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In a world full of financial uncertainties, ensuring the well-being of employees is paramount. This article is your comprehensive guide to understanding the key pillars of financial security in the working world: Employees Provident Fund (EPF), Social Security Organization (SOCSO), and the Employment Insurance System (EIS). We’ll break down these essential components in plain, simple language so you can navigate your financial journey with confidence.

1. Employees Provident Fund (EPF): Your Savings Shield

What is EPF?

The Employees Provident Fund, often referred to as EPF, is a compulsory savings scheme designed to help employees secure their financial future. This initiative is regulated by the government, and both employees and employers make monthly contributions to the fund.

How does EPF work?

EPF operates on a simple principle – a portion of your monthly income, typically 11% of your basic salary, is deducted and deposited into a personal EPF account. Over time, this amount grows through investments made by the fund. These savings are designed to provide financial stability during your retirement years.

Benefits of contributing to EPF

Contributing to EPF offers a range of benefits, including:

• Long-term savings for retirement.
• Potential for attractive returns on investments.
• Tax benefits
• Housing and education withdrawals.
• Financial support during emergencies and unforeseen circumstances.

2. Social Security Organization (SOCSO): Protecting You When You Need It

What is SOCSO?

The Social Security Organization, known as SOCSO, is a safety net for employees in Malaysia. It provides financial assistance and support to employees who face work-related accidents or illnesses. SOCSO aims to ensure that you and your loved ones are taken care of during tough times.

Who benefits from SOCSO?

SOCSO benefits all employees, regardless of their job type, industry, or income level. It covers both local and foreign workers, providing them with financial protection in the event of an accident or disability.

How to register for SOCSO?

Registering for SOCSO is typically the responsibility of your employer. They will ensure that your contributions are made, and you are covered by SOCSO. If you are self-employed or a gig worker, you can also register voluntarily to enjoy the benefits.

3. Employment Insurance System (EIS): Safety Net in Uncertain Times

Understanding EIS

The Employment Insurance System (EIS) is a government initiative that provides financial assistance to employees who have lost their jobs. It aims to support individuals during the challenging period of unemployment by offering temporary financial aid.

Eligibility for EIS benefits

To be eligible for EIS benefits, you must have made sufficient contributions to the EIS fund. You also need to meet specific criteria, such as being retrenched or involuntarily separated from your job.

How to make an EIS claim?

Claiming EIS benefits is a straightforward process. You can contact the EIS office, submit your application, and provide the necessary documentation. Once approved, you will receive financial support to help you through the difficult period of unemployment.

4. EPF vs. SOCSO vs. EIS: What Sets Them Apart?

EPF, SOCSO, and EIS are all essential components of financial security, but they serve different purposes. Let’s explore their key differences and similarities.

Key differences and similarities

• EPF focuses on long-term savings for retirement, while SOCSO and EIS provide immediate financial assistance during unexpected events.
• SOCSO primarily covers work-related accidents and illnesses, whereas EIS is dedicated to supporting the unemployed.
• SOCSO and EIS are contributed by both employees and employers for Malaysia. Non Malaysian only Employer for SOCSO. No EIS contribution. 

Which one should you prioritize?

It’s important to note that compliance with all three schemes is legally mandatory in Malaysia, and employees should not prioritize one over the other regarding contributions. Each scheme serves a specific purpose in an employee’s financial well-being, and it’s essential to fulfill all obligations to benefit from these schemes when needed.

5. The Importance of Financial Security

Financial security is a fundamental aspect of a stable and worry-free life. It encompasses the ability to meet daily needs, weather unexpected emergencies, and plan for a comfortable retirement. In Malaysia, three key components – the Employees Provident Fund (EPF), the Social Security Organization (SOCSO), and the Employment Insurance System (EIS) – play a vital role in ensuring financial security.

Why does financial security matter?

Financial security matters because it underpins our ability to lead stable and fulfilling lives. It serves as a buffer against financial stress, allowing us to meet basic needs, handle emergencies, and plan for the future. Without financial security, individuals and families may find themselves vulnerable to economic shocks, unable to retire comfortably, or struggling to access essential healthcare and education. Financial security offers peace of mind, enabling us to focus on our well-being and aspirations rather than constant financial worry.

How does EPF, SOCSO, and EIS contribute?

EPF, SOCSO, and EIS play distinct roles in contributing to your financial security:

• EPF builds your retirement savings.
• SOCSO offers protection in case of work-related accidents or illnesses.
• EIS provides a safety net during periods of unemployment.

6. Planning for Retirement with EPF

Building your retirement nest egg

EPF is a vital tool for building a comfortable retirement fund .The money saved in your EPF account grows over time thanks to investments made by the fund. This creates a substantial nest egg that you can rely on during your retirement years.

Withdrawal options and conditions

EPF allows withdrawals for specific purposes, such as purchasing a home, financing your child’s education, or covering medical expenses. However, there are conditions and restrictions for each type of withdrawal, ensuring that the money is used for its intended purpose.

EPF’s role in long-term financial stability

Your EPF savings are a cornerstone of your long-term financial stability. With consistent contributions and prudent management of your EPF account, you can look forward to a worry-free retirement.

7. Supporting Employees in Times of Need: SOCSO at Work

Medical benefits and coverage

SOCSO offers comprehensive medical benefits, covering the cost of treatment, hospitalization, and rehabilitation for work-related injuries or illnesses. This ensures that employees receive the necessary medical attention without worrying about expenses.

