malaysian labor laws that keep changing. In this respect, the engagement with service providers like FastLane Group by Chinese firms will enable conformity with the employment laws of any country where they are operating.
- Access to Local Talent: A PEO/EOR service provider can facilitate local recruitment allowing Malaysia’s large talent pool to be accessed by Chinese companies. They know the local job market and can locate suitable candidates promptly and easily.
- Cost Savings: The cost of setting up an office establishment for a Malaysian entity can be avoided by a Chinese company by using a PEO/EOR to handle their HR and payroll functions. This allows them to focus more on business operations instead of paying for administrative and legal expenses.
- Flexibility: The most important benefit derived from contracting PEO and EOR services is their ability to support expansions in Malaysia. This includes being able to rapidly expand or shrink a company’s employee base, which would have been costly otherwise through conventional HR administration.
Regulatory and Compliance Considerations in Malaysia
China businesses face tremendous challenges in penetrating the Malaysian market due to the complexity of employment laws. There is no doubt that it’s a broad framework covering aspects such as labor laws, immigration laws, taxation regimes, and social security duties. Failure to comprehend and abide can result in huge fines and even suspension of business. As such, PEOs and EORs have a critical role in Malaysia.
The role of PEO and EOR services in ensuring compliance
In Malaysia, PEO offers a co-employment model, where PEO is responsible for managing all human resources functions such as recruitment, payroll, tax filings, and employee benefits, leaving the client’s company to concentrate on their daily operation and enlarging their business. To this end, the PEO helps in ascertaining that there is conformity of all these aspects to Malaysian law.
However, in Malaysia, the EOR acts as the legal employer to the client company’s employees, bearing full liability for compliance and risk management. It is particularly helpful to their Chinese counterparts who don’t have a legal entity in Malaysia and so will enjoy this agreement. The use of EOR services enables them to work effectively, utilize the availability of local talents as well as comply with Malaysian regulations.
Using PEO and EOR services allows Chinese companies to enter the Malaysian market with ease. Companies do not have to worry about regulatory compliance issues as these are managed by experts, enabling them to concentrate on other important business activities. You can refer to an in-depth guide on PEO and EOR comparison for assistance and further reading.
Mitigating risks associated with foreign market entry
Any business venturing into a new market, particularly a foreign one is always exposed to risks. Chinese companies may face various risks including culture shocks, language obstacles, and lack of understanding regarding domestic laws or social norms among others in Malaysia. With this, PEO and EOR services can minimize such risks as they provide consultancy on how to navigate the local markets. Also, they help recruit the best talents that are available.
Setting Up Operations in Malaysia
FastLane Group delivers tailored PEO and EOR solutions in 5 simple steps for driving your growth. PEO and EOR services can set up operations in Malaysia for the Chinese as well as other foreign companies without the need for a legal registered entity. PEO employs local talent and deals with administrative HR tasks; on the other hand, an EOR becomes a legal employer. It enables establishments to start up easily, attract local talent, and adhere to the local laws. Malaysian PEO and EOR services enable Chinese companies to concentrate on their core tasks and developments with minimized risks posed by entering foreign markets.
In understanding the dynamism of these services, let’s examine how they revolutionize global hiring. This is especially the case with Chinese firms entering Malaysia’s promising market. To begin with, let’s look at some successful examples.
Showcase successful Chinese companies that entered Malaysia using PEO and EOR services
- An IT company based in China realized the opportunity of expanding into the Malaysian Market and went ahead to strategize its growth. The urgency of prompt market access was realized, as well as the necessity for a competitive edge by using locally available talent. In choosing Professional Employer Organization (PEO), they expanded swiftly into the Malaysian market while being in compliance with the legal provisions of that country. Within six months of entering Malaysia, the company secured a strong position with its operation based on the PEO support. Such an action helped them develop business, thus getting more profit out of the market advantages.
- An entry into Malaysia by a leading Chinese manufacturing company was met with hurdles. They quickly entered the Malaysian market with assistance from Employer of Record (EOR) services and were compliant with local laws. With this, the company could shift its attention towards key business activities as EOR had covered all the HR tasks. This enabled the Chinese company to become one of the major players in the Malaysian market without much delay.
For more successful cases, read Transforming Business Efficiency through HR Outsourcing.
The benefits of PEO and EOR services to Chinese Companies in Malaysia are enormous. This leads to compliance assurance, risk mitigation, and success by focusing on core operations. Partner with FastLane Group in Malaysia for an all-encompassing PEO and EOR solution that will see you tap into Malaysia deep pool of talent. We have developed tailored solutions that allow businesses to effectively leverage opportunities in Malaysia, expanding their operations by accessing the nation’s diverse workforce. The expertise and local knowledge we possess constitute solid grounds for any company seeking to establish and prosper in Malaysia. Let’s talk about ways that we can help you grow your business.