When do you graduate from an EOR to your own Malaysia entity?

The calculation below uses MYR 2,700 as the illustrative MYR equivalent of the Teamed fee. This is illustrative, not a fixed MYR price. The actual MYR amount depends on the exchange rate at the time of invoice. Teamed charges from $599 USD with zero FX mark-up.

At one employee, EOR at MYR 2,700 is cheaper than a typical entity overhead of MYR 4,000 or more. At two employees, EOR costs MYR 5,400 and the entity overhead is around MYR 4,200. The crossover lands at lower headcount than most markets because the Malaysian EOR fee in MYR is competitive against a Sdn Bhd that still needs full company secretarial, payroll bureau, and LHDN compliance overhead from employee one. The exact crossing point depends on your salary band. Run the Crossover Calculator to see yours.

All entity cost figures in this table are typical ranges. They cover outsourced payroll, bookkeeping, company secretarial services, SSM filings, EPF and SOCSO registration, and HR admin for a small Sdn Bhd. They are illustrative, not law figures. Actual costs vary with the complexity of your setup and the benefits programme you run.

EPF at 13% (for employee salaries at or below RM5,000) or 12% (for salaries above RM5,000) applies on both sides. SOCSO at 1.75% also applies on both sides. These are the same law costs whether you use EOR or your own entity. Run the Crossover Calculator with your own headcount and salary band.

1. Calculate the EOR cost

   Multiply the Teamed fee (from $599 USD) by your planned Malaysia headcount. This is the variable cost. It grows linearly as you hire.

2. Estimate the entity fixed overhead

   Typically MYR 3,500 to 6,000 per month for a small Sdn Bhd. This covers payroll bureau, bookkeeping, company secretarial, EPF and SOCSO admin, and first-point HR. This cost does not grow much until headcount exceeds fifteen.

3. Find the crossover headcount

   The crossover is where EOR monthly cost equals entity monthly overhead. For most Malaysia salary bands, this is around two to five employees. Use the Crossover Calculator for your own numbers.

4. Factor in non-financial triggers

   The maths gives you a headcount threshold. Government contract eligibility, local IP holding, Bumiputera equity requirements, and market-validation reversibility are separate questions that may shift the decision in either direction.

5. Plan the graduation date

   Allow four to six weeks for entity formation before the first payroll on your own Sdn Bhd. Factor in two to six weeks extra for banking. Start the GEMO process while EOR continues running.

These are typical ranges. They are not law figures. There is no law that sets what a Malaysian Sdn Bhd costs to form. The range reflects real market rates for professional services and varies with how much substance and complexity your structure needs.

Why banking is the hidden bottleneck

Malaysian business bank accounts for foreign-parented companies require additional documentary checks under Bank Negara Malaysia guidelines. Allow 2 to 6 weeks from application to a live account at most major banks. This turns a 3-week incorporation into a 6 to 8 week wait before the first payroll. Plan for it before setting the first payroll date.

These figures are typical market ranges for a small Malaysian Sdn Bhd with 1 to 15 employees. They are illustrative. They are not law figures. Actual costs depend on whether you outsource or hire in-house, and the complexity of your payroll and benefits programme.

Above 15 employees, dedicated Malaysian HR capacity and an in-house finance function typically become necessary. The cost band widens at that point.

Most cost comparisons skip the director-liability dimension because it is hard to put a number on. It is worth naming explicitly before you decide.

Personal director duties

Under the Companies Act 2016, every Malaysian Sdn Bhd director must act in good faith in the best interests of the company, exercise reasonable care and diligence, avoid conflicts of interest, and not make improper use of company information. A director who approves accounts they have not read is personally on the hook for any misstatement. These are personal duties. They cannot be outsourced to a company secretary.