Employment injury and invalidity benefits

In cases of severe work-related injuries that result in disability or loss of earning capacity, SOCSO provides employment injury and invalidity benefits. This financial support helps affected individuals and their families maintain their quality of life.

Rehabilitation programs

SOCSO doesn’t just provide financial support; it also offers rehabilitation programs to help employees recover and return to the workforce. These programs include vocational training, skills development, and job placement assistance.

8. Unforeseen Circumstances: EIS Comes to the Rescue

Types of benefits provided

EIS offers various benefits, such as job search allowances, reduced income allowances, and re-employment placement programs. These benefits are designed to ease the financial burden of unemployment.

EIS during layoffs and retrenchment

EIS is especially valuable during layoffs and retrenchment, as it provides financial assistance when you need it most. It ensures that you can cover your essential expenses while actively seeking new employment opportunities.

Re-employment programs

EIS goes a step further by offering re-employment programs, including job placement services and skills training. This helps unemployed individuals quickly transition into new job opportunities.

9. Contributing to EPF, SOCSO, and EIS: A Wise Investment

How contributions are calculated?

• Employees Provident Fund (EPF):
  • Contributions to EPF are typically a percentage of an employee’s monthly salary.
  • The employee contributes a portion of their salary, usually 11% of their monthly income, while the employer makes a matching contribution of 13%.
  • As per the information, these percentages were the standard rates, but they can vary slightly for specific categories of employees. It’s essential to check for the most up-to-date rates and any changes that might have occurred since then.

• Social Security Organization (SOCSO):
  • SOCSO contributions are calculated based on a fixed percentage of an employee’s monthly salary.
  • According to the information, employees contribute 0.5% of their monthly salary, while employers contribute 1.75%. These percentages may have changed, so it’s important to verify the latest rates.
• Employment Insurance System (EIS):
  • EIS contributions are also calculated based on a percentage of an employee’s monthly income.
  • The information said that employees contributed 0.2% of their monthly salary, while employers contributed 0.2% as well.
  • It’s important to check for any changes in these rates or regulations since my last knowledge update.

Employee and employer responsibilities

Both employees and employers have specific responsibilities regarding these funds. Employers must ensure that contributions are made, and employees need to stay informed about their rights and benefits.

The impact of regular contributions

Regular contributions to EPF, SOCSO, and EIS ensure that these systems function effectively. They also guarantee that you and your fellow employees are protected and supported in times of need.

10. Frequently Asked Questions (FAQs)

1. What happens if my employer doesn’t make EPF, SOCSO, or EIS contributions?

If your employer fails to make these contributions, you have the right to report them to the relevant authorities. Employers are legally obligated to contribute to these funds, and any violations can result in penalties.

2. Can I withdraw my EPF savings before retirement?

Yes, you can withdraw your EPF savings for specific purposes, such as buying a home, paying for education, or covering medical expenses. However, there are conditions and restrictions for each type of withdrawal.

3. What should I do if I lose my job and need EIS benefits?

If you lose your job and require EIS benefits, contact the EIS office and submit your application with the necessary documentation. The process is designed to provide timely support during periods of unemployment.

4. What should I do if I’m injured at work and need SOCSO benefits?

In the event of a work-related injury, report the incident to your employer immediately. They will guide you through the process of seeking medical attention and applying for SOCSO benefits.

5. Can I contribute to EPF, SOCSO, or EIS if I’m self-employed or a freelancer?

Yes, you can voluntarily contribute to SOCSO, and self-employed individuals can also register for EIS. This ensures you enjoy the protection and benefits offered by these systems.

The post Why EPF, SOCSO, and EIS Are Essential for Your Future Prosperity appeared first on BrioHR.

Understanding Compensation

Compensation refers to the combination of wages, salaries, and benefits that an organization offers to its employees in exchange for their work and contributions. It encompasses both monetary and non-monetary rewards and is a fundamental component of the employer-employee relationship. Compensation not only provides employees with financial security but also serves as a tool to recognize and reward their efforts, skills, and accomplishments.

Key Components of Compensation:

• Base salary: The fixed amount of money an employee receives on a regular basis for their role and responsibilities. It forms the foundation of an employee’s compensation package.
• Incentives, commissions, and bonuses: Variable payments tied to individual or group performance. These rewards are designed to motivate employees to achieve specific goals or outcomes.
• Benefits: Non-monetary rewards provided by the organization to enhance the overall well-being of employees. Benefits can include health insurance, leave packages, additional contribution to EPF/CPF etc.
• Perks: Additional offerings that contribute to the overall work experience, such as flexible work arrangements, on-site amenities, and professional development opportunities.

Exploring Employee Benefits

Employee benefits are a vital part of the compensation package and play a crucial role in attracting and retaining employees. These benefits go beyond monetary compensation and contribute to employees’ quality of life, job satisfaction, and overall work-life balance. Here are some common types of employee benefits:

• Health and wellness benefits: These include medical, dental, and vision insurance, as well as wellness programs that encourage employees to maintain a healthy lifestyle.
• Leave and time-off: Leave encompasses annual leave, sick leave, and other types of leave. Providing adequate leave allows employees to rest, recharge, and manage personal commitments.
• Flexible work arrangements: Flexibility in work hours or the option to work remotely can greatly improve employees’ work-life balance and job satisfaction.
• Educational and professional development: Supporting employees’ growth through training programs, workshops, and tuition reimbursement can enhance their skills and contribute to their career advancement.
• Childcare and family benefits: Offering assistance with childcare expenses or parental leave helps employees manage their family responsibilities effectively.
• Commuting benefits and other allowances: Providing allowances or options for commuting expenses, such as parking reimbursement or a transportation allowance can ease the financial burden on employees.

