Steamrolling HR & Payroll Complicated Structure

Complication in Payroll & HR Outsourcing

How about we start a little easier this time round?

  1. Search
  2. Shortlist
  3. Interview
  4. Hire
  5. Full-Time
  6. Permanent
  7. Part-Time
  8. Contract
  9. Temporary
  10. Hybrid
  11. Flexible
  12. International/Foreign Workforce
  13. Salary/Wages (minimum wage)
  14. Benefits
  15. Paid/Unpaid Sick Leave
  16. Paid/Unpaid Vacation
  17. Paid/Unpaid Maternity/Paternity
  18. Paid/Unpaid Compassionate Leave
  19. Paid/Unpaid Personal Leave/Time Off
  20. Work From Home Allowance eg. Workstation, Internet, Electricity

21. Commissions

22. Bonuses

23. Deductions

24. Claims

25. Contributions (EPF, SOCSO, HRDC)

26. Work Schedules

27. Shifts

28. Timesheets

29. Overtime

30. Insurance/Health Insurance

31. Pension Fund

32. Employee Income Tax

33. Employer Income Tax

34. Special Tax Reliefs

35. Suspension

36. Severance/Redundancy Pay

37. Termination/Layoff

38. Distribute Payments/Payouts

39. Payslips/Digital Payslips

40. Statutory Reporting to Local Authorities

Ladies and gentlemen and especially to the uninitiated, are you aware that the HR and Payroll practice encompasses all of the above? In fact, the job scope is beyond just the “Top 40” because philosophically speaking, a HR professional should come with the skills and experience to strategically add to the organisation. To sit this person down to go through the laundry list, and to punch keys and tally figures on the spreadsheets is definitely counter productive to the investment.

If I may add too, the above is only the tip of the iceberg for say a mid-sized company. The complication increases and cascades through every single nook and cranny of the employee’s record as and when something new occurs in the market because up until now, we haven’t yet touched on:

  • Regulatory changes
  • Wage subsidies
  • Treatment or definition of contractors with implications to payroll, taxes etc.
  • Overtime policies
  • Last-minute changes of plans, impacting paid/unpaid leaves, benefits etc.
  • Progressive support eg. mental health, occupational healthcare etc.
  • Multiple payroll cycles
  • Payroll tax deferment & waivers
  • Payroll infringements & its penalties
  • Training/Upskilling/Reskilling

If we add these 10 to the earlier list, we’ve reached 50. Let’s just stop here and quiz ourselves for a while.

  1. Do we have adequate resources to manage the “50” for our company?
  2. Is our in-house HR employees conversant with the “50”?
  3. Do we hire more for the HR department so we can master the “50”?
  4. Is it viable for a small company to hire an experienced HR professional to tackle the “50”?
  5. Will we be breaking the law if we do not comply with the “50”?
  6. Is it just “50” or will there be more?

To answer the last question, there will be more I’m afraid because not only is the market landscape changing with time, so are employees’ aspirations and the regulatory framework supporting the workforce. It gets complicated too when different jurisdictions have very different sets of regulations.

Then, there is also the permutation impact the “50” will have when an organisation is manned by say as many as 48 football teams and their entourage.

“How big must my HR Department be to cope with this? How much knowledge is enough? Which HR ERP is suitable or can we just super-programme MS Excel and get it over with?”

The HR + Payroll + Tech Maze

Drawing from my personal experience of having been on the tech side of a headhunting company with offices, employees and clients across the Asia Pacific region, I have seen the archaic ways of managing HR and Payroll related matters. If I may say so, technology has been a real blessing to our industry.

Just about 20 years ago, processing payroll wasn’t a pretty sight. HR or the designated payroll staff were deskbound for days as payday inched closer. Although the Pentiums and client-servers were there to do the storing, processing and printing of information, it didn’t take away the labour intensive part of the job to enter data and verify records. The unfortunate thing is, some companies are still processing their payroll this way today.

