Doing payroll for employees in Malaysia requires compliance with the country's labor laws, tax regulations, and statutory contributions. Here’s a step-by-step guide to manage payroll effectively:
1. Register Your Business
Before hiring employees, ensure your business is registered with the relevant authorities in Malaysia:
- Companies Commission of Malaysia (SSM): Register your business entity.
- Employees Provident Fund (EPF): For employee retirement savings contributions.
- Social Security Organization (SOCSO): For social security benefits and the Employment Insurance System (EIS).
- Inland Revenue Board of Malaysia (LHDN): For income tax deductions.
2. Understand Payroll Components
Your payroll must account for the following components:
- Gross Salary: Basic salary agreed with the employee.
- Allowances: Such as travel, meal, or housing allowances.
- Overtime Pay: As per the Employment Act 1955 (e.g., 1.5x for overtime on weekdays, 2x on rest days, and 3x on public holidays).
- Deductions: Contributions to EPF, SOCSO, EIS, and income tax (PCB).
- Net Salary: The amount paid to the employee after deductions.
3. Set Up Payroll Software or System
Using a payroll system can simplify calculations and ensure compliance:
- Local payroll software: Examples include Talenox, Kakitangan, or Swingvy.
- International platforms: Options like QuickBooks or Payboy, tailored for Malaysian payroll.
- Manual system: Use spreadsheets but ensure accurate formulas for deductions and contributions.
4. Calculate Employee Deductions
Malaysia requires specific statutory deductions from employees’ salaries:
- EPF (Employees Provident Fund):
- Employer contribution: 12-13% of the employee’s monthly salary.
- Employee contribution: 11% (default, but subject to changes based on government updates).
- SOCSO (Social Security Organization):
- Employer and employee contributions vary by salary range.
- Includes contributions for the Employment Insurance System (EIS).
- PCB (Potongan Cukai Berjadual or Monthly Tax Deduction):
- Withheld from employee salaries based on LHDN guidelines.
- Use the PCB calculator provided by LHDN to determine the correct deduction.
5. Prepare Monthly Payroll
- Collect attendance and timesheets: For accurate salary and overtime calculations.
- Verify allowances and bonuses: Ensure all benefits are accounted for.
- Perform calculations: Determine gross salary, deductions, and net pay.
6. Distribute Payslips and Payments
- Generate payslips: Include breakdowns of gross salary, allowances, deductions, and net pay. Ensure confidentiality.
- Pay employees: Transfer salaries to employee bank accounts by the agreed date.
- Maintain records: Keep payroll records for at least seven years, as required by law.
7. File Statutory Contributions
- EPF: Submit monthly contributions by the 15th of the following month through the i-Akaun system.
- SOCSO and EIS: Contributions are due by the 15th of the following month. Payment can be made via PERKESO Assist Portal.
- Income Tax (PCB): Submit monthly tax deductions to LHDN by the 15th of the following month using the e-PCB system.
8. Stay Updated with Regulations
- Monitor updates to labor laws, EPF rates, SOCSO contributions, and tax brackets.
- Regularly review your payroll process to ensure compliance with changes.
9. Manage Annual Payroll Tasks
- Form EA: Provide this form to employees for their annual tax filing.
- Form E: Submit the employer’s income statement to LHDN annually.
- Audit payroll: Ensure all calculations and records are accurate and compliant.
By following these steps and leveraging payroll software, you can efficiently manage payroll while staying compliant with Malaysian labor laws and tax regulations.
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