A culturally diverse country with an equally diverse economy, Malaysia is seen by many as a great investment destination. Once dependent on its traditional mining and agriculture, Malaysia’s economy has traversed through time to open itself to several other sectors today. Electronics, medical tourism, construction and automotive manufacturing are some among the many industries who set up shop in the country.
Malaysia is ranked 15th in the World Bank’s Ease of Doing Business index in 2019 – a clear indicator of the conducive business environment in the country. There are several factors that work in the favor of creating the economic environment that has attracted several global investments. Some of these factors include:
- Initiatives by the Malaysian government such as rebates, tax exemptions and more to attract investors
- Myriad business opportunities in various industries, right from technology sector to other investment areas such as electronics manufacturing, biotechnology and photovoltaic
- Malaysia’s geographic advantage is a huge advantage.It has always been a trading hub, involved in the exchange of goods and services from both, the east and west
- Malaysia Investment Development Authority(MIDA) works towards garnering foreign investments. Although MIDA encourages to invest in most sectors of the economy, incentives are exclusive to those focused on the automotive, technology, machinery, oil palm biomass, and electronics industries
- Highly skilled workforce is one of the most important factors. Being a country with a fairly young population means millions of skilled and capable graduates who enter the market every year, making the country a rich source for highly capable, potential employees. Additionally, technical and vocational education and training initiatives of Malaysian government looks at equipping the skilled workforce with continuous training to gain a competitive advantage and stay relevant with upgraded knowledge and skills
Perhaps these are the reasons why several international businesses choose to invest in Malaysia. But the employers must also make a note of the payroll complexities in the country. Generally functioning on a monthly basis, the entire payroll process in Malaysia takes into account the following points:
- Compulsory Perks such as statutory holidays, maternity and medical leave, paid annual leave as well as other benefits for termination and unemployment
- Elective Perks include lengthy duration of service, transport, housing allowances, medical insurance perks, pension programs etc.
- Sanctioned Contributions comprises of statutory social security contributions, EPF plan, Zakat donations (applicable to only Muslim employees) and contributions to PTPTN, Malaysia’s scheme for funding students
- Scheduler Tax Deduction Scheme, according to which tax deductions are calculated monthly
- Mandatory Payslip and Records that are required by the Malaysian government to ensure payroll details for all employees are recorded properly
- Tax, deducted on a monthly basis, at present is levied at rates varying from as little as 0% to as high as 28%, with respect to the salary amount.
Simplifying payroll with automation
The payroll process can be pretty arduous, especially for an organization that is not used to dealing with the payroll procedure of a country that has a firm hand on all its foreign investors. Without a sound knowledge of the payroll processes in the country, or a good payroll partner who is compliant and has the knowledge to help the business grow in this geography, it will be difficult for an enterprise to succeed in Malaysia.
Ramco HR with Global Payroll focuses on making the payroll process smooth. The regulations may look simple and straightforward but there can be different situations which may result in complexity while doing tax and social security calculations. Further, it is imperative for a global employer to be statutorily compliant with the relevant payroll governing laws and regulations, as even the slightest irregularity can result in huge penalties and penal action by the government. Ramco recognizes these challenges and has developed solutions to address them.
Ramco understands that automation can play a big role in streamlining the processes and bring in lot of efficiency. Taking it up a notch, at Ramco, we also add an Artificial Intelligence / Machine Learning layer to automation process that can help in getting error-free payroll processing done with relevant statutory compliances done on time. An international payroll partner having a strong product with AI/ML would be ideal to make the process smoother, compliant, accurate and up-to-date for the entire workforce.
Armed with the above facts and other crucial payroll information, you can now swiftly get started on realizing your business aspirations in Malaysia.