In establishing a company, a lot of factors must be considered to ensure its success and lessens any fees due to legal negligence. The part of the company that needs a bird’s eye view and hands-on work are the legalities and accounting. Minding your legalities protect your business from unwanted lawsuits while monitoring the cash flow keeps your business running. If we combine these two company sectors, the payroll system is found in the merging area.
Payroll is defined as the process of giving the employees, which are in the company’s master list, their due salary and other incentives based on their working hours via bank-to-bank or paycheck transactions. This process may seem uncomplicated, but in reality, it requires great attention to detail due to its underlying complexities. Processing payroll involves a 5-step procedure:
Step 1: Collects information about the total number of employees’ working hours.
Step 2: The collected information would be reviewed and approved by the supervisor for further processing.
Step 3: The gross payments will be calculated on an hourly basis.
Step 4: Calculate the possible deductions from the gross pay such as social security, Medicare tax, income tax, and other deductions.
Step 5: Distribution of payments.
A single mindless error in any of these steps could put a company in legal and financial jeopardy because of tax issues which can be costly and time-consuming to resolve.
Common Payroll Problems
Below are the following common payroll issues that need to be avoided to ensure loyalty and boost the productivity of your greatest business asset—your working personnel.
1. Incorrect Information
Incorrect information resulting in underpayment can negatively impact the company by increasing dissatisfaction among the employees and contributing to financial losses which could be difficult to correct.
2. Delayed Payments
It is an ethical practice of every company that payments should be paid on time lest it reduces the morale and productivity of the employees.
3. Employee Misclassification
Employee misclassifications root in the lack of categorization among the employees. In general, workers are typified as full-time, part-time, and contractual and each of these requires different tax requirements. Failure to correctly classify the employees would result in the denial of certain benefits.
4. Lack of Statutory Insights
The are several regulations and laws affecting the processing of payroll and these vary as well in different countries. For example, the Malaysia payroll system is different from other countries because it is done monthly. For this reason, your HR and Accounting Department must work hand-in-hand in keeping with the deadline of contributions lest your company will be subjected to hefty fines.
5. Overtime Tracking
Employees are protected by labor code laws, and this includes the entitlement to receive overtime pay.
If you are a foreign businessman who is new to the Malaysian market, you will need a Malaysia payroll provider who can help you in lifting the administrative work that you may be able to focus solely on your business expansion.