A World Economic Forum report on Asia’s growing business hubs lists Kuala Lumpur as one of the key economic zones in line with global cities such as Bangalore, Shenzhen, Taipei, Guangzhou & Ho Chi Minh City. Its proximity to Singapore and availability of resources – both natural and human capital – makes it a premium choice for cross-border entrepreneurship.
Though doing business in Malaysia is a step easier than most Asian nations, understanding the country’s statutory obligations may be burdensome for the new entrant. Hiring a Professional Employer Organisation (PEO) to recruit your contract staff or manage their payroll is one way that allows global companies to test waters in such new markets. While this is the best way to outsource HR, it is also one of the sought-after ways to kickstart a business without investing in costly FDI registration.
Entering into a contract agreement with a PEO can therefore be for the short-term or as in certain cases, for the long-run. Either way, you will need to have a deeper understanding of what your PEO contract can do and what it can’t. Cover everything you need in your PEO contract so that your business stays uninterrupted even if you are headquartered elsewhere.
Understanding Your PEO Contract
A PEO contract is usually a multi-page master document that explicitly details the responsibilities of the client and the PEO partner once they have decided to work together. In some cases, foreign companies will hire their own employees and engage the PEO to manage payroll and other tasks, while in other cases, PEOs have to find and recruit contract staff for these foreign companies.
At Propay Partners, the master document outlines the role of our services which includes obligations of procuring statutory licences and permits that are required for the performance of the employee during the stipulated period of work. We also ensure that personal income taxes, pension fees and other regulatory fees are remitted on time to tax authorities in Malaysia.
The master document also includes medical insurance and pension schemes as directed by the client and as well as adherence to data protection acts that the client and the PEO partner are obliged to follow. Apart from employment requisites, clients are also made to understand the importance of cash floats served well in advance so that the PEO can effectuate payroll transactions.
The document also highlights other terms and conditions; period of service; and annulment terms. With 20 years of experience in the employee mobility segment, Propay Partners provides PEO services to hire manpower for our clients. Hence, our master document is followed by a Work Order, an annexure that outlines all details about the employee the company intends to hire. Work Orders exist for all the employees hired through us.
The Work Order entails the employee’s name, designation, work location, employment benefits, visa requirements (for self and family), leaves, salary, and statutory contributions. Whether hired by client or by the PEO, the latter will be tasked with managing the company’s employees from the point of hiring till departure.
What Should You Prioritise in Your PEO Contract?
Companies that hire a PEO do so primarily because they are busy expanding their business and need extra support to handle their monthly payroll and HR requirements in a steady, uninterrupted fashion. This cannot come at the cost of infringements or liabilities, which may intensify if one does not think through the fineprint. Here are some things you should cover in your PEO contract:
We have been serving several global MNCs that have their manufacturing bases in Malaysia, Singapore and Thailand and working with them over several years. We have been fulfilling co-employment responsibilities to the satisfaction of both clients and immigration authorities, diligently and cost-efficiently. To know more about PEO services, do reach out to us at www.propaypartners.com
