Whether you are an employer or HR employee managing your company’s payroll or you are providing payroll services in Malaysia, it is almost impossible to avoid these common payroll mistakes.
1. Missing deadlines and notices
Whether you are submitting a monthly contribution to the Employee Provident Funds or Employee Insurance Scheme, there are deadlines along the payroll process to be met every month. If you miss the deadlines which are usually on the 15th of every month, be prepared for an unwanted and possibly hefty penalty.
The best practice is to adopt a software or system to automate the payroll process as much as possible. This way you can limit the chance of human mistakes. Also, you should always prepare your payroll process in advance to create a buffer period in case you need to make final amends.
2. Miscalculation of individual income tax, EPF Socso and EIS deductions
In Malaysia, when working as a payroll staff, you have to ensure the calculations for income tax, EPF, Socso and EIS deductions are accurate. In general, almost all HR departments have their own record keeping and practices for their monthly payroll. However, most of them are still doing the calculation manually which increases the chance of mistakes.
Hence, it is important to use a reliable tool such as the PCB Calculator by PayrollPanda, which allows the user to find out the net salary and individual income tax deduction for your employees easily and quickly.
3. Miscalculation of overtime payment
For staff who follow the Employment Act (e.g. wages not exceeding RM2,000, manual labourers), the rules for overtime calculations can be found here. Employer and HR departments should always calculate the overtime payment correctly. This error can be severe for your company as it may affect your employees’ trust or even cause a lawsuit if things get too serious.
Note that these rules can be used as guidelines for other staff as well, i.e. staff not following the Employment Act. Typically different rates apply whether the overtime is during or outside normal working hours and during normal work days, rest days or public holidays.
4. Error in employees’ information
Employees’ information such as salary/wages, job level, entitlement, deductions and tax rates can change from month-to-month. If your business employs more than two people you are still likely to make a mistake in your payroll process without the latest information.
To minimise this risk, the HR department must monitor and keep track of all information to ensure they are up-to-date. They should always communicate with the employees and head of the department to get the latest updates to avoid any mistake.
5. Messy record keeping
If your HR department is still using an Excel sheet to keep track of all payroll details, it is time to get worried. It is not unusual to see small and medium enterprises practicing a manual approach to keep payroll records as it seems like the easiest way to do.
However, the risk of record mismanagement can lead to unwanted circumstances in the company. For example, an ex-employee is arguing that he was not paid according to his contract two years ago and your HR department did not keep the payroll record or accidentally misplaced it. Either way, this is a disadvantage to your company which could bring forth a penalty or certain reputational damage.
You should start exploring different payroll services that offer decent record keeping to save yourself from trouble like this.
6. Fail to commit to a regular payroll schedule
One of the biggest mistakes in payroll processing is not paying staff on time every month. Not sticking to a regular salary payout date makes it difficult for your employees to adjust their finances. Hence, it is always a good thing to set a fixed date for salary payout and implement policies such as an early salary release before public holidays.
Businesses in Malaysia should not take payroll processing lightly as it affects the organisation and operations more than you might think. This is why using a payroll software like PayrollPanda can be extremely helpful as it helps to manage your payroll functions while you focus on more pressing business activities.
This article is contributed by PayrollPanda, a simple cloud payroll & HR software for Malaysian SMEs. Payroll Panda recently launched a free PCB calculator which allows Malaysian employer and employees to easily check their PCB.