To circumvent this thorny issue, progressive developments in technology have empowered users with a smarter way to input variables and allow them to resolve the complex matrix structures into the system. Such intricacies can now be embedded without much fuss so the wide variety of payment calculations and incentive schemes according to the bands and layers in organisations can be processed right down to the last decimal points.

But tech’s efficiency is also its own drawback because while it can process flawlessly, AI codes haven’t matured enough to independently attend to or understand matters relating to legislation and how it impacts the employment environment. For example, the mass layoffs of large and international companies that are happening right now, it’s more than just termination and severance pay if one is to comply with every set of rules the employees are domiciled in.

“Compliance becomes that much more important, to prevent companies from incurring fines and penalties.”

This is where our cognitive intelligence is required most, it’s also why areas like the Executive Search practice must chiefly be led by a senior practitioner to have a better grasp of the kind of professionals the client is looking to hire or in another instance, how we can better rationalise cost of employment as operational expenditure and not capital expenditure.

If technology is able to declutter the mountainous HR documents (read contracts, claims, reports) on the desk for the sake of having something tangible to sign on, today it has literally gone where no one thought was possible, like identifying geolocations to ascertain an employee’s attendance, capturing sophisticated tax and deduction calculations, protecting our data through advanced cyber security best practices and more.

It’s Complicated, but should it?

Last year in September, we wrote an article on Common Payroll Mistakes That Cause Big Problems where it raised our attention about Malaysia as the 2nd most complicated country in the world to process HR and Payroll records, 2nd only to Belgium (out of 77 jurisdictions measured by the research) but number 1 in Asia Pacific.

Now picture this, according to the ranking, we are more complicated than China, India and Indonesia. This is as mind boggling as pitting 32.9 million against hundreds of million to billions (sizes of the population of countries just mentioned).

So as we have just started the brand new year of 2023, it would be opportune for me to just say that at CXL, we are principally an HR company. Technology is merely our tool to complement our business in our effort to support our clients.

This means we’re first and foremost a HR organisation, nothing else comes beyond that. It’s also why we live and breathe HR every second of the day as we process our clients’ HR and Payroll needs – end to end, through every payroll cycle and most importantly, compliant to all statutory requirements.

About Fariz

Fariz Abdullah is the Chief Executive Officer (CEO) of CXL Group. The organisation offers HR solutions which include Contingent Workforce, Executive Search and Payroll & HR Outsourcing. Under his purview, Fariz has transformed CXL Group into an HR organisation that believes in the importance of advancing through technology but with a deep focus on the human touch in an increasingly digital era.

Insights into Malaysia’s Pulsating Job Market

Hot jobs in hot cities in Malaysia

We speak to Dhiva Karthik, Managing Consultant of CXL Executive Search Division, to tap the pulse of the job market and identify what’s trending in the labour market.

According to Dhiva, an anomaly has occurred where there is a record breaking number of job openings in the market per candidate yet the unemployment rate is low at 3.7% as of 3Q 2022 and down to 3.6% in October (source: Department of Statistics Malaysia). In terms of job openings, 3Q 2022 also saw a 9.9% surge compared to the previous quarter, registering its highest growth since 4Q 2021. Based on this, candidates in Malaysia are actually spoilt for choice, what more when they can choose from permanent, contractual, part-time, freelance to the casual assignments in the gig economy.

To decipher the demand and supply issue, it’s dependent on where you’re looking from because gone are the days when employees are content with just a paycheck. Among others, they now put an employer’s offer letter under the microscope and scrutinise attributes such as the company’s vision, the job’s purpose, potential exposure and work-life balance. Just on the latter alone, it is also worth noting that the talent market has just begun prioritising it in a much larger way, right after the endemic phase began.

The “Balanced” Variant of the 21st Century

The bold demand for a “balanced lifestyle” has in fact become a double edged sword for some smaller companies because the quest for “freedom” somewhat levelled the playing field these SMEs too can vie for the best candidates. Like the paycheck consideration, gone are also the days when everyone will flock to the big boys and sacrifice their waking hours to work around the clock and toil over the weekends just to be part of a large or international company. These days, talents have an affinity for close knitted companies where freedom and respect are the inseparable twins at the workplace, particularly so for SME service providers in Penang.

