Amanda Chua, Author at Omni HR

Ensuring accurate and timely payroll is a cornerstone of any successful HR department. But what happens when an employee doesn’t work a full pay period? Understanding prorated salary meaning is essential for handling these scenarios effectively. This guide will break down everything you need to know about calculating and processing prorated salary.

What is a prorated salary?

A prorated salary, also known as pro rata salary, refers to a wage that is calculated based on the hours worked in relation to a full-time schedule. This can happen when someone starts or leaves mid-pay period, or takes unpaid leave. It is also a proportional payment system commonly used for part-time and contract jobs.

It is essential to have a clear understanding of the prorated salary meaning due to the following reasons:

Fairness and equity: Having a prorated salary structure ensures employees are paid fairly for time worked. Employees are paid in proportion to the time they invest in the work, ensuring they receive compensation that reflects their actual contribution to the role or project.

Encourages flexibility: By accommodating various arrangements, such as part-time work and temporary contracts, this gives more room for flexibility in the workplace. Offering a prorated salary provides a form of flexibility that can attract a diverse range of talent and meet the needs of both employees and employers, promoting work-life balance in the office.

Retains talent: For employees who may need temporary modifications to their work schedule or reduced hours due to personal circumstances, offering a prorated salary remains a useful tool in retaining these talents.

Read next: The Cost of Recruitment: HR’s Guide to Creating, Tracking and Implementing a Salary Budget

When will a salary be prorated?

There are several situations where an employer can use a pro rata salary, such aàs part-time work or when an employee doesn’t work a full year. In these cases, prorated salary meaning is calculated based on the amount of time worked compared to the amount of time a full-time employee would be expected to work. Further examples are shown below:

Starting new job in the middle of pay period

For new salaried employees who start working for a company in the middle of the pay period, the method of payment for the first paycheck would be a prorated salary.

Since they haven’t worked the entire pay period, their first paycheck will reflect the portion of the period they actually were employed. It’s essentially a partial payment until the next regular paycheck, which will cover a full pay period.

For example:
An employee starts a new job on 15 September. The company has a biweekly pay period (pays every two weeks). In this case, their first paycheck would be prorated for the second half of September (from 15 September to 31 September).

Leaving or terminated from a job in the middle of pay period

An employer is entitled to terminate the appointment of an employee in accordance with the terms of the relevant contract of employment. A periodic employee is one who receives a salary per calendar month. The common practice is that a periodic employee whose appointment is terminated in the course of a particular month receives a pro rata salary for the number of days they worked in the exit month.

Received a promotion or pay raise in the middle of pay period

In this case, an employee’s paycheck will likely reflect two different pay rates. The beginning portion will be based on their original salary, and the remaining part will reflect their new higher salary. This ensures a smooth transition in an employee’s pay, reflecting the raise.

For example, a team member gets promoted on 1 September, with a raise included. Their September paycheck would likely show two separate earnings amounts:
The first half would reflect their original salary for the days worked before the promotion (1 August to 31 August).
The second half would show their new, higher salary for the days worked after the promotion (from 1 September to 15 September, assuming a biweekly pay period).

Relevant reads: Understanding and Administering Salary Adjustments

Working part-time with a fixed salary

Working part-time requires an employee to work fewer hours than a full-time schedule. Since a full-time salary represents a set amount for a full workload, a part-time employee logically earns a proportional amount based on their reduced hours.

Shortened workweeks due to holidays

If there are holidays that fall within a pay period and cause a reduction in an employee’s scheduled work hours, they might receive a prorated salary to reflect the fewer hours worked due to the holiday.

However, this depends on your company’s policy for holiday pay. Some employers might provide paid holidays where your pay wouldn’t be affected.

Taking unpaid leave

Unpaid leave refers to time off where an employee does not accrue regular pay. Since the individual is not working during this period, they would receive a prorated salary from their employer which would account for the days they were on leave and didn’t work.

Calculating Prorated Salary

While determining the prorated salary meaning can be complex in certain situations, here’s a simplified step-by-step process employers and HR managers can use for calculating prorated salary meaning:

1. Divide annual salary by number of weeks in a year

In order to calculate prorated salary, you’ll need to determine the exact number of days the employee worked and multiply the findings by the daily pay rate.

Prorated salary = (number of days worked) × (daily pay rate)

However, you cannot jump right in by making the above calculations. To get the daily pay rate, you’d have to follow a number of steps.

This first step involves converting the annual salary into a weekly amount. Annual salary refers to the total amount of income earned in a year. You need to calculate the total pay of the employee for the entire pay period (the whole year) without making any adjustments.

The next thing is to divide the employee’s yearly salary by the number of weeks in a year (typically 52 weeks). This gives you their weekly equivalent pay.

2. Divide weekly salary by the number of days employee normally works in a week

Next, you need to determine the employee’s daily pay rate. To do this, you’ll have to divide the weekly salary obtained in step 1 by the number of days the employee usually works in a week.

3. Multiply employee’s daily rate by the number of days employee worked in the pay period

This is where you get the prorated salary meaning amount. Multiply the daily rate (just calculated above) by the number of days the employee actually worked in the pay period.

Hence, we’ve arrived at our formula from the beginning:

Prorated salary = (number of days worked) × (daily rate)

Although there are some additional factors to consider, the steps outlined above are not a one-size-fits-all approach to calculating prorated salary meaning, due to varying circumstances.

For example, the steps above indicate that you’re prorating for a specific pay period, such as a biweekly paycheck. The timeframe may vary and adjustments may be necessary if prorating for a different period.

Also, if the employee took an unpaid leave during the pay period, you’ll need to factor that into the number of days or hours worked when understanding the prorated salary meaning.

Let’s look at further examples of how an employee’s pro rata salary can be calculated considering each factor listed above.

Example 1: New Employee – Biweekly Pay

Sarah is a new employee who starts on a Wednesday in the middle of a pay period. Sarah’s annual salary is $60,000, and your company uses a biweekly (every two weeks) pay schedule. Employees typically work 5 days a week (40 hours).

Step 1: Annual Salary to Weekly Salary

Weekly Salary = $60,000 / 52 weeks/year = $1,153.85

Step 2: Weekly Salary to Daily Rate

Daily Rate = $1,153.85 / 5 days/week = $230.77

Step 3: Daily Rate to Prorated Pay (since she starts mid-pay period)

Sarah worked three days (Thursday, Friday, and Tuesday of next week) in this biweekly pay period.

Sarah’s pro rata salary for her first biweekly pay period would be:

Prorated Salary = $230.77/day × 3 days = $692.31

Example 2: Employee Taking Unpaid Leave – Monthly Pay

Jeremy is a salaried employee who makes $72,000 annually and is paid monthly. Jeremy usually works 20 days a month, but he will be taking 3 unpaid vacation days during the upcoming pay period.

Step 1: Annual Salary to Monthly Salary

Monthly Salary = $72,000 / 12 months/year = $6,000

Step 2: Monthly Salary to Daily Rate

Daily Rate = $6,000 / 20 days/month = $300

Step 3: Daily Rate to Prorated Pay (considering unpaid leave)

Jeremy will be working 17 days (20 total – 3 vacation days) during this pay period.

Jeremy’s pro rata salary for this period will be:

Prorated Salary = $300/day × 17 days = $5,100

Additional reading and tool: Payroll Template and Guide for HR Teams

Will statutory deductions be prorated?

Statutory deductions are mandatory contributions withheld from an employee’s salary by law. These typically include income tax, social security, and other government programs.

The deduction is prorated when an employee’s pro rata salary covers a portion of a pay period, such as starting a new job mid-month or leaving one mid-month. The general rule is that deductions will be calculated based on the proportion of the pay period during which they worked.

Here’s a complete breakdown of the process:

Gross Salary: The individual’s total pay before deductions.
Pay Period: The timeframe their salary covers (e.g., biweekly, monthly).
Days Worked: The number of days an employee worked within the pay period.

How to prorate statutory deductions?

There’s no one-size-fits-all method, but here are some common approaches:

Daily basis: Divide the monthly statutory deduction amount by the number of working days in the month and multiply by the number of days the employee worked.

