Payroll calculation might seem like a tiring task on your monthly to-do-list. But, it’s important that employees receive their pay in time. This to make sure that employees stay loyal and comply with government regulations. You must want to find the best payroll system for your company’s particular needs. Payment systems all have different capabilities, but there are a few easy steps that you can follow to ensure accurate payroll calculation.
1. Determine the employee’s gross pay
Before you can begin to calculate payroll, you must know what the employee’s gross income is. Every employee might have different gross pay based on their contract and job level. It’s important that you keep a record of which employees receive how much gross pay.
2. Allowances
Now that you know each employee’s gross pay, you need to add any allowances they are eligible to receive. These allowances might be transportation allowance, meal allowance, even housing allowance.
3. Overtime Pay
Overtime work is any work done in excess of the normal hours of work (excluding breaks). The limit of overtime work shall be a total of 104 hours in any 1 month. This means an average of 4 hours in 1 day. For any overtime work carried out more than the normal hours of work, the employee shall be paid at a rate not less than 1.5 times his hourly rate of pay irrespective of the basis on which his rate of pay is fixed.
4. Tax Deductions
After you add allowances to employee gross pay, the next thing you need to calculate in payroll calculation is tax deductions.
The tax year in Malaysia runs from 1 January to 31 December. The tax rate for non-residents is currently a flat 30%, whereas the tax rate for residents is on a sliding scale from 0% to 30%, depending on which income grouping they fall into. Typically, for an average paid worker residence tax is at 14%.
Some businesses will pay the tax on behalf of their staff, whereas others ask their workers to submit the payment themselves. There is also a fixed monthly SOCSO (Social Security Organization) fee for non-residents of 49.4 Malaysian Ringgit (RM) per month, which is similar to a national insurance fee.
5. Other Deductions
These deductions might cover EPF contribution, for absence from work, damage or loss of money or goods, for recovering advances, loans, overpaid salary, or unearned employment benefits, or any other deductions authorized by any other written law.
6. Distribute Pay to Employees
After you calculate all of those deductions and additional pay, the last thing you need to do is to send employees’ payroll to their accounts. Before, make sure you check your payroll calculation to make sure there are no mistakes.
All employees in Malaysia should be issued a payslip when they are paid, including information such as wages earned and deductions made.
All these processes can be pretty complex and take a lot of time and resources. HRMLabs can help you to calculate payroll automatically. With our cloud-based software and centralized platform, you can generate employee payroll in just a few clicks.
HRMLabs also help companies to calculate their EPF contribution and other deductions such as tax. Also, additional salary such as allowance, claim, benefits, and overtime pay.
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