As an HR professional, your role involves designing and managing a compensation and benefits package that aligns with the organization’s goals, values, and industry standards while meeting the diverse needs of employees. A well-crafted compensation strategy not only attracts and retains top talent but also fosters a positive work environment and contributes to the company’s overall success. In the following chapters, we will delve deeper into the strategies and best practices for effective compensation and benefits management.

Designing a Compensation Strategy

Internal Equity vs. External Competitiveness

When creating a compensation strategy, HR professionals must balance the concepts of internal equity and external competitiveness.

• Internal Equity: This principle focuses on ensuring fairness and consistency within the organization. Employees performing similar roles should be compensated fairly, regardless of personal characteristics or background. Internal equity is essential to maintain a harmonious workplace and prevent feelings of inequality among employees.
• External Competitiveness: This aspect revolves around aligning your compensation packages with the external job market. To attract and retain top talent, your organization’s compensation should be competitive with industry norms and other companies in your region or sector.

Job Analysis and Evaluation

Job analysis involves studying and documenting the tasks, responsibilities, skills, and qualifications required for each position within the organization. Job evaluation, on the other hand, is the process of assigning relative values to different jobs based on their complexity, impact, and contribution to the organization.

Methods of Job Evaluation:

• Job ranking: Jobs are ranked in order of importance, with the highest-ranked job receiving the highest compensation.
• Point method: Jobs are assigned points based on various factors like skill requirements, complexity, and responsibility levels.
• Market pricing: Jobs are valued based on market data, ensuring your compensation is competitive.

Market Research and Benchmarking

Conducting market research and benchmarking is crucial to determine how your organization’s compensation offerings compare to industry standards. This involves collecting data on compensation practices from other companies in your industry and geographic region.

Steps for Market Research:

1. Gather data: Collect information on base salaries, bonuses, and benefits offered by similar organizations.
2. Analyze data: Compare the collected data to your current compensation practices to identify gaps and areas for improvement.
3. Adjustment strategies: Decide whether you need to adjust your compensation packages to align with market trends. This could involve salary increases, benefits enhancements, or other adjustments.

Market research provides insights into the current competitive landscape, allowing you to make informed decisions that will attract and retain top talent while keeping your organization’s compensation strategy up to date.

Determining Salary and Monetary Compensation

Base salary forms the foundation of an employee’s compensation package and reflects the value the organization places on the employee’s role and responsibilities. Determining an appropriate base salary involves careful consideration of several factors to ensure fairness, competitiveness, and alignment with both internal and external standards.

Factors Influencing Base Salary

• Job role and responsibilities: The complexity, scope, and level of responsibilities associated with a job play a significant role in determining its base salary. Higher-level positions with more significant impact on the organization often command higher salaries.
• Skill and experience: Employees with specialized skills or extensive experience in their field are often compensated more generously. A candidate’s education, certifications, and years of relevant experience contribute to their market value.
• Market conditions: External market factors, such as industry norms, geographic location, and regional cost of living, influence how much organizations should pay to remain competitive in attracting talent.
• Internal equity: Ensuring that salaries are consistent and fair within the organization is vital for maintaining a harmonious work environment. Employees performing similar roles should receive comparable compensation.
• Performance and contribution: High-performing employees who consistently exceed expectations and contribute to the organization’s success may be eligible for performance-based raises or bonuses.

Pay Grades and Ranges

Organizations often use pay grades and salary ranges to structure their compensation system. Pay grades group similar jobs together based on factors like job level, responsibilities, and required skills. Within each pay grade, a range of salaries is established, with a minimum, midpoint, and maximum value.

Advantages of Pay Grades and Ranges:

• Consistency: Pay grades provide a structured approach to compensation that ensures fairness and equity.
• Flexibility: Salary ranges allow for some variation in compensation while staying within predetermined boundaries.
• Transparency: Clearly defined pay grades and ranges enable employees to understand how their salary was determined and what potential for growth exists.

Salary Structure and Bands

A salary structure is a framework that outlines how various job roles are organized into bands or levels, each with its own salary range. This structure aligns with the organization’s hierarchy and career progression.

Benefits of a Salary Structure:

• Clear progression: Employees can see the path for advancement within the organization, encouraging professional growth.
• Fairness: Transparent salary bands help prevent wage gaps and ensure employees are compensated fairly.
• Attracting talent: A well-defined structure can attract candidates by demonstrating opportunities for career development.

When designing a salary structure, consider factors such as the number of bands, the criteria for moving between bands, and the frequency of salary reviews.

By carefully considering these factors and using tools like pay grades, salary ranges, and structured salary bands, HR professionals can establish a fair and competitive base salary structure that attracts and retains qualified employees while maintaining internal equity. In the next chapter, we will explore the various types of incentive and bonus programs that can further motivate and reward employees for their exceptional performance.