Percentage basis: Calculate the percentage of the month in which the employee worked and apply that percentage to their monthly statutory deduction.

However, the specifics of statutory deductions and proration will vary depending on the country, employer, and type of deduction. For example, in Singapore prorated salaries are subject to income tax and Central Provident Fund (CPF) contributions. Employees who receive prorated salaries must declare their income accurately and file their tax returns on time with the Inland Revenue Authority of Singapore (IRAS). Therefore, It’s important to consult your local employment laws and regulations for any specific requirements regarding prorated salaries.

Read next: Payroll Singapore Reference Guide: Everything You Need to Know

Easily Navigate Prorated Salary with Omni Payroll

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Prorated salary ensures fairness and transparency, boosting employee motivation and employee satisfaction, leading to higher productivity and reduced attrition rates. Given its benefits, implementing a pro rata salary structure is crucial for modern growing businesses. Thankfully, managing it doesn’t have to be complicated, thanks to HR tools.

All-in-one HR softwares like Omni can help you and your company efficiently tackle the pro rata salary process. By streamlining processes and gathering valuable insights through data analytics, our software can provide an ideal framework for businesses invested in creating a fair and transparent workplace culture.

Omni makes it easier than ever to calculate accurate employee prorated salary payments and tax calculations through automation that saves time and reduces errors. And with automated payroll information synchronization, end of month processing becomes a streamlined and seamless effort.

Our expert support and assistance is tailored to your businesses unique requirements and local regulations. Chat with the Omni team to learn more about how our HRIS solution can help you supercharge your business operations as you grow.

Fringe benefits are a crucial aspect of modern compensation strategies, going beyond basic salaries to offer employees a comprehensive package that supports their overall well-being. For HR teams and business owners, understanding and effectively managing these benefits is key to attracting and retaining top talent.

This article aims to answer the question of what are fringe benefits and why they are a crucial component of modern compensation strategies. Armed with this knowledge, you will be better equipped to create a more attractive and supportive company culture that benefits your employees and organization.

Exploring what are fringe benefits reveal a range of non-wage compensations that employers offer to attract and retain talent. As we delve into what fringe benefits are, it becomes clear that these perks extend well beyond health insurance and retirement plans.

What are fringe benefits?

One may wonder what are fringe benefits and how they differ from standard salary offerings. Fringe benefits, often referred to as “perks” or “employee benefits,” encompass a wide range of additional compensations provided to employees on top of their standard salaries or wages. Unlike salary, fringe benefits are non-wage compensations aimed at improving an employee’s engagement and life within and outside the workplace.

The importance of these benefits lies in their ability to offer support in areas like health, financial security, and personal growth, creating a comprehensive compensation package for employees that goes beyond just a paycheck. Understanding fringe benefits available helps HR teams and business owners design more attractive and competitive compensation packages.

By integrating additional fringe benefits into the overall compensation strategy, organizations can significantly enhance their brand image to current and potential employees, fostering a more satisfied and loyal workforce.

What are the required and voluntary benefits?

When understanding what are fringe benefits, it’s crucial to be able to distinguish between required and voluntary offerings. This distinction is important for HR teams and business owners when it comes to crafting comprehensive benefits packages that comply with legal standards while addressing the unique needs of their workforce.

Required fringe benefits

Certain benefits are mandated by law and must be provided by employers. These include:

Paid time off (PTO)

This refers to vacation, sick leave, and public holidays. The specific allotment and conditions can vary based on local employment laws.

Severance pay

Compensation provided to employees upon termination of employment under certain conditions, offering financial support during their transition.

Maternity leave

Providing maternity leave for mothers around the time of childbirth or adoption, ensuring they have the necessary time to care for their new child without fear of losing their job.

Statutory contributions

Employers are required to contribute to national schemes on behalf of their employees, such as social security, healthcare, and pension funds, ensuring a level of financial security for the workforce.

Common examples of voluntary benefits

Voluntary benefits are those that employers choose to offer beyond the legally required minimums, which can potentially make the company more attractive to current and potential employees. Here are some common examples:

Health insurance

Offers coverage for medical expenses, including doctor visits, hospital stays, surgeries, and sometimes dental and vision care. Health insurance is one of the most valued benefits by employees, as it directly affects their well-being.

Retirement savings plan

Allows employees to save for retirement, often with the advantage of tax-deferred growth. Many employers also match a portion of the employee’s contributions, further incentivizing participation and helping employees secure their financial future.

Life insurance

Provides financial security to an employee’s beneficiaries in the event of their death. This benefit is particularly appreciated by employees with dependents, as it ensures their loved ones are financially taken care of.

Disability insurance

Offers income protection to employees who are unable to work due to a disability. This insurance can be short-term, covering a few months, or long-term, covering several years, safeguarding an employee’s income during periods of illness or injury.

Relevant reads: What is SG Enable? Tools for Building a More Equitable Working Environment in Singapore

Why do companies provide fringe benefits?

Now that we’ve covered the types of fringe benefits, another critical aspect of this discussion is understanding what are fringe benefits and their role in employee satisfaction and retention.

The provision of fringe benefits goes beyond compliance with legal requirements or industry standards. It’s a strategic move made by businesses to achieve several key objectives that contribute to the organization’s success and sustainability. Fringe benefits can serve multiple purposes such as:

Attract top talent

In today’s competitive job market, salary alone might not be enough to attract the best candidates. Voluntary fringe benefits such as health insurance, retirement savings plans, and flexible working conditions can make it more appealing.

Keep employees engaged and motivated

Offering benefits that contribute to employees’ well-being and job satisfaction helps in keeping them motivated. Engaged employees are more productive, creative, and committed to company goals.

Omni in action: Discover how Newbit unlocked the power of employee engagement with Omni!

Reduce attrition rates

High turnover can be costly for companies, not just financially but also in terms of lost knowledge and skills. By providing a comprehensive benefits package, employers can reduce attrition rates, saving on recruitment costs and preserving organizational knowledge.

Enhanced employer brand

A company that is known for taking good care of its employees enhances its reputation among potential candidates, within the industry and its customer base. This positive employer brand can lead to increased business opportunities and attract quality talent.

Next, we’ll explore the key considerations for HR teams and business owners when it comes to designing a fringe benefits program that meets the needs of both employees and the organization.

Things to Consider When Designing a Benefits Program

If you’re looking to enhance your compensation packages, you should start by asking, ‘What are fringe benefits and how can they be effectively implemented?’

Designing a great benefits program requires careful attention to several crucial factors which includes meeting legal standards, aligning with organizational objectives and catering to the diverse needs of your employees.

Here are some things you should know about when designing your fringe benefits program:

Needs assessment

An important factor to think about when considering what are fringe benefits includes assessing the diverse needs and preferences of your workforce. Start by understanding the needs and preferences of your workforce. Surveys, focus groups, and 1-on-1 meetings can provide valuable insights into what benefits are most valued by employees. This assessment should also take into account the diversity of your workforce, including different life stages, family situations, and health considerations.

For example, employee surveys revealed a high demand for mental health support due to employee burnout and hybrid working arrangements. In response, you can introduce an Employee Assistance Program (EAP) or implement mental health days, and a flexible working policy, which can significantly enhance job satisfaction and productivity.

Determine your budget

The scope of your benefits program will largely be determined by how much your HR budget. It’s important to factor in both direct and administrative costs of the benefits. Balancing generosity with sustainability is key to creating a benefits package that is both attractive to employees and financially viable for the company.

Ensure compliance

Regulatory compliance is another critical aspect of fringe benefits administration. This includes adhering to regulations on mandatory benefits such as health insurance, retirement savings, and paid leave. Failure to comply can result in costly penalties and potentially damage your company’s reputation.

Feedback mechanisms

Feedback is essential for the continuous assessment and improvement of your fringe benefits policy. Consider implementing regular surveys, suggestion boxes, and forums for open discussion, allowing employees to express their opinions and preferences.

