Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.
For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.
For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.
As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.
While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.
A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.
Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Malaysia can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Malaysia , you have to:
If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Malaysia .
An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.
An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.
Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.
At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.
Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:
Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.
Paying employees in Malaysia is not the same as paying workers in your own country. Employees have to be paid using Malaysia’s employment and payroll standards.
This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.
Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.
After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:
One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.
Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.
Outside of EORs acting as the full admin employer, many also provide remote payroll.
For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.
We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.
Working hours are limited to 48 hours per week. The most common office practice is 45 hours per week (9 am-6 pm, Mon-Fri)
The minimum guideline for overtime pay in the Employment Act is:
The Employment Act only covers manual workers and non-manual workers with a monthly salary that does not exceed RM 2,000. However, these guidelines are often used as guidance in Common Law cases for other employees.
Salaries are usually paid monthly. Salaries must be paid within 7 days of the following month.
It is only common practice in the manufacturing industry to pay salaries in 13 installments.
PTO is calculated by the:
There are 6 compulsory public holidays and 10 optional public holidays (employer should choose at least 5 of these but it is common for offices to close on all).
State day is a compulsory public holiday and the day varies from state to state. All other holidays are national.
The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:
Female employees are covered in full by the employer for a least 90 days if they have been employed in the last four months and have worked for the same employer for at least 90 days in the 9 months prior to childbirth.
There are no provisions in the law regarding paternity leave for the private sector, however, in the public sector, fathers are entitled to 7-14 days.
Employees can be dismissed for misconduct or poor work performance. Termination is subject to employee challenge for unfair dismissal.
It is recommended that proper procedure is followed (warning, time and guidance to improve performance) in order to reduce the likelihood of an unfair dismissal claim.
The notice period in Malaysia is:
No set amount but should be equitable between employee and employer.
Minimum termination benefits for employees who are fired for reasons not connected to their conduct are as follows:
Probation is optional. The common practice is to have 1-3 months probations.
The Employment Act does not distinguish between employees on probation and permanent employees.