Non-Monetary Rewards

While monetary compensation is a significant factor in attracting and retaining employees, non-monetary rewards play a crucial role in creating a positive and motivating work environment. These rewards focus on enhancing employees’ job satisfaction, engagement, and overall well-being. Here are various non-monetary rewards that HR professionals can implement to create a well-rounded compensation package.

Recognition and Appreciation

Recognition is a powerful tool for boosting employee morale and motivation. Regularly acknowledging employees’ hard work and contributions fosters a culture of appreciation and reinforces positive behaviors.

Ways to Implement Recognition Programs:

• Employee of the month: Highlight outstanding employees and their achievements on a monthly basis.
• Peer recognition: Allow employees to recognize and commend their colleagues for exceptional work.
• Managerial recognition: Encourage managers to provide timely and specific feedback to their team members.

Career Development Opportunities

Investing in employees’ professional growth not only benefits them individually but also contributes to the organization’s success. Providing opportunities for learning and advancement demonstrates a commitment to employee development.

Methods to Offer Career Development:

• Training programs: Offer workshops, seminars, and online courses to enhance employees’ skills and knowledge.
• Mentorship programs: Pair experienced employees with those seeking guidance and career advice.
• Promotion pathways: Clearly define paths for advancement within the organization to give employees a sense of direction.

Work-Life Balance Initiatives

Promoting work-life balance demonstrates that the organization values employees’ personal well-being. Employees who can maintain a healthy balance between work and personal life are often more engaged and productive.

Initiatives to Promote Work-Life Balance:

• Flexible work arrangements: Allow employees to adjust their work hours or work remotely when feasible.
• Leave policies: Offer sufficient paid vacation days and encourage employees to use them for relaxation.
• Wellness programs: Provide resources for physical and mental well-being, such as gym memberships, stress reduction activities, or company-organized sports activities.

Employee Engagement Activities

Engaged employees are more committed to their work and the organization. Engaging activities help foster a sense of belonging and camaraderie among employees.

Engagement Initiatives to Consider:

• Team-building Activities: Organize team outings, workshops, or volunteer events to strengthen team bonds.
• Employee Surveys: Collect feedback through periodic pulse surveys to understand employee needs and preferences.
• Open Communication Channels: Create opportunities for employees to share their ideas and feedback with management.

Personalized Benefits

Recognize that each employee has unique needs and preferences. Offering a degree of personalization in benefits allows employees to choose what matters most to them.

Ways to Implement Personalization:

• Flexible Benefits: Allow employees to choose from a range of benefits that suit their individual circumstances.
• Customized Development Plans: Tailor career development plans based on employees’ aspirations and strengths.

By incorporating these non-monetary rewards into your compensation strategy, you can create a holistic package that addresses both financial and non-financial needs. Remember that an effective compensation package not only attracts talent but also promotes a positive workplace culture and supports employees’ overall well-being.

The post The HR Professional’s Guide to Compensation and Benefits appeared first on BrioHR.

Hence, in simple English, wages are monetary payments earned for work or services. At a basic level, anyone who’s ever worked a basic part-time job would know what wages are.

However, when you really dig into the details, how wages are defined can really determine payroll decisions for HR. In Malaysia, what constitutes ‘wages’ will affect employee remuneration, statutory deductions, taxes etc.

With that, let’s dive into what Malaysian wages are all about from an HR perspective.

Wages as Defined by the Employment Act 1955

Wages are defined in section 2 of the Employment Act 1955 as:

[Basic] wages and all other payments in cash payable to an employee for work done in respect of his contract of service but does not include:

• the value of any house accommodation or the supply of any food, fuel, light or water or medical attendance, or of any approved amenity or approved service;

• any contribution paid by the employer on his own account to any pension fund, provident fund, superannuation scheme, retrenchment, termination, lay-off or retirement scheme, thrift scheme or any other fund or scheme established for the benefit or welfare of the employee;

• any travelling allowance or the value of any travelling concession;

• any sum payable to the employee to defray special expenses entailed on him by the nature of his employment;

• any gratuity payable on discharge or retirement; or

• any annual bonus or any part of any annual bonus.

Essentially, the Employment Act holds that only an employee’s basic pay will count as wages. This is critical for determining if an employee’s pay meets the minimum wage required by Malaysian law (which is RM1,500 per month).

In addition, it also means that whatever is not included in the Employment Act’s exclusion in the definition of wages, it will count towards wages. These include any fixed allowances (housing allowance, meal allowance, phone allowance etc). Notably, the Employment Act excludes travel allowances from wages.

A recent Federal Court decision has also included a major exclusion to the definition of wages, in that the service charge in a hotel, bar, restaurant etc is not part of basic wages and cannot be counted towards the minimum wage. This is because the service charge is borne by the customer instead of the employer and is automatically due to the employee anyway.

Another use for this definition of wages is to calculate an employee’s daily or hourly wage. From there, you can use it to calculate the prorated salary of an employee.

Wages as Defined by the Employees’ Provident Fund

The definition of wages by the Employees’ Provident Fund (EPF) is different from that of the Employment Act, as it is used to determine what payments to the employee will attract EPF statutory contributions.