By doing so, you can make necessary and informed adjustments to your policy, ensuring it remains aligned with employee needs and preferences. This can signal a commitment to employee well-being and fosters a culture of continuous improvement and engagement within the organization.

Technology in managing fringe benefits

Adopting HR tools can be a great way to streamline the administration of fringe benefits. Platforms like Omni can simplify time-off tracking and approvals, thereby minimizing HR administrative tasks whilst empowering employees to access benefits available to them.

Beyond time management, all-in-one HR software that offer employee self-service portals and mobile accessibility play a crucial role in enriching the overall user experience, making benefits programs more effective and engaging for all stakeholders.

By factoring in these considerations, your company can design a fringe benefit program that not only is attractive to current and potential employees but also promotes a motivated and engaged workforce, setting the foundation for long-term organizational success.

Creating a Happier, Healthier Workforce

It is clear that fringe benefits enable businesses to attract, recruit, motivate and retain highly skilled employees. It also results in increased employee satisfaction and loyalty, thereby reducing attrition rates. Omni gives you the tools and resources you need to build a well-organized, engaged workforce and effectively implement your fringe benefits programs.

Omni streamlines your fringe benefit efforts, automates time-consuming and repetitive tasks, and frees up your valuable time and energy so you can focus on what really matters — strategically engaging and nurturing your team.

Omni’s time off management capabilities help managers and HR teams swiftly navigate employee leave management. Omni’s platform allows you to approve leave applications on the go and keep track of who’s in and out of the office with at-a-glance scheduling.

Our employee self-service portal empowers employees to submit their time off requests, which automatically routes to the appropriate manager thanks to customizable approval workflows. With automated calculations, employees and managers can easily view leave balances in real-time, and track how many vacation days they have left without having to go through HR.

Book a demo with our team today!

Want to boost employee engagement? Download our free HR Calendar 2024 for more inspiration!

You might be an HR officer in a large corporation noticing low employee morale and performance despite having adequate staff. Or, you could be in a medium-sized organization grappling with high attrition rates, finding it challenging to attract and retain top talent.

In either scenario, these challenges signal the need to adopt HR analytics while carrying out your duties. Doing so can enhance your HR practices, make informed decisions, and ultimately foster positive employer-employee relationships.

This article delves into the essential metrics for HR analytics, why it’s important for your business, and how to go about implementing it effectively.

What is HR Analytics?

HR analytics is a system of collecting, analyzing, and interpreting human capital data in an organization. Its goal is to help HR teams make better decisions that enhance business results and show the impact of human resource initiatives. It covers all employee and company data, including employee engagement, hiring, retention, skill enhancement, productivity, etc.

HR teams gather these insights from employee surveys, performance reviews, or exit interviews. You can also get them from your company’s HR software or tools for recruiting, payroll, and other HR administration.

When data is readily available, HR teams can forecast employee turnover, answer questions, and offer solutions with concrete evidence. Ultimately, you gain insights that shape your company’s HR practices and implement strategies that support organizational goals.

Read next: 5 Reasons to Switch to an All-In-One HR Software

Why is it important for your business?

If you’re like the 60% of HR leaders from Gartner’s report, developing your team’s effectiveness should be a part of your strategy to improve the future of work in 2024. However, you need to arm yourself with adequate information to excel at this strategy. And that’s the essence of HR analytics. It’s crucial to the success of any organization as it helps to:

Drive decision making

HR analytics provides data-driven insights into various aspects of a company that drive an effective decision-making process. For instance, by analyzing recruitment and employee performance data, HR teams can identify and implement successful hiring practices during recruitment. Also, you’ll recognize high-performing employees and take more efficient steps in solving team-related problems. Generally, HR analytics offers an objective and more precise approach to workforce decisions than relying on your guts or unconscious bias.

Improve return on investment

HR analytics can significantly enhance return on investment by providing valuable insights into workforce dynamics, allowing HR professionals to make well-informed decisions that impact the organization positively.

By analyzing past recruitment data, you can identify effective recruitment channels and hire the right talent for your company. Additionally, you can assess employee engagement and measure performances to anticipate and prevent issues like employee burnout or high turnover. Ultimately, it allows you to create a more positive workplace for your employees.

Provide predictive insights and analysis

HR analytics applies HR data analysis and statistical methods to analyze data, identify patterns, and provide insights into HR and workforce activities.

For instance, HR teams can forecast an employee’s performance by examining past performance and engagement data. This helps the department identify why employees’ morale may be low and recognize top performers with the potential to succeed in critical roles.

Identify areas of inefficiencies

If you observe certain employees falling behind in their tasks, instead of just asking them about it, analyze historical performance data to understand the reasons for any performance gaps. Organize training sessions to enhance skills as necessary.

Also, if your HR processes are inefficient or time-consuming, HR analytics can pinpoint slowdowns, refine workflows, and automate routine tasks to improve and enhance efficiency.

HR analytics spots and rectifies areas of inefficiencies within the organization. It identifies trends causing turnovers and exposes potential issues that may not easily be discovered or resolved.

Enhances employer branding

By collecting and interpreting data, you’ll gain insights that will help create a more productive company culture. When employees perceive the company positively, it often results in lower turnover and attracts high-performing talent.

Consider this: According to Glassdoor, 86% of job seekers review company ratings and reviews before applying. If both current and former employees have positive opinions about your company, it will likely encourage potential talent to apply, thereby expanding your workforce.

What does HR Analytics measure?

In every company, the HR team is crucial for growth. From recruiting and developing talents to monitoring employee turnover, HR professionals constantly shape company culture and performance.

HR data analysis measures different human resource activities, and the right ones for your company depend on what your HR team aims to improve and achieve. Here are some examples of key metrics that you can consider:

Recruitment

When finding, selecting, and hiring qualified talents for a position, HR data analysis tracks metrics that help organizations weigh how effective and efficient their recruitment processes are. The goal is to optimize hiring strategies and identify opportunities to reduce cost of recruitment while boosting recruitment ROI.

Two key recruitment metrics are:

Cost per hire: This metric measures the average cost incurred when hiring a new employee. It analyzes the efficiency of the hiring process and tracks all internal and external expenses the company incurred to fill a vacant position. This includes money spent on job ads, agency fees, background checks and screening costs, recruitment software costs, onboarding costs, wages of the recruiters who interviewed candidates, etc.
Time to hire: This metric measures how long it takes for an organization to hire a new employee. It covers the number of days from when a candidate applies for the role to the point the candidate accepts the offer. For instance, if your company takes a long time to hire, the hiring process is slow and inefficient, possibly due to bottlenecks. However, by tracking this metric, HR teams can identify issues in the talent acquisition process and set goals for enhancing efficiency.

Performance management

HR data analysis sets and tracks key performance indicators related to employee performance by evaluating:

Skills gap analysis: This HR data analysis weighs employees’ current skills and identifies skills they need to improve on to achieve business goals. By measuring this metric, HR teams will spot skill gaps and provide learning opportunities that support employee career growth, boost performance, and inspire job satisfaction.
Training effectiveness: HR data analysis measures how effective training programs are in improving employee performance. For instance, HR teams measure the extent to which employees partake in and complete training, their skills before and after the training, their impact on company goals, etc. The first step when measuring training effectiveness is to set goals for training programs and KPIs. Such KPIs include employee performance scores, customer satisfaction ratings, or other relevant metrics related to your organization.
Performance ratings: This HR analytics yardstick assesses the number of employees rated as high, average, or low performers. Its goal is to identify possible gaps in the performance evaluation process and spot areas for improvement.

Employee engagement

HR data analyzes employee engagement to help businesses understand, monitor, and boost the employee experience for better workplace culture and organizational success.

Metrics here include:

Turnover rates: By keeping track of the percentage of employees that leave your organization during a given time period, you get to identify patterns and prevent future reoccurrences.
Absenteeism rates: You should also note how often employees stay away from work and their reasons. This HR data analysis will help identify trends and implement strategies that can reduce absenteeism.
Employee satisfaction survey result: This HR analytics metric shows employees’ level of satisfaction and commitment to their jobs. It measures their productivity to boost employee retention, loyalty, and performance.

