Most common payroll mistakes in Malaysia
It is nearly impossible to avoid these common payroll mistakes if you are an employer or HR employee managing your company's payroll or whether you provide payroll services in Malaysia.
Missing deadlines and notices
Whether you are submitting a monthly contribution to the Employee Provident Funds or the Employee Insurance Scheme, there are deadlines along the payroll process that must be met each month. If you fail to meet the deadlines, which are usually on the 15th of each month, you will face an unwanted and potentially costly penalty. Plan ahead of time for your payroll process to allow for any last-minute changes.
Miscalculation of individual income tax, EPF, Socso and EIS deductions
When working as a payroll employee in Malaysia, you must ensure that the calculations for income tax, EPF, Socso, and EIS deductions are correct. Almost all HR departments keep their own records and practises for their monthly payroll. However, the majority of them continue to perform the calculation manually, which increases the possibility of error.
As a result, it is critical to use a dependable tool that allows the user to quickly and easily calculate the net salary and individual income tax deduction for your employees.
Miscalculation of overtime payment
Overtime payments should always be calculated correctly by employers and human resource departments. Typically, different rates apply depending on whether the overtime is performed during or outside of normal working hours, as well as on normal work days, rest days, or public holidays. This error can have serious consequences for your company because it can erode your employees' trust or even lead to a lawsuit if things get too serious.
Error in employees’ information
Salary/wages, job level, entitlement, deductions, and tax rates for employees can vary from month to month. Even if your company employs more than two people, you are still likely to make a mistake in your payroll process if you do not have the most up-to-date information.
To reduce this risk, the HR department must monitor and track all information to ensure it is latest. They should always communicate with the employees and the head of department to get the most up-to-date information and avoid making mistakes.
Messy record keeping
If your HR department is still using an Excel spreadsheet to keep track of all payroll details, you should be concerned. It is not uncommon to see small and medium-sized businesses keep payroll records manually because it appears to be the simplest way to do so.
However, the risk of record mismanagement can result in unfavourable circumstances in the workplace. For example, an ex-employee claims that he was not paid in accordance with his contract two years ago, and your HR department either did not keep the payroll record or misplaced it. In either case, this is a disadvantage for your company, and it may result in a penalty or reputational damage.
To avoid problems like this, you should begin investigating various payroll services that provide adequate record keeping.
Fail to commit to a regular payroll schedule
One of the most common mistakes in payroll processing is failing to pay employees on time every month. It is difficult for your employees to adjust their finances if you do not adhere to a regular salary payout date. As a result, it is always a good idea to establish a fixed date for salary payout and to implement policies such as early salary release prior to public holidays.
Payroll processing should not be taken lightly by Malaysian businesses, as it has a greater impact on the organisation and operations than you might think. Outsourcing your payroll to a service provider like Ashton Corporate Services ensures increases the accuracy of your company’s payroll process when compared to in-house payroll management as it gets prepared, analysed, and evaluated by qualified professionals. Talk to us today to see how our competitive payroll services can help your business.