Table of Contents
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Employee Benefits and Deductions
Malaysian labor laws mandate that employers provide certain benefits to employees, including paid leave, public holidays, and health insurance. Employers must comply with these regulations to avoid disputes and legal challenges.
Paid Leave and Holidays
Employees in Malaysia are entitled to a minimum of 8 days of paid annual leave per year, which increases with the length of service. After two years of service, employees are entitled to 12 days of paid leave, and after five years of service, they are entitled to 16 days. In addition to annual leave, employees are also entitled to paid sick leave, maternity leave, and public holidays.
Employers must ensure that employees receive their full leave entitlements and are compensated for any unused leave. Public holidays are also paid, and if an employee is required to work on a public holiday, they must be compensated at a higher rate.
Social Security and Health Insurance
While SOCSO provides social security coverage, employers may also offer additional health insurance benefits to employees. Although not legally required, providing supplementary health insurance can help attract and retain talent. Employers should ensure that any additional benefits are clearly outlined in the employment contract and integrated into the payroll system.
When Non-Compliance May Occur
Non-compliance with Malaysia’s payroll regulations can result in significant penalties, legal disputes, and damage to the company’s reputation. Below are some common areas where non-compliance may occur and how to avoid them:
Late Salary Payments
Employers must pay salaries on time according to the terms specified in the employment contract. Delayed salary payments can result in fines and employee disputes. To avoid this, businesses should implement a reliable payroll system that ensures timely payments.
Failure to Contribute to EPF/SOCSO on Time
Employers who miss the deadlines for EPF and SOCSO contributions may face financial penalties and interest charges. It is essential to set up an automated payroll system that calculates contributions accurately and ensures they are submitted on time.
Incorrect Income Tax Withholding
Failing to withhold the correct amount of income tax or delaying tax submissions can lead to audits and penalties from the Malaysian Inland Revenue Board. Employers must ensure that their payroll systems are capable of calculating and reporting taxes accurately to avoid these risks.
Non-Compliance with Leave and Benefits
Employers who fail to provide statutory leave or benefits may face legal challenges and claims for compensation. To avoid this, businesses should familiarize themselves with Malaysian labor laws and ensure that employees receive their full entitlements.
How AYP Can Help
Managing payroll in Malaysia requires expertise and a deep understanding of local labor laws, social security contributions, and tax regulations. AYP offers a range of services to help businesses manage payroll efficiently and ensure compliance with Malaysian regulations.
Professional Employer Organisation (PEO) Services
With AYP’s PEO services, businesses can outsource payroll management, including EPF and SOCSO contributions, tax withholding, and employee benefits. We take care of all employer responsibilities, ensuring that your company stays compliant with Malaysia’s labor laws and payroll regulations.
Employer of Record (EOR) Services
AYP also offers EOR services, acting as the legal employer for your workforce in Malaysia. We handle all payroll and administrative tasks, including salary payments, statutory contributions, and tax reporting, allowing you to focus on growing your business.
Payroll Outsourcing Management (POM) Services
AYP’s Payroll Outsourcing Management (POM) services provide a complete solution for managing payroll in Malaysia. From calculating salaries and deductions to submitting contributions and filing tax returns, we ensure that your payroll is accurate, compliant, and efficient.
By partnering with AYP, businesses can streamline payroll processes, reduce the risk of non-compliance, and avoid penalties.