The compliance treadmill

• Annual return (SSM): within 30 days of the anniversary of incorporation. Late means a fine per day outstanding.
• Statutory accounts: within 6 months of financial year-end. Late attracts director liability under the Companies Act 2016.
• Audit requirement: private companies with revenue above the prescribed threshold must have annual accounts audited. That is an ongoing professional engagement, not a one-off cost.
• PCB / MTD remittance to LHDN: by the 15th of each month following the payroll month. Late remittances attract a 10% penalty under the Income Tax Act 1967.
• EPF and SOCSO contributions: due by the 15th of each month. Directors who fail to remit are personally liable for arrears under the Employees Provident Fund Act 1991 and the Employees Social Security Act 1969.
• Beneficial ownership register: under the Companies Act 2016, register of substantial shareholders must be kept current within 14 days of any change.

Each filing is individually manageable. Stacked across a year, they consume real management attention and rely on your company secretary not missing a deadline. An EOR carries all of these on its own entity.

• Under 3 Malaysian employees at typical professional salaries: EOR is cheaper every month. The entity overhead has nothing to amortise against at this scale.
• Market validation phase: you are hiring 1 or 2 people to test commercial fit. Entity setup commits capital and management attention before you know whether the Malaysia market will deliver.
• Project-based hires: 6 to 12 month engagements where the formation cost and ongoing overhead will not amortise before the project ends.
• High-salary hires only: when your Malaysia headcount will be small but senior (above RM10,000 per person per month), the EPF rate drops to 12% for each employee. The cost advantage of an entity is smaller, and the EOR stays competitive to a higher headcount.
• Acquired team you may divest: post-acquisition holding patterns where adding a Malaysian entity creates wind-down complexity later.

• Sustained headcount above 5 Malaysian employees at typical salaries: the entity overhead amortises across enough people that per-head cost falls below the EOR fee.
• Government contracts or tender requirements: many Malaysian government tenders require a locally incorporated company with a local registered address. EOR employment does not meet this requirement.
• Local intellectual property holding: if your Malaysia team generates IP that needs to be held locally for tax or licensing reasons, a Sdn Bhd with a proper share structure is the right vehicle. EOR cannot hold IP on your behalf.
• Bumiputera partnership or equity requirements: certain Malaysian business licences and regulated sectors require a minimum percentage of Bumiputera shareholding. This requires your own entity, not EOR employment.
• Enterprise customer or bank expectation: some Malaysian enterprise customers and financial institutions require contracting with a locally incorporated supplier. Worth flagging early if relevant to your sales or banking motion.

The technical mechanic is contract novation: the employment contract transfers from Teamed's partner entity to your new Sdn Bhd on a specified date. All terms carry across. Salary, EPF contributions, annual leave entitlement, and continuous service date all remain unchanged. The employee sees a different employer name on their payslip. Nothing else changes.

What we do operationally:

• Stand up your Malaysian Sdn Bhd through GEMO, around 4 to 6 weeks, while EOR continues running in parallel.
• Register the entity with SSM, EPF (KWSP), SOCSO/PERKESO, EIS, and LHDN (PCB/MTD).
• Open the entity's EPF employer account and SOCSO employer code.
• Novate every active employment contract on a single effective date.
• Migrate ongoing benefits without any lapse.
• File final EOR-period EPF and SOCSO contributions and open new employer accounts on the entity from the novation date.
• Provide the same People Ops specialist as the post-graduation primary contact.

The Graduation Model exists because every other EOR makes this hard. We treat the move as something we help you plan for from the day you hire your first employee through us.

Real HR and legal experts handle your Malaysia hires from the first offer letter through every monthly EPF submission and annual EA form. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the EPF line at 13% (or 12% for salaries above RM5,000), the SOCSO line at 1.75%, and the leave accrual for 8 days. Nothing is hidden inside the management fee.

EOR payroll, contractor onboarding, and entity setup all live on one platform. Run the Crossover Calculator to see the month the model flips. Start from the Malaysia hiring overview. Key sources: EPF (KWSP) employer contributions, PERKESO (SOCSO) contribution rates, and Jabatan Tenaga Kerja Semenanjung Malaysia (JTKSM).