How to Convert Contractors to Employees in Malaysia: A Practical Guide
Table of Contents
Key Takeaways:
- Legal distinctions between contractors and employees in Malaysia
- Steps for converting contractors to employees
- Employer of Record (EoR) solutions for businesses without a local entity
We’re here to help you on your journey to hire, manage and pay.
Without an Entity: Using an Employer of Record (EoR)
For businesses without a legal entity in Malaysia, managing the process of converting contractors to employees can be more complicated. Setting up a local entity is often time-consuming and expensive, making it impractical for companies looking to scale quickly or test the market.
This is where an Employer of Record (EoR) can provide a seamless solution.
How an Employer of Record Works
An Employer of Record (EoR) allows businesses to hire employees in Malaysia without setting up a legal entity. The EoR acts as the legal employer on paper, managing all the compliance-related tasks such as payroll, tax withholdings, EPF contributions, and SOCSO registration. The company, however, retains full operational control over the employee’s day-to-day activities.
Benefits of Using an EoR for Contractor Conversion
- Faster Hiring Process: An EoR can expedite the process of converting contractors to employees, eliminating the need for lengthy entity setup procedures.
- Compliance Assurance: The EoR handles all the compliance-related tasks, ensuring that your business remains aligned with Malaysian labor laws and social security contributions.
- Reduced Administrative Burden: By outsourcing employment management to an EoR, companies can focus on their core business activities without worrying about administrative tasks such as payroll and benefits administration.
For companies without a local presence in Malaysia, using an EoR is an efficient and compliant way to convert contractors into full-time employees while maintaining operational flexibility.
How AYP Can Help
At AYP, we offer tailored Employer of Record services in Malaysia, designed to help businesses convert contractors into employees smoothly and in full compliance with local labor regulations. Our comprehensive EoR solutions cover all aspects of employment management, including payroll, EPF and SOCSO contributions, benefits administration, and contract management.
Whether you already have a local entity or are looking to expand into Malaysia without the complexities of entity establishment, AYP can help ensure that your workforce transitions from contractors to employees with ease and legal compliance.