Wages are defined in section 2 of the Employees’ Provident Fund Act 1991 as:

[All] remuneration in money, due to an employee under his contract of service or apprenticeship whether agreed to be paid monthly, weekly, daily or otherwise and includes any bonus, commission or allowance payable by the employer to the employee whether such bonus, commission or allowance is payable under his contract of service, apprenticeship or otherwise, but does not include:

• service charge;

• overtime payment;

• gratuity;

• retirement benefit;

• retrenchment, lay-off or termination benefits;

• any travelling allowance or the value of any travelling concession; or

• any other remuneration or payment as may be exempted by the Minister.

In practical terms, it means that nearly all wages or employee remuneration will be subject to EPF contributions. The two notable exceptions are:

• Overtime payments
• Any travelling allowance or the value of any travel concession.*

*HR practitioners should note that if the employee is paid a fixed allowance relating to ‘travel’ such as petrol allowance, mileage allowance etc, they are subject to EPF contribution. If such allowances are paid as part of a reimbursable expense claim, it is not subject to EPF contribution. In general, if a payment to the employee is made to reimburse them, it will not be subject to EPF contribution.

Wages as Defined by PERKESO

Like the EPF, Social Security Organisation, or PERKESO uses their definition of wages to see what types of remuneration attract PERKESO statutory deductions.

Wages are defined in section 2 of the Employees’ Social Security Act 1969 as:

[All] remuneration payable in money by an employer to an employee including any payment in respect of leave, holidays, overtime, and extra work on holidays but does not include:

• any contribution payable by the principal employer or the immediate employer to any pension fund or provident fund, or under this Act;

• any travelling allowance or the value of any travelling concession;

• any sum paid to an employee to defray special expenses incurred as a result of his employment;

• any gratuity payable on discharge or retirement;

• annual bonus;

• any other remuneration as may be prescribed.

Just like EPF, almost all types of remuneration will be subject to PERKESO contributions. Unlike EPF, it also includes overtime payments.

In addition, PERKESO also expressly excludes reimbursable expense claims as wages, as “any sum paid to an employee to defray special expenses incurred as a result of his employment.”

What About Allowances?

Allowances or perquisites are considered additional pay on top of an employee’s regular salary. They add up to the gross pay amount and can either be paid on a recurring or non-recurring basis.

In general, allowances do count towards an employee’s wages. All three Acts mentioned above (Employment Act, EPF Act, SOCSO Act) do not exclude allowances or perquisites from their definition of ‘wages’. However, all three Acts expressly exclude travelling allowances from counting towards the definition of ‘wages’.

Do Non-monetary Benefits/Benefits-in-Kind Count Towards Wages?

Non-monetary benefits or benefits-in-kind aren’t included in an employee’s salary or wages. Instead, such benefits or perks are provided for the employee’s comfort, e.g. health insurance or provision of a company car.

Since these benefits are not convertible into cash, they do not count towards an employee’s wages. Thus, it is important to distinguish between such benefits and allowances for this purpose. Essentially, it means that when the benefits are provided to the employee, they are not easily sold, assigned, transferred, or convertible into cash.

Get Wages and Payroll Right with BrioHR

Wages may look simple at first glance, but it gets more complicated the more you look into it. But with BrioHR, you can use the payroll module to calculate everything quickly and accurately. BrioHR is also LHDN-approved so you know that all the calculations are compliant with all regulations.

With a secure, scalable, user-friendly platform, BrioHR covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.

This enables business owners and HR teams to truly focus on what matters most – people.

Visit briohr.com and get a free demo now.

The post Everything You Ever Wanted to Know About Wages appeared first on BrioHR.

This may sound like a simple process, but once you start hiring more employees, it can quickly spiral out of control. Keeping track of the different pay grades, attendance, expense claims, statutory deductions and more is an extremely tedious process. Thus, many businesses hire payroll specialists just to keep on top of the latest payroll regulations.

What Payroll Actually Consists Of
Payroll is more than just paying salary on time. It also includes:

Different compensation models: You may have salaried employees paid monthly, part-time employees paid hourly, or commission-based salespeople.
Statutory deductions: In certain jurisdictions, employers are obligated to deduct certain sums from employees’ pay, such as income tax and/or pension fund contributions.
Benefits and expense claims: You will need to track these payments and include them in payroll for them to be taxed suitably.
New hires and leavers: Their salaries need to be pro-rated according to their normal pay.

Different Ways of Managing Payroll
There are different ways to manage payroll, depending on your business:

Manual payroll: It is possible to manage payroll manually, but it’s only feasible when you don’t have a large headcount and a dedicated HR person. It may seem like the cheapest option on paper, but it gets tedious quickly. The costs will quickly outweigh the cheapness.
Outsourced payroll: Outsourcing payroll to an accountant or dedicated payroll provider is a common way of relieving the burden off HR. However, this solution does not scale well as headcount increases. Furthermore, detailed payroll data and analytics are usually not available.
Payroll software: This is an automated, cost-effective way of doing payroll. You don’t need prior experience to set the software up, and you can easily scale up as your business grows. But there are many choices out there, so you need to make your choice carefully.
Why Payroll Software Saves You Money
1. Saving Time
As they say in business, time is money. Doing payroll manually is tedious and repetitive. Payroll software automates the entire process, letting your HR team focus on more important tasks.

2. Cutting Outsourcing Costs
Outsourcing your payroll can get expensive quickly, especially as your business grows. Modern payroll software is designed to be intuitive and user-friendly, so that your HR team can get going with it quickly.

