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By Wong Hern Yee

The last thing a business wants to do is adopt a new HR software that brings new problems. Many already face the problem of not knowing what to do when it comes to issuing payslips and how to efficiently update or archive them. This includes entrepreneurs, SME business owners, HR administrators with no prior experience, finance controllers of MNCs and even outsourcing consultants with a portfolio of clients.

Good software can simplify the entire process such that you need only decide how many pairs of eyeballs are necessary to be confident that the final amount is always accurate.

So, what are the 3 things to consider when looking for a cloud-based HR software in Malaysia?

Calculation Logic

There are several very important calculations that a cloud-based HR software must factor in when processing payroll for companies in Malaysia. These include the following:

1. Proration of salary. When a monthly-rated full-time employee has incomplete months of work (typically for new hires or departures), a cloud-based HR software should help you calculate the employee’s salary for an incomplete month of work. The common practice is to use workdays in a month for calculation.

2. Salary payment in arrears (i.e. money that is owed and should be paid earlier). There may be instances when the employer and a new hire mutually agree that the new hire’s first salary payment can be carried over to the following month. In this case, any Employees Provident Fund (EPF) / Kumpulan Wang Simpanan Pekerja (KWSP) contribution due should still be calculated for the first month of work. A smart cloud-based HR software will ensure that this is carried out.

3. Pay frequency. This includes –

  • Monthly Pay: Typically allocated to full-time employees.
  • Weekly, Bi-weekly or Bi-monthly Pay: These are practised by businesses with significant numbers of part-time employees and/or a preference for more frequent pay disbursement.

It would be good to have a HR software that supports your employees’ weekly and bi-monthly pay due to EPF considerations (contribution amount is determined by a full calendar month’s salary). A good HR software will help you withhold the maximum amount of EPF for employee contribution to ensure that when such employees resign, there will be enough buffer for EPF contribution.

4. Rate of pay. Hourly/daily rated with varying rates based on the day of the week or rest days and public holidays. While this isn’t a common feature, a smart system should factor in the hourly/daily rate of pay. After all, it is common practice among companies that employ part-timers.

5. Additional payments and deductions. Examples are reimbursement, allowance, bonus, commission, overtime, leave encashment, loans, and unpaid leave. Apart from capturing these pay items, it’s crucial to determine if they are part of the payments that contribute to EPF and Tax calculations. Most software typically tag common items accordingly while some utilise an open-ended feature for users to determine the appropriate contribution.

6. Statutory contributions. A HR system must help you ensure that the treatment of decimal places is applied correctly when calculating the following statutory contributions for each employee:

User Functions

1. Mass data upload. If you have too many entries to key in individually, having a feature that helps you upload data in bulk is a real time-saver. However, the challenge lies in how well the data is sorted within the software. A smart process should require minimal data massaging, with the option for user-defined formatting and naming conventions.

2. Job grades. A job grade is a group of job positions with the same/similar level of responsibility in a company; it is often used to assign organisational structure and decide on the different levels of pay in a firm. In a sizeable workforce, it is useful to have a HR system that allows you to define job grades. After all, defined job grades are good for career progression mapping. It will also strongly assist in matching employees to predefined compensation packages.

3. Reports. The bare minimum is a summary of all payroll items with sum totals. Building upon this, the variation in style becomes quite extensive. It would be good for the report view to rely on design (i.e. colour, layout, alerts) to facilitate checking without having to switch between reports/views. In the event that different reports are needed to serve a unique validation purpose, a smart HR system should allow this as well. Take for instance, employee leave reports. An intuitive HR software would allow you the flexibility of exporting a report that is either Leave Type based or employee-based – depending on which variables you’d prefer to keep track of.

4. Payslips. Most software should support individual access to be able to view the payslip online or forwarding of payslips to email.

5. Integration.

  • The must-haves: Online submission compatibility with the top banks in Malaysia. Payroll features comply to requirements of all Malaysian statutory bodies like EPF, LHDN and SOCSO.
  • The good-to-have: Integrated into accounting, Leave & Attendance tracking, and expense management software. Everybody loves an all-in-one software.

Architecture & Design

1. On the cloud. More users are adopting cloud software over on-premise installation. The advantage is data mobility plus no hassle over version updates, especially with regular statutory updates affecting calculation logic. With regulated data protection laws, any fuss over data security on a cloud database is quickly fading.

2. Speed. Some software’s processing speed is affected by the total headcount captured. Modern cloud-based HR software using newer technology stacks should process thousands of records within seconds. If you think that HR tools are generally and naturally prone to hanging, just know that laggy systems don’t have to be the norm.

3. Simple. A software with comprehensive computation logic coupled with enough user functions should be excellent right? Yes, functionally. But how simple is it to master? Simple enough that you can ignore the user manual and skip the training session? It’s really worth considering. Intuitive product design speeds up learning, especially for the inexperienced user.

So, are you ready to look for the right HR software?

All in all, you just need to keep these three factors in mind when choosing a cloud-based HR Software- calculation logic, user functions, and architecture & design. This can make automation less mind-boggling and also ease your employees’ concerns that new tools will be harder to use than their existing methods. Putting careful thought in adopting a suitable HR software will also help enormously in boosting your organisation’s productivity.

Click here to learn more about running your HR processes.

Wong Hern Yee leads Talenox’s content marketing campaigns and event management initiatives regionally.

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