PEO and EOR in Malaysia: Legal Compliance with EPF, SOCSO, and Income Tax Made Easy
Malaysia is one of Southeast Asia’s most attractive destinations for business expansion. Its strategic location, skilled workforce, and stable economic policies have made it a hub for regional growth.
However, many foreign and local businesses face one common challenge — navigating Malaysia’s labour laws, payroll requirements, and statutory contributions like EPF, SOCSO, and income tax.
That’s where PEO (Professional Employer Organisation) and EOR (Employer of Record) services come in. These models simplify hiring, payroll, and compliance so that businesses can focus on growth while experts manage employment regulations.
At ShineWing TY TEOH, we provide trusted PEO and EOR services in Malaysia, helping companies of all sizes stay compliant, efficient, and confident when expanding or hiring locally.
Learn more: PEO and EOR Services Malaysia
However, many foreign and local businesses face one common challenge — navigating Malaysia’s labour laws, payroll requirements, and statutory contributions like EPF, SOCSO, and income tax.
That’s where PEO (Professional Employer Organisation) and EOR (Employer of Record) services come in. These models simplify hiring, payroll, and compliance so that businesses can focus on growth while experts manage employment regulations.
At ShineWing TY TEOH, we provide trusted PEO and EOR services in Malaysia, helping companies of all sizes stay compliant, efficient, and confident when expanding or hiring locally.
Learn more: PEO and EOR Services Malaysia
Understanding PEO and EOR: What’s the Difference?
Although both PEO and EOR solutions manage HR and payroll, their structures differ slightly. Understanding the difference helps businesses select the right model for their goals.
| Term | Full Form | Core Function | Who Employs the Worker? |
|---|---|---|---|
| PEO | Professional Employer Organisation | Co-employment model where HR functions (payroll, benefits, compliance) are shared between client and provider | Both client & PEO |
| EOR | Employer of Record | Legal employer on behalf of client; manages employment contracts, payroll, and tax compliance | EOR provider |
PEO services are ideal for companies that already have a Malaysian entity but need expert support with HR and payroll compliance.
EOR services, on the other hand, are designed for businesses — especially foreign firms — that want to hire talent in Malaysia without setting up a local entity.
Read next: Types of Accounting Services and How They Work
EOR services, on the other hand, are designed for businesses — especially foreign firms — that want to hire talent in Malaysia without setting up a local entity.
Read next: Types of Accounting Services and How They Work
Why PEO and EOR Services Are Gaining Momentum in Malaysia
Malaysia’s economic landscape is evolving rapidly. The rise of hybrid work, digitalisation, and global hiring has driven more companies to seek flexible, compliant workforce solutions.
Here’s why many SMEs and international corporations now prefer PEO and EOR models:
These services are especially valuable for companies new to Malaysia or those expanding regionally while maintaining strict financial compliance.
Here’s why many SMEs and international corporations now prefer PEO and EOR models:
- Faster market entry — Hire local employees immediately without waiting for entity setup.
- Reduced legal complexity — Let local experts handle payroll, EPF, SOCSO, and tax compliance.
- Full regulatory compliance — Avoid penalties from non-compliance with Malaysian labour laws.
- Operational efficiency — Focus on business strategy while HR and payroll are managed by professionals.
These services are especially valuable for companies new to Malaysia or those expanding regionally while maintaining strict financial compliance.
Key Compliance Components: EPF, SOCSO, and Income Tax
1. Employees Provident Fund (EPF)
The Employees Provident Fund is Malaysia’s mandatory retirement savings scheme. Both employers and employees contribute monthly to the EPF to ensure financial security after retirement.
Failure to contribute accurately or on time may result in penalties or legal action.
EOR providers like ShineWing TY TEOH ensure that every EPF submission is timely and compliant with statutory requirements.
- Employer contribution: 13% or 12% (depending on employee wages).
- Employee contribution: 11% of monthly salary.
- Filing frequency: Monthly submission via the EPF portal.
Failure to contribute accurately or on time may result in penalties or legal action.
EOR providers like ShineWing TY TEOH ensure that every EPF submission is timely and compliant with statutory requirements.
2. Social Security Organisation (SOCSO)
SOCSO (also known as PERKESO) protects employees through workplace injury and invalidity insurance.
For full compliance, employers must register new hires within 30 days and remit monthly contributions promptly.
- Employer contribution: 1.75% of wages.
- Employee contribution: 0.5% of wages.
- Coverage: Employment Injury and Invalidity Pension Schemes.
For full compliance, employers must register new hires within 30 days and remit monthly contributions promptly.
3. Income Tax (PCB / MTD)
Under Malaysia’s Income Tax Act 1967, employers are responsible for deducting and remitting monthly income tax (Potongan Cukai Bulanan or MTD) to the Inland Revenue Board (LHDN).
This includes:
For many businesses, managing these filings across departments is time-consuming. That’s why engaging a professional EOR or PEO service ensures every tax and payroll obligation is accurately handled.
Related: Company Taxes in Malaysia to Know
This includes:
- Withholding tax from employee salaries.
- Submitting annual Form E (employer summary) and EA (employee earnings).
- Issuing accurate payslips reflecting deductions.
For many businesses, managing these filings across departments is time-consuming. That’s why engaging a professional EOR or PEO service ensures every tax and payroll obligation is accurately handled.
Related: Company Taxes in Malaysia to Know
How PEO and EOR Services Simplify Compliance
Whether you’re a startup hiring your first Malaysian employee or a multinational scaling operations, PEO and EOR services offer streamlined compliance management.