Compensation and benefits

HR data also measures compensations in terms of:

Pay equity analysis: Also known as an equal pay audit or pay parity audit, HR teams use a PEA to identify pay gaps within an organization. It helps to compare pay for employees with similar duties to notice any unfair differences. Furthermore, conducting a PEA during HR data analysis promotes fairness and transparency creating a more inclusive workplace compensation practices.
Cost of benefits: HR data analysis also tracks employee benefit programs by calculating the costs associated with all the company’s benefits to identify expenses and their impacts on employees. This helps to manage costs effectively and align benefits expenses with organizational goals.
Benefit utilization rates: HR analytics also lets you keep track of employees who actively use your company’s benefits. It works by dividing the number of employees in the benefits program by the number of eligible employees. With this, you can make data-driven decisions that enhance employee satisfaction through benefit programs.

Workforce demographics

HR analytics gathers employee demographic data from various sources, such as payroll systems, Human Resources Information System (HRIS), employee surveys, and other databases your company uses. The key metrics here are:

Gender diversity: HR analytics also monitor the gender distribution of employees concerning compensation, engagement, turnover, and other KPIs. By examining this data, you can identify discrepancies and address them appropriately, ultimately promoting gender equality and inclusivity in the workplace.
Age distribution: This metric collects data on employees’ birth dates and age categories to determine if the company covers all employable ages and promotes an age-inclusive workplace.

Read next: The Difference Between HRIS vs HRMS

Key Steps in The HR Analytics Process

Now that we’ve gotten the basics of HR data analysis established, let’s delve into what you need to implement the HR analytics process in your own organization:

1. Identify goals and objectives

The first step to achieving anything is knowing what you want to achieve. So, consider your company’s HR objectives and why you intend to use HR data analysis for better results. Is it to hire more qualified staff, boost employee engagement and retention, offer more benefits, or improve brand perception? Knowing the objective will help you direct your HR data efforts accordingly.

2. Collect relevant data

Once you’ve determined your objectives for HR data, collect qualitative and quantitative data from relevant sources. This includes your company’s HR software tools, employee surveys, payroll systems, recruitment platforms, interviews and more. The data may consist of employees’ ages, birth dates, and past performance, among others.

3. Clean and organize data for analysis

After collecting relevant data, it’s time to collate and prepare them for interpretation and analysis. So, clean and organize the data by identifying missing values, removing errors, organizing them into categories, etc. This is necessary to get accurate results.

4. Communicate findings and take action

Share the results from the HR data analysis with your team. Then, interpret them to get valuable insights and practical suggestions that can solve specific HR challenges. Take a step further by implementing the insights while considering business goals. This will improve your HR strategies and optimize decision-making.

Leveraging Data to Empower HR Leaders

HR analytics is a powerful tool that can transform the way HR professionals operate. By leveraging data, HR professionals can make informed decisions that drive organizational success. Additionally, implementing a robust HRIS can further empower HR leaders to leverage data and make informed decisions.

With all-in-one HR software like Omni, you can leverage automation and streamline your processes while gaining actionable insights for continuous improvement and team effectiveness.Through leveraging the power of automation, Omni allows HR teams and managers access to custom reports on specific metrics in the HR data analysis process and swiftly address potential issues and drive company performance.

Discover how Capital Club enhanced employee time to productivity by 78.5% with Omni’s automation!

To join the 83% of Omni customers who have unlocked new, actionable insights after using our solution, book a free demo with our team today.

Offering floating holidays for employees can be a great way to boost productivity and employee engagement. As a result, HR teams should consider implementing floating holidays whilst ensuring compliance.

In this article, we’ll answer the question of ‘what is a floating holiday?’, the benefits it provides for employers and employees, and how to create a floating holiday policy.

What is a floating holiday?

A floating holiday is a paid day off from work that employees can take in addition to paid time off (PTO) and public holidays. The day the employee decides to take off is up to them. Employees can use it as a substitute for a public holiday or to celebrate special events like religious holidays, festivals, birthdays, etc.

The beauty of floating holidays is their flexibility. However, company policies may give certain restrictions, such as requiring advance notice or restricting employees from using it during peak business periods. Clear communication of these policies will ensure clarity.

For example, an employee who follows a religion that is not widely practiced in their area can use a floating holiday to honor a major religious festival, such as Deepavali or Hari Raya Puasa. This allows the employee to participate in cultural rituals and family gatherings, demonstrating that the employer values their religious commitments without affecting their annual leave or sick leave.

Another example of a floating holiday is celebrating a personal milestone or a significant family event, like a graduation ceremony. This flexibility acknowledges the importance of their personal life while not impacting their regular paid time off.

What is the difference between a floating holiday and a public holiday?

When answering the question of ‘what is a floating holiday’, it’s important to discern the difference between a floating holiday and a public holiday.

A floating holiday is a day off that employees can take at their discretion. In contrast, a public holiday is a day designated by the government as a non-working day for the general population, usually to commemorate a historical or cultural event.

Although public holidays are fixed and observed nationwide, floating holidays are much more flexible and can be used based on individual preferences or needs, often requiring prior approval from the employer.

What is the difference between a floating holiday and paid time off?

Paid time off (PTO) and floating holidays may seem alike since they are both benefits that offer employees a day (or days) without work. However, the distinction lies in the scope of each benefit.

PTO is a comprehensive term that encompasses various types of leave, such as vacation days, sick leave, and holidays. Unlike PTO, which can typically be carried over into the following year, most companies do not allow employees to carry over floating holidays.

Depending on your state’s PTO regulations, if a floating holiday is not associated with a specific event, you may be required to compensate employees for unused floating holidays upon their departure. Not all states mandate this, so it is essential to familiarize yourself with local regulations.

For example, some companies offer floating holidays for occasions like Christmas Eve, allowing employees to choose whether or not to utilize them. However, if an employee resigns in August, they would not receive compensation for the Christmas Eve holiday, as it is contingent upon remaining employed until the holiday occurs.

Is it mandatory for employers to provide floating holidays?

When understanding the concept of what is a floating holiday, an essential aspect to consider is its mandatory nature. In short, employers are not obligated to offer floating holidays.

Whether or not a company gives its employees a floating holiday is determined by its internal policies and practices and any applicable state or local regulations. Some employers can choose to offer it as part of their benefits package to provide employees with greater flexibility, but it’s not a legal requirement in most places.

Read next: HR’s Guide to Employee Leave Management

Benefits of a Floating Holiday

There are a lot of employers and employees alike who stand to gain from creating a floating holiday policy. Here’s why:

For employees

Increased flexibility: Employees who take floating holidays have the freedom to choose when they take time off, allowing them to better align their personal needs with their work responsibilities.
Improved work-life balance: Every employee values work-life balance, and having the option to use a floating holiday gives them a chance to better balance personal commitments without sacrificing their professional responsibilities.
Feeling valued and trusted by employers: Providing this benefit for employees shows their employers value their well-being and it creates a more motivated work environment where employees feel appreciated and respected, leading to higher job satisfaction.

For employers

Attracting and retaining top talent: Getting top talent to apply and stay with your company is possible through floating holidays. For employees who value work-life balance, they may be more likely to stay with employers who offer more flexible paid time off options.
Improved employee engagement and satisfaction: When employees are aligned with company values, they put in their best work and the freedom they have to manage their schedules makes them more engaged and satisfied with their work, leading to lower attrition rates.
Accommodating diversity and inclusion needs: Allowing your employees to take time off for cultural or religious events that are meaningful to them shows respect for their identities and beliefs, promoting diversity and a more inclusive work environment.
Spreading our time off: Offering a floating holiday can allow employees to spread out their time off throughout the year, rather than being limited to fixed holidays. This can ensure workload is effectively distributed, prevent absenteeism and employee burnout during important work seasons.

