A Malaysian recruitment agency set to launch a pioneering "ethical" hiring model has called for an industry overhaul to tackle debt bondage among migrant workers and end modern slavery in the Southeast Asian nation.

Led by a team of three women, Kuala Lumpur-based Pinkcollar has billed itself as the first ethical recruitment agency in Malaysia, which relies heavily on foreign labourers to fill jobs in construction, factories or domestic care.

The company will drop the hefty fees usually imposed by recruitment firms on workers for helping them find jobs, an industry-wide policy that has pushed thousands of people into crippling debt they are rarely able to escape.

"We are trying to disrupt it (the industry) really," founder Zenna Law told the Thomson Reuters Foundation at Pinkcollar's office ahead of the "ethical" scheme's launch on Wednesday.

"We are hoping that ... we can elevate the standard of the entire industry," said Law, who along with her partners is in her 20s and was raised with the help of migrant domestic workers as a child.

Malaysia is home to millions of foreign labourers and one of the top destinations in Asia for impoverished women from countries such as Indonesia and the Philippines who take up jobs as domestic workers.

Cases of abuse have been widely reported, but migrant rights groups say workers often cannot escape as they have to work to repay the recruiters that found them work and make deductions from their monthly wages.

The Malaysian government said last year it was looking into ways to cut middlemen and end debt bondage, a form of modern-day slavery.

Although it is a first for Malaysia, ethical recruiters have sprung up in the Philippines and Hong Kong in recent years as businesses and private households come under pressure to end slavery.

Pinkcollar will focus on domestic workers from the Philippines in its first phase, recruiting through social media before matching them with employers through interviews that give both parties a say in the hiring process and terms.

The hiring fees, which typically range from 12,000 to 18,000 Malaysian ringgit ($2,900-$4,300), will be payable by the employer, said Pinkcollar's Law.

The firm's name is derived from the term given to jobs usually held by women - such as nannies and helpers.

"When workers owe agencies, not only they have less freedom to switch jobs but also to leave bad and unsafe work place. Debt bondage is what we are trying to tackle," Law said.

Migrant rights groups welcomed the initiative but warned its implementation could be problematic as countries such as Indonesia would only allow workers to go abroad through its locally-approved agencies.

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"It could be quite chaotic for the sending country because they want to monitor the whereabouts of the workers," said Alex Ong from advocacy group Migrant Care, which campaigns for migrant workers in Malaysia.

Recruitment agencies are not allowed to charge workers in the formal sectors - such as manufacturing and plantation - fees that are higher one month's salary, under current guidelines set by the employers' group, the Malaysian Employers' Federation.

But domestic workers are excluded from the clause, and typically have to spend six months with almost all their wages deducted to cover the costs they owe the recruiters for local travel or medical tests, said Ong.

"The question is why this protection is not applicable for domestic workers too," asked Ong, calling for a legal reform.

Malaysia is home to an estimated 212,000 of about 40 million people trapped in modern slavery worldwide, according to the Global Slavery Index by human rights group Walk Free Foundation.