3. Automating Processes
With payroll software, tedious payroll tasks like sending out payslips are automated for you. What’s more, complicated calculations like statutory deductions, expense claims, and variable commissions can be calculated automatically.

4. Increasing Compliance
With the amount of statutory deductions that you need to deal with, it can be complicated to calculate. If you calculate these deductions incorrectly, you may put your company at risk of payroll penalties from the government. Payroll software can calculate these deductions quickly and accurately, saving you time as well as the cost of fines.

5. Reducing Errors
Payroll errors are costly to fix. If you find an error before salaries have been paid out, you will have to correct it in a time-consuming manner. This can lead to delayed payments, which will frustrate your employees. Worse still, when the error is found after payments are made, you will need to spend even more time and money fixing the overpayment or underpayment.

6. Keeping Your Data Secure
Data breaches aren’t theoretical anymore – they are a very real threat to businesses. If your payroll data is leaked, your business can be fined. That’s not to mention the reputational damage your business will suffer, leading to a possible loss of revenue.

7. Enabling On-the-go Work
Cloud-based payroll software can enable HR to run payroll from anywhere. Whether working from home, office, or even a café, HR can log in remotely and access the information they need. Not only that, employees can also log into the system and get payslip information etc using the software’s self-service system.

Save Money with Payroll Software from BrioHR
If you’re looking for payroll software for your business, BrioHR can do everything listed above and more. BrioHR’s all-in-one, cloud-based solution automates repetitive tasks and empowers HR in a user-friendly interface. This enables business owners and HR teams to truly focus on what matters most – people.

Visit briohr.com and get a free demo now.

The post How Payroll Software Can Save You Money appeared first on BrioHR.

As an employer, you have two very important tax-related obligations at the beginning of every year:

• You need to prepare Form EA for every employee.
• You will also need to file Form E with the Inland Revenue Board, or Lembaga Hasil Dalam Negeri (LHDN).

Here, we break down each form so you can understand it better and file it appropriately.

What is Form EA?

Officially known as the “Statement of Remuneration from Employment”, put simply Form EA is a summary of the employee’s earnings from the employer for the year.

The purpose of Form EA is to enable employees to file their own taxes properly and declare their earnings to LHDN. That way, it can be determined which tax bracket they fall under.

It is mandatory for the employer to prepare Form EA for every employee – regardless of full-time, part-time, or fixed term status. As long as the employee has worked for more than seven days, and has received payment for their work, Form EA must be issued to the employee.

The following categories of employment earnings need to be included in Form EA:

• Gross salary
• Overtime pay
• Commission
• Bonus or other gratuities
• Allowances/perquisites (e.g. travel allowance, meal allowance)
• Benefits-in-kind (e.g. health insurance, company car and driver)
• Value of Living Accommodation (VOLA)
• Contributions to private pension (by employer)
• Compensation for loss of employment

While Form EA need not be submitted to LHDN by the employer, failure to prepare Form EA may result in a fine of up to RM20,000, imprisonment for a term not exceeding six months, or both.

The deadline for providing Form EA for the year ending 31 December 2022 is 28 February 2023. You can view a sample of Form EA here.

What is Form E?

Form E is a declaration made by the employer to LHDN on the number of employees, total remuneration paid to them, as well as the total amount of tax deductions for the year.

It is compulsory for the following employers to submit Form E:

• Companies registered with the Companies Commission of Malaysia (Sdn Bhd, Berhad, LLP), with or without employees
• Sole proprietors with employees
• Partnerships with employees

It is not compulsory for the following to submit Form E, but it is nevertheless recommended to file anyway:

• Sole proprietors without employees
• Partnerships without employees

Like Form EA, every employee – regardless of full-time, part-time, or fixed term status – must be reported in Form E.

Employers should note that LHDN no longer accepts manual submission of Form E. All calculations relating to Form E need to be done online using LHDN’s e-PCB system or a LHDN-approved payroll software. Failure to declare Form E may result in a fine of up to RM20,000, imprisonment for a term not exceeding six months, or both.

The deadline for filing Form E for the year ending 31 December 2022 is 31 March 2023. You can view a sample of Form E here.

Get Form EA and Form E Right with BrioHR

Calculating remuneration and tax deductions manually for one employee is already tedious, let alone tens or even hundreds of employees.

With LHDN-approved payroll software like BrioHR, you can generate Form EA and Form E with just a few clicks. Everything is filled in automatically and accurately. You can then distribute Form EA to all your employees via email, while Form E is prepared and ready for e-Filing with LHDN. All this can be done within just five minutes.

With 9 powerful modules, BrioHR’s software covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.

This enables business owners and HR teams to truly focus on what matters most – people.

Visit briohr.com and get a free demo now.

The post A Guide to Malaysia’s Annual Tax Forms (Form EA and Form E) appeared first on BrioHR.

Who Is a Part-Time Employee?

Part-time employees are defined as employees who work between 30% to 70% of the normal working hours of a full-time employee, i.e. 48 hours per week.

Any more than that, they will be considered full-time employees. Less than that and they are classed as ‘casual employees’ or freelancers.

What Are Part-Time Employees Entitled To?

The rights of part-time employees are covered by the Employment (Part-Time Employees) Regulations 2010. As subsidiary legislation made pursuant to the Employment Act 1955, part-time employees are also covered under the main Employment Act.