In terms of job openings, we now see a sudden rise in demand for talents in the Finance, Key Account, Customer Service, Supply Chain and the IT industries. These are mainly a consequence of the Covid-19 pandemic which led to a mass drive for digitalisation.

As for the hot jobs in the big cities like Klang Valley, Penang and Johor Bahru, they are:

  • Revenue or Treasury-related – to cope with the high interest rate environment, manage a company’s cash flows;
  • HR – in particular tech companies to restructure and redesign their organizations to meet changing business environment;
  • Supply Chain – impacted by global supply chain issues and shortages of key components;
  • Customer Service – a result of digitalisation & business process simplications;;
  • Tech or IT – evergreen, highest in demand now; and
  • Communications – PR, corporate communications, government liaisons as a reactive measure to the change in government.
Executive Search Solutions in Malaysia

Whether employers in these cities are able to find suitable candidates quick enough to fill the vacancies, it is up to how nimble the hiring managers are in looking in the right direction. It’s no rocket science here but the magic rests on where these talents are usually located, like a symbiotic relationship along the food chain.

For example, IT talents are mostly located around Klang Valley and employers from other states will inevitably have to come to the city to search for them. For the engineers, Mechanical Engineers, which by the way is the most popular type of engineering variant in Malaysia, are generally in Johor, Perak, Terengganu, Pahang etc.

Electronics & Electrical Engineers have a higher presence in Penang, attracted by the industrial, electronics and advanced manufacturing ecosystem there. Chemicals-related professionals on the other hand like the Chemical Engineers are mostly found in Terengganu and Pahang due to the presence of raw materials, more relaxed emission control regulations and proximity to maritime terminals for export.

If we hear you right, it sounds like some roles might be more difficult to fill in certain cities than they are in others, is that right?

Yes because like in Penang, which is currently experiencing the fastest growth because of the new opportunities over at the mainland in Batu Kawan and also influenced by Kulim’s growing market in Kedah, it is short of talents for roles such as the customer-facing Technical Engineers, Key Account Managers, Application Engineers, Service Engineers and Supply Chain talents.

Over in Johor Bahru, the single biggest challenge to retain talent is the Singapore-factor, and this is an across-the-board issue plaguing all industries. As such, companies in the southern capital are encouraged to be more innovative and competitive so they stand a better chance against the Republic’s offerings.

For the tech roles, and as already indicated above, every state in the country faces a shortage and they have little choice but to source for them in Klang Valley. Sharing the same concentration area is also the shared services sector like finance, banking, HR, marketing (and digital marketing) and customer service.

Then for companies looking to hire the very senior executives for the strategic and visionary roles, it can be a daunting task to persuade them to relocate due to the risks associated with leaving a steady career which are sometimes complete with cushy retirement plans already well in place. A change to an uncharted territory can be quite nerve wrecking.

The rationale behind these nucleuses of talents can be traced to how government and industry agencies are at work. Like in Kuala Lumpur for instance, the stricter emission control regulations in the metropolis has driven the manufacturing sectors somewhere else and with that, the talents suited for the jobs have also followed suit. But because KL has traditionally been the country’s financial centre, this has motivated education institutions to offer courses related to such disciplines so graduating students can immediately plug in to the hiring companies.

Along the same vein, agencies like Invest Selangor (Invest Selangor Bhd), InvestPenang (Invest-in-Penang Bhd), JCorp (Johor Corporation), just to name a few, have also propped up incentives, economic thrusts and re-drafting policies to convince companies to set up shops and offer up jobs to talents in their respective states. But the billion Ringgit question is this, will the jobs and talents find each other?

In the next and concluding part of this 2-part series, we’ll take a look at the pivotal factors companies and candidates ought to factor into their hiring formulas and resumes to facilitate a better match between man and job.