For SMEs
- Access a full HR and payroll infrastructure without hiring internal HR teams.
- Maintain compliance with EPF, SOCSO, and income tax effortlessly.
- Focus on growing your business instead of administrative burden.
For Multinational Companies
- Hire Malaysian talent without setting up a Sdn. Bhd. entity.
- Meet local employment and tax requirements immediately.
- Avoid delays, legal issues, and financial penalties.
By leveraging ShineWing TY TEOH’s integrated solutions, your workforce remains fully compliant while your accounting and payroll systems stay synchronised.
How PEO and EOR Complement Accounting Services
Employment and accounting functions are deeply intertwined.
Every payroll transaction affects financial statements, tax filings, and audit readiness.
Integrating PEO/EOR with accounting services ensures:
As one of the leading firms providing accounting services in Malaysia, ShineWing TY TEOH offers an integrated solution — where HR, payroll, tax, and accounting align under one expert team.
Integrating PEO/EOR with accounting services ensures:
- Consistent payroll reconciliation and reporting.
- Transparent financial documentation for audits.
- Accurate calculation of statutory contributions.
- Seamless coordination between HR, tax, and accounting teams.
As one of the leading firms providing accounting services in Malaysia, ShineWing TY TEOH offers an integrated solution — where HR, payroll, tax, and accounting align under one expert team.
Malaysia’s Legal Framework for Employment Compliance
To operate legally, every employer in Malaysia must comply with laws enforced by several authorities:
| Regulatory Body | Responsibility |
|---|---|
| Department of Labour (JTK) | Enforces the Employment Act 1955 (contracts, wages, working hours). |
| Inland Revenue Board (LHDN) | Oversees income tax deduction and remittance. |
| EPF & SOCSO | Manage employee benefits and contributions. |
| EIS (Employment Insurance System) | Provides unemployment protection. |
Staying compliant with all four pillars is vital for sustainable business operations. Working with a licensed EOR/PEO partner ensures your company meets every statutory requirement accurately and on time.
Case Example: How EOR Services Work in Practice
Scenario:
A Singapore-based fintech startup wants to hire a customer support team in Kuala Lumpur but doesn’t have a local entity.
Challenge:
They need to manage Malaysian payroll, EPF, SOCSO, and tax deductions legally — without going through the long process of company incorporation.
Solution:
They engage ShineWing TY TEOH as their Employer of Record (EOR).
Outcome:
The startup operates smoothly in Malaysia, hires compliant local employees within weeks, and focuses on scaling its business without HR or tax complications.
A Singapore-based fintech startup wants to hire a customer support team in Kuala Lumpur but doesn’t have a local entity.
Challenge:
They need to manage Malaysian payroll, EPF, SOCSO, and tax deductions legally — without going through the long process of company incorporation.
Solution:
They engage ShineWing TY TEOH as their Employer of Record (EOR).
- ShineWing legally employs the staff on their behalf.
- Handles payroll processing, EPF/SOCSO contributions, and tax remittance.
- Provides transparent monthly reports for financial reconciliation.
Outcome:
The startup operates smoothly in Malaysia, hires compliant local employees within weeks, and focuses on scaling its business without HR or tax complications.
How ShineWing TY TEOH Ensures Full Compliance
As a professional accounting firm in Malaysia, ShineWing TY TEOH offers a holistic suite of services that merge financial governance with HR management.
Our PEO and EOR services cover:
We provide both local and international clients with a single point of contact for HR, payroll, and accounting — ensuring complete transparency and compliance under Malaysian law.
Visit: PEO and EOR Services Malaysia
Our PEO and EOR services cover:
- Payroll administration and salary processing
- EPF, SOCSO, and income tax compliance
- Employment contract management
- HR policy advisory and regulatory liaison
- Accounting and financial reporting integration
- Support for audits and government inspections
We provide both local and international clients with a single point of contact for HR, payroll, and accounting — ensuring complete transparency and compliance under Malaysian law.
Visit: PEO and EOR Services Malaysia
PEO, EOR, and Accounting: The Perfect Partnership
The synergy between PEO/EOR and accounting is becoming essential for modern businesses.
With regulatory landscapes evolving, companies need real-time financial insights to make strategic HR decisions.
By combining ShineWing TY TEOH’s employment solutions and accounting expertise, you benefit from:
Explore more: Accounting Services in Malaysia
By combining ShineWing TY TEOH’s employment solutions and accounting expertise, you benefit from:
- Accurate payroll accounting and audit readiness.
- Efficient reporting for board and investor transparency.
- Assurance that every financial and HR decision aligns with compliance requirements.
Explore more: Accounting Services in Malaysia
Conclusion: Hire Confidently, Stay Compliant
Managing compliance in Malaysia can be challenging, but it doesn’t have to be.
With PEO and EOR services, you can hire, pay, and manage employees efficiently while remaining compliant with EPF, SOCSO, and income tax laws.
Partnering with ShineWing TY TEOH ensures your business operations are supported by experts in both employment and accounting — giving you the freedom to focus on growth, not paperwork.
Simplify compliance and expand with confidence. Start your journey with ShineWing TY TEOH today.
Partnering with ShineWing TY TEOH ensures your business operations are supported by experts in both employment and accounting — giving you the freedom to focus on growth, not paperwork.
Simplify compliance and expand with confidence. Start your journey with ShineWing TY TEOH today.
