Malaysia Payroll Processing & Compliance Guide

Malaysia has a comprehensive and well-developed system of labour regulations. The Malaysian government is keen to ensure that businesses in the country operate in compliance with these regulations, which can often be complex.

As a result, payroll processing in Malaysia requires careful planning and execution to ensure that all relevant statutory payments are made on time and in full. This guide provides an overview of the key aspects of Malaysian payroll processing and compliance.

The Malaysian Payroll Process

Payroll in Malaysia process typically involves the following:

Calculating gross pay

Employers will need to calculate the gross pay for each employee. This is done by multiplying the hours worked by the hourly rate and then adding any allowances or commissions. After this, you’ll need to deduct the applicable entitlements and deductions from the gross pay. This results in the net pay for each employee.

In Malaysia, the minimum wage is set at RM1,500 per month. There are specific rules related to the number of overtime hours permitted and the pay rates for the same.

Withholding taxes

In Malaysia, employers must withhold employees’ monthly taxes, the rates of which can vary from zero to 30% depending on the pay scale. The complexity of Malaysia’s tax regulations means it is advised for foreign businesses to outsource their payroll administration to a professional payroll provider.

Statutory contributions

The statutory contributions employees and employers must make include SOCSO (Social Security Organisation) scheme, EIS (Employee Insurance Scheme), and EPF (Employee Provident Fund). The SOCSO contributions are calculated at 0.5% of the monthly earnings of an employee, while employers contribute 1.75% of the employee’s monthly wages. The contribution rate for EIS is 0.2% of the monthly salary of employees. The rate of contribution is capped at a monthly wage ceiling of RM4,000.

Leave and benefits

Payroll benefits are of two major categories: mandatory and voluntary. Mandatory benefits include maternity leave, paid annual leave, benefits for termination, and statutory holidays. Voluntary benefits are more flexible and can include allowances for transport or housing, medical insurance schemes, and bonuses.

Filing tax returns

Employers are required to submit a tax return on a monthly basis to the Inland Revenue Board. Not doing so can result in six-month imprisonment and/or fines ranging from RM200 to RM20,000.

Payroll records

Malaysia’s Personal Data Protection Act (PDPA) requires employers to retain payroll records for at least six years. This ensures that the government can investigate any complaints of data breaches.

Bypass Malaysia Payroll Complications

If you are looking to skip the complications of payroll calculations in Malaysia, outsource your payroll management to Links. As the leading Asia-Pacific payroll management company, Links has been providing payroll services to clients for over 15 years.

With professionals handling your payroll, you will not be caught out by non-compliance and you can focus your team on growing the business. To learn more about how Links can help, contact our team now!

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