Things to Include in Your Floating Holiday Policy

1. Number of floating holidays

To ensure clarity about when employees can take a holiday, define the number of days they can take in your policy. Here are two important factors to consider:

Industry standard: Depending on the industry and work tasks, some may have more floating holidays than others. For instance, in the creative sector, offering more paid time off benefits can be a way to attract and retain top talent, given the emphasis on work-life balance and flexibility.
Company size and budget: Company size and budget constraints should be considered when setting a policy. Larger companies with more resources may offer a more significant number of floating holidays as part of their employee benefits package.

2. Blackout periods

You should establish blackout periods, typically during busy business seasons, when employees are not allowed to take floating holidays. This helps the company avoid being understaffed during important cultural events.

It’s also important to properly state any restrictions you have on when or how employees can use the holiday. Define things like how many days they can take at a stretch or the maximum number of employees that can take their holidays within a period.

3. Advance notice for requests

Your floating holiday policy should balance flexibility with scheduling needs. Employees should be required to inform employers in advance, making planning work around employee absence easier. Exceptions for a shorter notice period can be allowed for urgent situations.

Incorporating into the policy the requirement for employees intending to take floating holidays during busy periods to complete their work in advance can help alleviate the workload for their colleagues.

4. Approval process

The approval process is important in a floating holiday policy as it helps with orderliness and smooth operations within the organization.

Typically, employees are required to request their desired floating holiday from their manager and HR team. The request is then assessed by their manager to ensure it fits with the team’s current operating situation, and it is either approved or denied.

Once approved, employees will be notified. Proper documentation is then completed, usually using HR tools, to ensure accurate tracking of employee time off and compliance with payroll regulations.

Read next: What is a Leave Management System? Why Every Business Needs One

5. Carry over or encashment

Most floating holiday policies don’t contain carryovers from one year to the next. Although some companies offer it, it’s not against the law. Companies that allow employees to carry over their holiday may also provide them the option to encash their unused floating holidays.

Encashment can benefit employees who prefer extra income or have difficulty scheduling time off due to workload or other commitments. You can include this in your policy if it aligns with your overall company goal.

6. Tracking and scheduling

Employers should establish clear guidelines for tracking and scheduling employees’ floating holidays. Employers can use HR software to log employees’ time off requests, and managers can review and approve them.

It’s important to specify in the policy the importance of maintaining transparency and consistency in leave management. This helps ensure that employees use their allocated days off appropriately.

7. Communication

Nothing beats clear communication regarding workplace relations. Employers can educate and train employees on what is a floating holiday and the existing policy, holding Q&A sessions to help them understand their rights to the benefit.

If you, as an employer or HR manager, are unsure where to start with your policy, we’ve got you covered with a fully customizable, downloadable employee handbook template to guide you on creating your floating holiday policy.

Building a Thriving Workplace with HR Tools

With Omni’s time off management capabilities, managers can approve floating holiday applications on the go, and keep track of who’s in and out of the office with at-a-glance scheduling. Our employee self-service portal enables employees to submit their time off requests, which are automatically routed to the appropriate manager thanks to customizable approval workflows. Our user-friendly mobile application further simplifies the process, allowing employees to apply for time off requests on the go.

For further leave management ease, Omni seamlessly integrates with your team’s well-loved work tools such as Slack, enabling managers to manage time off approvals with a simple push of a button. With automated calculations, employees and managers can easily view leave balances in real-time, and track how many floating holidays they have left without having to go through HR.

Try out Omni for 14 days free!

Book a demo with our team today and we’ll walk you through our platform’s capabilities and demonstrate how Omni can transform your leave management processes, saving you time, reducing administrative burdens, and enhancing overall efficiency.

The development of paid maternity leave under labor law Malaysia aims to provide a more inclusive workplace for women, recognizing the life transition they undergo when welcoming a newborn and the importance of bonding and health recovery. Maternity leave Malaysia remains a protected right.

However, there is a growing advocacy among employees for better work-life balance to improve productivity. The introduction of paternity leave also acknowledges the father’s role in childcare. As organizations are beginning to embrace parental leave Malaysia, it shows that children are the shared responsibility of both parents, rather than a burden in the workplace.

Employers and HR professionals striving to create a supportive company culture must stay updated with new policies to provide the necessary parental support for their employees. Creating a culture that supports parental leave Malaysia is beneficial for both employers and employees.

Do employees get parental leave Malaysia?

The amendments made to the Employment Act have given both fathers and mothers the right to parental leave Malaysia.

Prior to these amendments, the Employment Act in Malaysia only provided for paid maternity leave Malaysia. Male employees could be granted paternity leave at the discretion of their employers, as it was not legally mandated by the labor law Malaysia.

With the government’s introduction of parental leave Malaysia, organizations now prioritize leave management. This change provides better support for employees seeking a work-life balance while starting a family.

Is it compulsory for employers to provide parental leave Malaysia?

Yes, the Employment Act covers all employees, irrespective of their wages — which means that paternity and maternity leave Malaysia are statutory rights that employers owe to their employees.

Providing parental leave Malaysia helps an organization protect the well-being and mental health of their employees, fostering a safe environment that leads to higher employee engagement and reduced attrition rates. If an employer were to deny parental leave Malaysia to an eligible employee without proper justification, it would mean a violation of labor law Malaysia. This could result in legal issues, complaints, or disputes.

What is maternity leave Malaysia?

Maternity leave Malaysia is the authorized absence from work granted to a female employee in connection with childbirth by her employers. Maternity leave Malaysia is protected under the Employment Act.

Relevant reading: HR’s 2024 Guide to Singapore Maternity Leave

Section 2(1) of the Employment Act 1955 defines “confinement” as the period that begins at least 22 weeks into pregnancy and concludes with the birth of a child or children. If multiple children are born together, the confinement follows the birth of the last-born child.

Regarding maternity leave Malaysia:

Employers cannot remove or decrease maternity benefits already specified in the employment agreement.

It is expected that employers grant all female employees a minimum duration of paid maternity leave.
Under the labor law Malaysia, employers are not permitted to terminate the contract of a female employee while she is on maternity leave Malaysia unless it is because of a business closure.

To be eligible, employees must fulfill these conditions as well:

The employee must be employed for four months preceding confinement.
The rights to maternity leave Malaysia only apply to the first five children of the female employee.

Maternity leave Malaysia also provides protection for female employees who are unable to return to work after the maternity leave period due to pregnancy-related health issues. Those who have this issue can retain their jobs for an additional 90 days beyond the standard leave period. Any termination within this extended time without appropriate medical certification of fitness for work is a violation of the labor law Malaysia.

Entitlement

Female employees are expected to inform employers of their maternity leave Malaysia, including the start date and expected confinement period, at least 60 days in advance.

If there’s any need to begin maternity leave earlier due to medical reasons, employees must make sure to communicate properly with the employer as soon as possible. Communication can help in promoting parental leave Malaysia as a budding work culture.

While on maternity leave, if a female employee gets certified fit to return to work by a registered medical practitioner, she is entitled to resume work at any time, with the consent of her employer under the labor law Malaysia.

The leave eligibility in the Employment Act 1955 is applicable to both Malaysian and foreign employees. Therefore, foreign female employees are entitled to maternity leave Malaysia and the allowance as well.

In the unfortunate event that a female employee suffers a miscarriage after at least 22 weeks of pregnancy, she is still entitled to maternity leave and allowance, as long as she meets the conditions outlined in the Act.

Duration

Maternity leave Malaysia was extended from the previous 60 days to 98 consecutive days for eligible female employees.

Commencement

Expectant mothers can take maternity leave Malaysia at any time, provided it begins no earlier than 30 days before their expected confinement date or extends beyond the day immediately following it. A doctor’s letter confirming the due date often endorses this flexibility.

Maternity allowance

Maternity allowance is the financial support given to female employees during their maternity leave. As stated previously, the minimum time for paid maternity leave Malaysia is 98 days.

According to the Act:

An employee qualifies for maternity allowance if she has a total work history with the employer for at least 90 days within the nine months before her confinement.
The maternity allowance is paid for the entire eligible leave period, which must span not less than 98 consecutive days.
To qualify for the maternity allowance, the female employee must meet the employment duration criteria and not have five or more surviving children.