As such, part-time employees are entitled to much of the same benefits that full-time employees enjoy, such as minimum wages, leave, and overtime – albeit at reduced rates.

Here are some of the benefits that part-time employees enjoy:

Sick leave:

• 10 days per year if employed for 1–2 years,
• 13 days per year if employed for 2–5 years,
• 15 days per year if employed for longer than 5 years.

Annual leave:

• 6 days per year if employed for 1–2 years,
• 8 days per year if employed for 2–5 years,
• 11 days per year if employed for longer than 5 years.

Overtime:

• 1x hourly rate of pay if they exceed normal hours of work but do not exceed the normal hours of a full-time employee.
• 5x hourly rate of pay if they exceed the normal hours of a full-time employee.

Other Part-Time Employee FAQs:

Are part-time employees subject to EPF and SOCSO contributions?

Yes, they are subject to EPF, SOCSO, and EIS contributions at the same rate as full-time employees.

Are part-time employees entitled to health insurance, allowances etc?

This will depend on company policy, as such benefits are not legally mandated. Some companies do provide full or partial benefits to part-time employees, while some don’t have this at all.

If an employee is paid by the hour and works irregular hours, are they considered part-timers?

If their total work hours are between 30% to 70% of the normal working hours of a full-time employee, then yes, they are part-time employees – regardless of the irregularity of their working hours. Therefore, they too enjoy the protections under the Employment (Part-Time Employees) Regulations 2010.

If a full-time employee wants to convert their status to a part-time employee, what should HR do?

Going from a full-time position to a part-time position will normally mean a reduction in working hours, as well as a reduction in salary.

For this, both employer and employee need to terminate the full-time employment contract and agree to a new part-time arrangement.

Are fixed-term contract employees part-timers?

This is a common mistake that many employers make. A part-time employee’s status is determined by the number of hours worked per week, not by their contractual length of service.

For example, an employee on a six-month contract is not considered a part-time employee. Their working hours are likely to be similar to full-time employees, at least until their contract ends. Benefits for fixed-term contract employees are stipulated in their contract without reference to any statutory entitlements.

Can the company terminate part-time employees at will?

No. Like full-time employees, part-time employees can only be dismissed with ‘just cause and excuse’. This means that the employer must go through the proper procedure before dismissing them, e.g. sending warning letters, putting them on a performance improvement plan (PIP) etc.

Manage Part-Time Employees Right with BrioHR

One of the most important aspects of managing a blended workforce is payroll. It’s essential to ensure that both part-time and full-time employees are paid accurately and on time.

BrioHR’s payroll module enables your business to pay part-time employees on an hourly or monthly basis, calculate statutory deductions accurately, as well as being customizable to your needs. In addition, staff management is made easy with the leave module where you can see who is on leave at a single glance.

With a secure, scalable, user-friendly platform, BrioHR covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.

This enables business owners and HR teams to truly focus on what matters most – people.

Visit briohr.com and get a free demo now.

The post What You Need to Know About Part-Time Employees appeared first on BrioHR.

Hence, knowing how to prorate salary correctly will save you time and money. Salary proration only applies to salaried employees that are paid every month. Employees paid hourly don’t need their pay to be prorated – instead, only the hours worked are counted.

There are three options for calculating salary proration in Malaysia. Employers are free to choose which formula to use, as there is no single formula specified by law.

Proration by Calendar Days

Salary is prorated by the number of days in the month, e.g. 30 or 31 days. Weekends and public holidays are included.

Proration by Working Days

Salary is prorated according to the number of working days in the month. Weekends and public holidays are excluded.

Proration by Regular Days

For the purposes of calculating an employee’s ‘regular days’ rate of pay per month, Malaysia uses a standard, fixed 26-day calculation regardless of weekends and public holidays.

Example Calculations

Ann joined Acme Sdn Bhd on 8 January 2022. Her monthly salary is RM5,000. She works normal hours, five days a week.

Calculation by calendar days:

Calculation by working days:

Calculation by regular days:

Prorating Statutory Deductions (EPF, Socso, PCB)?

Statutory deductions like EPF, Socso, and PCB are also prorated according to the actual salary paid. Using the above example, if Ann’s salary is prorated using the calendar days method, she will earn RM3870.97. Accordingly, her EPF contribution (at 11% rate) will be RM427.

Prorate Salary Easily with BrioHR

It’s easy to prorate salary for one employee, but what if you have two, three, or more employees coming in (or leaving) at once? And at different pay grades?

BrioHR’s payroll module makes salary calculations easy. BrioHR automates payroll setup for new employees, as well as automatically calculate all salary-related data. All you have to do is check and approve.

With 9 powerful modules, BrioHR’s software covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.

This enables business owners and HR teams to truly focus on what matters most – people.

Visit briohr.com and get a free demo now.

The post Your Guide to Prorated Salary Calculation appeared first on BrioHR.

When a payroll error occurs, it can disrupt operations until it is resolved. It affects employee morale and exposes the company to legal penalties. Thus, as much as is possible, such mistakes need to be avoided.

Here are five of the most common and avoidable payroll errors.

1. Paying Employees Late

According to the Employment Act 1955, employers are required to pay monthly salaries no later than the seventh day of the following month. Most companies have pay day on the last day of the month.

Despite this, missing pay day can result in HR having to field questions from dissatisfied employees, since many employees plan their finances around their scheduled pay.