For instance, if a female employee who has been with a company for two years discovers she is pregnant, expecting to give birth in six months. She meets the eligibility criteria for maternity allowance, having fulfilled the required duration of employment.

However, the situation changes under the labor law Malaysia if she has only recently started working, for example, about two months before discovering her pregnancy with an expected delivery in six months. While she is entitled to maternity leave Malaysia, she would not qualify for the allowance. This is because she has not been employed for a minimum of 90 days within the nine months leading up to her confinement.

Termination of a pregnant employee

Under the provisions of maternity leave Malaysia, terminating the employment of a pregnant female employee or one experiencing pregnancy-related illnesses is considered unlawful.

There are specific circumstances like a willful breach of employment contract, misconduct, or business closure that could cause such termination. If the termination happens, according to the labor law Malaysia, the employer is expected to prove that the decision was unrelated to the pregnancy or any associated health issues.

What is paternity leave Malaysia?

Male employees get paid time off after becoming new fathers and this paid time is called paternity leave. Unlike maternity leave, paternity leave for new fathers remains relatively scarce worldwide.

Allowing male employees to take paternity leave not only allows them to be a part of their child’s beginning and also supports their partner during the postpartum period.

There’s an increasing recognition of the role of a father in a child’s upbringing, and businesses are beginning to acknowledge parental leave Malaysia. Paternity leave policies are different from those of employers; while some give the employee only the statutory minimum time, others can give up to 30 days of leave.

Entitlement

The entitlement for paternity leave is seven consecutive days.

Eligibility

According to the labor law Malaysia, to be eligible for the seven days of paid leave, male employees must meet the following conditions:

Legal marriage: The employee must be legally married to the mother of the newborn. Paternity leave is only granted in the context of a recognized marital relationship.
Length of employment: The new father must be employed with the same employer for a minimum period of 12 months immediately before the commencement of the paternity leave.

Notify employer

The employer mandates that a male employee inform them about his spouse’s pregnancy at least 30 days before the anticipated due date or as soon as the pregnancy is known.

This advance notice allows the employer ample time to make necessary arrangements for paternity leave, ensuring a smooth transition in the workplace. It’s important that both male and female employees do this for parental leave Malaysia.

Manage Parental Leave Malaysia Effectively with Omni

Parental leave Malaysia is a crucial benefit that supports employees in achieving a healthy work-life balance. With the recent amendments to labor law Malaysia have expanded parental leave Malaysia entitlements, emphasizing the importance of having the right HR tools to manage such benefits effectively.

Read next: The HR Tools Growing Teams Need in 2024

Omni’s all-in-one HRIS makes it possible to manage the entire end-to-end employee life cycle in one platform. Our robust time off management capabilities allow HR teams to streamline the management process of parental leave Malaysia. With customizable leave allowances, employers can set parental leave criteria based on Malaysian standards, company policies, or individual eligibility, simplifying compliance efforts and standardizing benefit allocation for their teams. These automated processes help HR professionals track eligibility, manage parental leave applications, and ensure proper reimbursement with ease, while ensuring employees get the time they need to recover and return to work productive and engaged.

Omni also seamlessly integrates with your team’s most loved work tools such as Slack, enabling managers to receive and manage time off approvals directly within the messaging platform, removing time-consuming steps from leave management with a quick push of a button. With automated calculations, employees and managers can easily view parental leave balances in real-time without the intervention of HR.

Our employee self-service portal empowers employees to swiftly submit their maternity leave requests, automatically routing to the appropriate managers with customizable approval workflows. And our user-friendly mobile application allows for on-the-go approvals and communication, so you can manage leave balances and employee benefits from anywhere.

Our localized solutions and unified system merges your parental leave Malaysia management efforts with payroll processing, facilitating automatic, accurate calculations and compliance with local regulations.

Try out Omni for 14 days today!

Book a demo with us today to learn more about how Omni can transform your parental leave management processes, saving you time, reducing administrative burdens, and enhancing overall efficiency.

A study found that 71% of employees worked overtime at least once a week. While this can boost productivity, failing to compensate your employees for these extra hours violates a major Philippines labor law.

ADP Research Institute reports that unpaid overtime increased from an average of 7.3 hours a week in 2020 to 9.2 hours per week in 2021. This trend is concerning in a country like the Philippines, where protecting employees and ensuring fair compensation are priorities.

When it comes down to how to compute overtime pay Philippines, it can be complex for HR professionals and business owners, especially if they are not familiar with the labor laws. Manual methods can be time-consuming and prone to errors.

This guide explains how to compute overtime pay Philippines, helping you navigate this process and ensuring compliance with labor laws.

What is overtime pay?

Overtime pay is a crucial component of how to compute overtime pay and is mandated by Philippine labor law, governed by the Labor Code, as it compensates employees for working beyond regular hours.

The law stipulates normal work hours of eight per day or 48 per week, with overtime pay rates varying depending on the day. For instance, on regular workdays, overtime pay is set at 25% of the regular hourly rate, while on rest days and holidays, it is 30% of the hourly rate.

This compensation is designed to protect employees from exploitation and ensure fair pay. HR teams and employers should foster transparency in their company culture. The essence of overtime pay is to protect employees from exploitation and ensure they receive fair compensation for their work. Understanding how to compute overtime pay rates accurately is essential to avoid errors.

What are the types of overtime pay?

In the Philippines, there are specific labor laws governing overtime pay. These regulations state the types of overtime pay and the different rates for regular days, special days, rest days, and holidays.

1. Regular day overtime

Employees get this compensation when they work overtime on ordinary work days

2. Rest day overtime

This is the compensation for employees who work during their rest days. Usually, rest days are at least 24 hours after every six consecutive regular work days.

3. Special holiday overtime

When employees work on a day the government declares as a public holiday, they are to be compensated with extra pay for the additional hours rendered.

4. Regular holiday overtime

This is the pay for working on regular holidays like Christmas, Eid’l Fitr, Maundy Thursday, Christmas, or New Year’s Day.

5. Emergency overtime

This is the payment for work done during war, natural disasters, or emergencies when urgent work is needed to prevent loss of life or damage.

In addition to understanding how to compute overtime pay Philippines, it’s crucial to use an accurate formula that takes into account specific circumstances and labor regulations. This is necessary because computations differ for each additional hour worked, and employees can earn more based on the type of overtime pay.

For example, when employees work on a special holiday, they should receive an additional payment of at least 30% of their regular wage. If the holiday falls on their scheduled rest day, the employee is entitled to an extra rate of at least 50% of their regular wage.

Who is eligible for overtime?

To learn how to compute overtime pay Philippines, it is important to first understand who is eligible for overtime. Regular employees are eligible for overtime pay. However, exceptions include:

Managerial employees

These are employees whose main job involves supervising the company, a department, or other management team members. Managerial employees aren’t entitled to overtime pay when they exceed eight working hours.

Field personnel

This refers to non-agricultural employees who carry out their duties outside the principal place of business. They’re not eligible because their actual work hours in the field aren’t certain.

Retail and service establishments

Retail and service establishments with less than ten workers are not eligible for overtime pay.

Other employees not eligible for overtime, as provided under Article 82 of the Labor Code, are:

The employer’s family members depend on them for support.
Domestic helpers
Individuals in the personal service of another
Workers are paid by results determined by the Secretary of Labor in appropriate regulations.

When can employers require overtime work?

The Labor Code spells out the requirement for overtime work Philippines and provides a legal framework for fair compensation. Per the code, employers can request overtime work during:

National emergencies

The National Assembly or the Chief Executive can declare a national emergency during situations that threaten the nation’s security, economy, or welfare. Such emergencies include natural disasters, terrorist attacks, economic crises, and public health emergencies. You can request overtime work during this period.

Local emergencies

Demand extra work during certain events threatening public safety, health, or property within a particular city, state, or town. Such local emergencies include natural disasters, power outages, pandemics, or other unforeseen emergencies.

Urgent tasks on machines, installations, or equipment

When your company’s machines, installations, or equipment need urgent fixing, you’re entitled to demand extra hours.

Prevent loss or damage to perishable goods

Request additional working hours when needed to avoid the loss or damage of certain goods. However, you must be sure the situation requires overtime work by considering the nature of the perishable goods, how urgent they are, and the likely consequences of not acting on time.

Abnormal pressure of work due to special circumstances

Ask employees to work overtime when there’s much extra work due to special situations. This request should be made when alternatives like outsourcing tasks, hiring makeshift workers, or adjusting schedules are difficult to adopt.

Completion of work needed before the regular 8-hour workday

Employees can work extra hours if needed to complete or continue a task started before the eighth hour to avoid serious problems for business operations.

Can employees request or refuse overtime work?

Employees can request overtime to extend their working hours beyond the regular schedule, but approval depends on factors like labor laws, operational needs and company policies.

HR teams consider factors such as performance, availability, budget, workload, and staffing levels when granting these requests.

Overtime work in the Philippines is voluntary, and employers should not compel employees to work beyond their standard hours. However, compulsory overtime is allowed during emergencies, imminent losses, or critical business situations. Refusal to work additional hours during such circumstances may lead to disciplinary actions or termination.

How to compute overtime pay Philippines?

Paying for overtime has the advantage of boosting employee productivity. The additional compensation enhances employee engagement, motivating employees to strive harder to achieve goals. Ultimately, this approach ensures that every hour worked is fairly compensated in accordance with the law.

However, it all begins with an accurate overtime pay formula to properly show you how to compute overtime pay. This process may appear complex at first glance. For example, you cannot simply calculate overtime pay by multiplying additional hours worked by a fixed rate. Instead, you must adhere to the specific regulations that govern how to compute overtime pay Philippines.

1. Determine the regular hourly rate

The first step on how to compute overtime pay Philippines is to set the hourly rate. As we established previously, the standard working hours in the Philippines are eight hours per day or 48 hours per week. So, to get the regular hourly rate, work with the employee’s salary or daily wage.

Read next: Philippines Minimum Wage Guide for Employers

Say you’re in the Davao region, and your company is in the non-plantation agricultural sector. The Philippine minimum wage for this sector is ₱457 per day. To get the hourly rate, divide the daily wage by eight hours.

For example: ₱457/8= ₱57.125 as hourly rate.

On the other hand, you’ll have to determine the daily wage if you’re working based on salaries.

For example: if an employee earns ₱50,000 monthly and works 22 days per month, the daily wage would be:

₱50,000 / 22 = ₱2272.727

Now, to get the hourly rate, divide the daily wage by 8:

₱2,272.727 / 8 = ₱284.09

2. Identify the applicable overtime rate

Up next on how to compute overtime pay, identify the applicable overtime rate, which typically ranges from 125% to 200% of the employee’s regular wage rate, with higher rates during rest days and holidays.

Since the overtime rate depends on the type of overtime, here are examples of applicable rates per day:

Regular work day: 25% wage increase for each hour.
Rest day or special day: 30% wage increase per hour.
Special holiday that falls on a scheduled work day: 50% wage increase.
Regular holiday: 30% wage increase.
Overtime work falling on a scheduled rest day: 30% wage increase.
Night shift: at least a 10% wage increase for each hour.

3. Calculate the overtime hours

The next step on how to compute overtime pay is to calculate the extra hours worked for overtime pay. For example, if an employee worked overtime for a day, that would be eight hours. If they worked an additional two hours, the overtime would be two hours. This information is crucial for the subsequent steps in the overtime pay formula.

4. Compute the overtime pay

Compute the overtime pay depending on the applicable OT rate.

For example, using the 25% overtime rate for a regular workday:

Multiply the hourly rate by 125%, that is 1.25.

If the base hourly rate is ₱100, the overtime pay per hour will be ₱125.

5. Add up the total overtime pay

The final step on how to compute overtime pay Philippines is to add up the total overtime pay.

If an employee works two extra hours on a regular workday at an hourly rate of ₱100, their overtime pay would amount to ₱125 X 2, totalling an additional ₱250 to their regular wage. Working two hours for five days in a week would result in an additional of ₱1250 to their regular wage by the end of the week.

Calculating overtime pay for night shift employees

Employees who work between 10:00 pm and 6:00 am are entitled to a night shift differential (NSD) of at least 10% of their regular hourly wage.

In this case, the steps above to compute overtime pay for night-shift employees still apply.

For example, if an employee worked two additional hours during a night shift and their hourly wage was ₱100, it’ll amount to:

₱100 x 10% = ₱10 + ₱100 = ₱110 as the NSD rate.

₱110 x 1.25 = ₱137.50 as the overtime rate.

₱137.50 x 2 hours = ₱275 as overtime pay.

Ways to Ensure Responsible Overtime Practices

Overtime can boost productivity and income in a company. However, knowing how to compute overtime pay Philippines is just the beginning; effectively managing the process is equally important.

Failure to manage extra working hours properly can lead to serious consequences, including a lack of work-life balance, employee burnout, reduced engagement, and ironically, lower productivity.

To mitigate these risks, consider these steps to manage your employees’ overtime effectively:

Plan and schedule work effectively

Forecast workload changes by reviewing past data and business trends. This prepares you and leaves enough room to add extra working hours to the company’s schedule. Then, set realistic goals and delegate tasks based on importance and urgency for better execution.

Compensate employees fairly

Fair compensation is a fundamental aspect of the Philippine labor code and a key driver of employee motivation. By following the steps outlined on how to compute overtime pay Philippines, your company will give employees fair payment for additional hours worked.

Maintain clear communication and accurate records

Effective communication is essential in any organization. Internal communication channels should facilitate this to ensure employees provide prompt responses and feedback. It’s also important to align communication with your company values. Use channels such as newsletters, emails, communication apps, and 1-on-1 meetings to enhance communication and involve everyone, including remote workers.

Additionally, maintaining accurate records of employees on your payroll is crucial. Managing performance ensures alignment with your company’s remuneration and goals. Secure employee records allow HR teams to easily access employment contracts and necessary documents to assist with how to compute overtime pay Philippines and other wage adjustments. This approach helps in developing a company culture that fosters employee satisfaction and growth.

Promote healthy work-life balance

Maintaining a healthy work-life balance is a crucial aspect for employee well-being, productivity, and job satisfaction. Encourage employees to manage their time effectively and prioritize their health, relationships, and interests outside of work.

Provide support through flexible work arrangements, rest periods, clear communication of expectations, time off, and activities that enhance mental, physical, and emotional well-being.

Optimize Overtime Management with HR Tools

Ensuring accuracy in computing overtime pay is crucial for both employees and employers. It not only helps in complying with labor laws but also fosters trust and fairness in the workplace.

Additionally, optimizing overtime management with HR tools like Omni can streamline processes, reduce errors, and improve overall efficiency on how to compute overtime pay Philippines.

With features like support for Philippine peso, automated tax calculations, and managed SSS, PhilHealth and PAG-IBIG contributions, Omni can help HR simplify the overtime pay formula and ensure compliance to the Labor Code with ease.

Book a demo with us today and see how Omni can simplify the intricacies and complexities on how to compute overtime pay in the Philippines and minimize the costs associated with common errors.

Try out Omni for 14 days today!

What is the Philippine Labor Code?

The Philippine Labor Code is a comprehensive legal framework designed to regulate employment practices, labor relations, and company standards within the Philippines. Established to protect the rights and welfare of workers, the Code sets forth the legal standards for wages, working hours, benefits, and conditions of employment.

It serves as the cornerstone for labor relations, providing mechanisms for dispute resolutions between employers and employees and ensuring fair labor practices. The Labor Code of the Philippines 2024 is dynamic, periodically updated to address the evolving needs of the workforce and the economy, making it essential for employers in medium-sized businesses across APAC to stay informed and compliant to foster a positive work environment.

Who is covered under the Labor Code?