2. Overpayment or Underpayment of Salary

Paying the wrong amount of salary can result in an unending headache for HR. Correcting the situation will entail tracking down the amount that was over- or underpaid, notifying the employee concerned, and acting accordingly. Either way, it will be a messy situation for both employer and employee.

This is an especially important consideration when it comes to calculating overtime pay. The overtime calculation formula is provided for in the Employment Act 1955, but employers still make mistakes, especially if overtime pay is calculated manually. Such errors can result in employee dissatisfaction at best, or an incoming legal suit if it happens repeatedly.

3. Miscalculating Statutory Deductions, e.g. EPF, SOCSO, PCB Etc

Generally, there are set formulas for calculating the various statutory deductions, which payroll processors already implement. However, calculating the various statutory deductions can become very complex, particularly for multiple employees.

Another common error is only including salary in the EPF calculation. In general, most types of employee remuneration are subject to EPF contribution, such as allowances, commission, as well as bonus payments.

4. Missing Deadlines for Statutory Deductions

Employers are responsible for paying their statutory contribution to EPF, SOCSO etc before the stipulated deadline (usually the 15th day of the month). If they miss this deadline, they will be liable for a penalty.

5. Keeping Incomplete or Disorganized Payroll Records

Having messy payroll records can lead to errors that take weeks or months to uncover. This is especially common if the business relies on paper records or even Excel sheets. Such unstructured data makes it hard to do any meaningful analysis and make proper, informed workforce decisions.

What’s more, the business may even be penalized for this. Malaysian tax authorities require businesses to keep at least seven years of tax records, whether in digital or paper form. Since payroll data includes employee tax deductions, this falls under the records retention rule.

Eliminate Payroll Errors with BrioHR

When working with something as crucial as payroll, you need fast, reliable software to get the job done.

BrioHR’s LHDN-approved payroll software automates payroll, eliminating human error and saving time calculating complex deductions. Data from expense claims and timesheets can also be transferred over, ensuring your employees are always paid correctly and on time.

With 9 powerful modules, BrioHR’s software covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.

This enables business owners and HR teams to truly focus on what matters most – people.

Visit briohr.com and get a free demo now.

The post The Top 5 Payroll Errors to Avoid appeared first on BrioHR.

Although it can be tempting to maximize profits by cutting wages, the consequence of such low-wage practices is low employee performance, low motivation, and can cripple your business. Study after study has confirmed that paying higher salaries results in increased productivity and also higher profitability for the business.

For example, a study published by United States Secretary of the Treasury Janet Yellen way back in 1984 supports this by stating, “reduced shirking by employees due to a higher cost of job loss; lower turnover; an improvement in the average quality of job applicants and improved morale.” A more recent comparison between US retailers also shows that Costco – which pays comparatively higher wages – is more profitable than its closest competitors.

Making More Money by Switching Jobs

Though the COVID-19 pandemic has turned the labour market on its head, paying your employees higher salaries is still a good idea.

A survey conducted by BrioHR has seen 3 in 4 respondents expect a salary increase of more than 10%, while 1 in 4 respondents expect a salary increase of 2% to 10% in 2022. The survey, which polled hundreds of professionals in June of this year, shows that higher pay is also high on the minds of employees for the upcoming compensation cycle.

In addition, according to a survey conducted by JobStreet survey in December, 80% of employees were considering changing jobs because they could make more money by doing so than by staying put. The average 3% to 5% annual pay increases simply cannot compete with the double-digit increases that workers can obtain by changing jobs.

Hence, companies paying minimum wage will be outgunned, outmanned, and eventually overtaken by their more generous competitors. Furthermore, currently the employment market is very much a talent-driven market, where talented employees are needed across virtually every sector. In addition, the rising costs of living are pushing employees to seek better pay.

A Strategic Interest in Higher Salaries

With the economy recovering from the pandemic, it’s possible that wage increases are not yet feasible for many businesses, especially small and medium enterprises (SMEs).

Still, to remain competitive as an employer, companies will have to demonstrate a commitment to higher employee wages. Astute employers are taking steps to close salary gaps and ensure that all employees are paid fairly. They recognize that a cautious ‘wait and see’ approach to compensation is risky and can lead to the loss of top talent.

What’s more, when employees feel that the only way to keep up with inflation is to change to a higher-paying job, they will. This hurts the business not only in terms of turnover, but also in terms of team morale and productivity. When their colleagues see their teammates resigning in favour of a better job, they will also be tempted to switch. This cascading effect is devastating to businesses that rely on employees’ knowhow to keep things running.

Therefore, it makes sense to pay top performers top dollar in order to keep them at the company. It is in the strategic, long-term interests of the company to pay more, attract the right people, and keep them.

Unlock Your Employees’ Potential with BrioHR

Aside from a great compensation package, HR software can also unlock your employees’ potential by freeing HR from repetitive tasks. Instead of doing paperwork, your team can build learning and development plans, create a great onboarding experience, or even organize a team-building getaway!

BrioHR’s all-in-one, cloud-based solution with nine powerful modules automates repetitive tasks and empowers HR in a user-friendly interface. This enables business owners and HR teams to truly focus on what matters most – people.

Visit briohr.com and get a free demo now.

The post Should You Pay Your Employees More? appeared first on BrioHR.