The Labor Code of the Philippines 2024 encompasses a wide range of individuals within the employment sphere, aiming to provide comprehensive protections and standards across various employment types. Specifically, it covers:

Regular employees: Those who perform activities necessary to the usual business operations of the employer, signifying a long-term relationship.
Project employees: Individuals with fixed employment for a specific project, of which the employer specifies the duration and scope at the engagement time.
Seasonal employees: Workers employed for tasks or activities that are seasonal in nature, and their employment is limited to the duration of the season.
Casual employees: Those engaged in work that is not part of the employer’s regular business and is only occasional or temporary.
Probationary employees: Employees on trial during a given period, allowing the employer to determine their suitability for regular employment based on standards made known to the employee at the time of engagement.

Additionally, the Labor Code provides specific provisions for domestic workers, known locally as “Kasambahay,” covering their rights and welfare distinctly.

However, the Labor Code excludes certain groups from its coverage, including government employees governed by civil service regulations, international organizations with diplomatic immunities, and individuals in the informal sector under specific conditions.

This broad coverage ensures that the vast majority of workers in the Philippines are protected under labor laws, promoting fair treatment in the company and providing mechanisms for resolving employment disputes. Understanding this coverage as HR teams and business owners is essential in developing policies compliant with the Labor Code of the Philippines 2024, fostering a sound and supportive work environment.

What are the types of employment?

The Labor Code of the Philippines 2024 defines various types of employment to accommodate the diverse nature of work arrangements and industry practices. Understanding these classifications is crucial for HR teams and business owners to ensure compliance with labor standards and foster a productive work environment. Here’s a breakdown:

Regular employment

This type signifies a permanent employment status, where an employee performs tasks necessary to the business’s operation. The Labor Code ensures that regular employees are entitled to full benefits and job security, including the right to unionize and receive employer-contributed social, health, and welfare benefits.

Project employment

Employers hire project employees for specific projects or undertakings with predetermined durations. The employment automatically ends at the project’s conclusion. While project employees receive the same benefits as regular employees during their project’s term, they lack tenure security after the project finishes.

Seasonal employment

Similar to project employment, employers hire seasonal employees for work that aligns with the seasonality of the operation, and the employment lasts only as long as the season does. One may consider these employees as regular employees, but this status lasts only during the season of their employment.

Casual employment

Casual employment involves hiring workers for tasks not typically essential to the employer’s main business. Employers may consider a casual employee as a regular employee with respect to the performed activity if they work for at least one year, continuously or intermittently.

Fixed-period employment

Also known as term or contract employment, this arrangement involves an employee agreeing to provide services for a specific period. This type of employment remains valid only when based on the intrinsic quality of the work and not aimed at circumventing workers’ tenure rights.

For modern, medium-sized businesses in APAC with a progressive mindset, recognizing these employment types and their respective rights, benefits, and limitations is key to managing a happier team. Proper classification avoids legal pitfalls and fosters a better company culture by ensuring employee engagement under fair and clear terms.

What are the key provisions of the Labor Code?

The Labor Code of the Philippines 2024 provides a framework of rights and standards aimed at protecting workers while ensuring that employers can maintain a productive and efficient workforce. Here are some of the key provisions outlined in the labor code that HR teams and business owners should be aware of:

Minimum wage

The Labor Code of the Philippines 2024 requires employers to pay a minimum wage for workers, which varies across regions to account for the differential cost of living. Employers must comply with the Philippines minimum wage rates, ensuring that employees receive fair compensation for their labor.

Read next: Philippines Minimum Wage Guide for Employers

Working hours

Standard working hours are set at eight hours per day, for a total of 48 hours per week. Employers must compensate employees at a higher rate for hours worked beyond the standard, known as overtime pay.

Night shift differential

Employees who work between 10 PM and 6 AM are entitled to a night shift differential of at least 10% of their regular wage. This provision ensures fair compensation for workers contributing labor during less desirable hours.

Rest days

The Labor Code guarantees employees a minimum of one rest day after every six consecutive workdays. This provision enables them to rest, recover, and allocate time for personal activities or spending time with family, thereby helping to prevent employee burnout.

Maternity & paternity leave

Female employees are entitled to maternity leave benefits, while male employees can avail of paternity leave, supporting parents in balancing their work and family responsibilities.

Parental leave

In addition to maternity and paternity leave, the law allows qualified solo parents to take parental leave, acknowledging the unique challenges single-parent families face.

13th month pay

Employers must give their employees a 13th-month pay, equal to 1/12 of the total basic salary an employee earns within a calendar year, and pay it on or before December 24th each year. This practice serves as a meaningful way to recognize and reward employees for their hard work and dedication throughout the year, boosting employee morale and fostering a positive work environment.

Read next: 12 Employee Recognition Examples to Keep Your Team Engaged All Year

Special leaves for women

Female employees are entitled to special leaves for reasons related to their health and safety, such as cases of gynecological disorders, provided that they have rendered at least six months of continuous aggregate employment.

Service incentive leave

Employees who have rendered at least one year of service are entitled to a yearly service incentive leave of five days with pay.

For businesses in the APAC region striving to cultivate a progressive company culture, adherence to these provisions is about valuing employee welfare and promoting a supportive and equitable work environment. Understanding and implementing these key provisions of the Labor Code of the Philippines 2024 can significantly contribute to fostering happier, more productive teams.

What are the three ways of termination under the Labor Code?

The Labor Code of the Philippines 2024 specifies conditions for terminating employment, protecting employees’ rights, and enabling employers to manage their workforce effectively. Understanding these conditions is crucial for HR teams and business owners to handle termination processes legally and ethically. Here are the three primary ways of termination as per the Labor Code of the Philippines 2024:

Termination for just cause

This refers to termination initiated by the employer due to actions of the employee that constitute a serious violation of company rules or standards. Examples include habitual neglect of duties, willful breach of trust, commission of a crime against the employer or any immediate family member, and other similar cases. The process requires due notice to the employee, providing an opportunity to explain or defend their actions.

Termination for authorized cause

This type of termination is due to operational requirements of the business such as installation of labor-saving devices, redundancy, retrenchment to prevent losses, closure or cessation of operation, and disease or illness of the employee that risks the health of the workforce. In such cases, the employer must give both the employees and the Department of Labor and Employment written notice at least 30 days before the termination takes effect, along with the appropriate separation pay as the law mandates.

Termination based on serious diseases or health conditions

When an employee cannot perform their duties due to a serious illness, the employer has the right to terminate employment to maintain operational productivity and protect the wellbeing of other employees. The Labor Code requires a medical certificate to support the termination decision, stating that the disease remains incurable within six months despite proper medical treatment. The employee is entitled to separation pay in accordance with the provisions of the Labor Code of the Philippines 2024.

Navigating the termination process and notice periods with fairness, compassion, and legality is paramount for fostering a better company culture and growing productive teams. Adhering to the Labor Code’s stipulations on termination reinforces your company’s commitment to ethical business practices and respect for individual rights.

Relevant reads: 10 Impactful Exit Interview Questions to Improve Your Employee Experience

Ways to Stay Compliant with the Labor Code

Staying compliant with the Labor Code of the Philippines 2024 is essential for businesses in the APAC region, to avoid legal repercussions and foster a positive company culture that values fairness and respect for employees’ rights. Here are practical ways for HR teams and business owners to ensure compliance:

Stay updated on regulations

Labor laws and regulations can evolve, reflecting changes in the socio-economic landscape or in response to emerging company trends. It’s crucial for businesses to stay informed about these changes. You can achieve this by regularly consulting with labor law experts and participating in seminars and training sessions focused on labor law compliance.

Adopt clear and transparent policies

Developing and implementing company policies that align with the Labor Code of the Philippines 2024 is fundamental. These policies should cover all aspects of employment, from hiring to termination, and include detailed provisions for wages, benefits, working hours, leave entitlements, and grievance-handling procedures.

Leverage HR technology

Modern HR tools can significantly aid in maintaining Labor Code compliance. These systems can help in maintaining accurate employee records, which are crucial for audit purposes and in case of labor disputes. Investing in the right HR software not only streamlines administrative tasks but also minimizes the risk of non-compliance.

Read next: Top 6 HRIS Philippines for 2024

For businesses aiming to cultivate a progressive and inclusive company culture, adherence to the Labor Code of the Philippines 2024 is non-negotiable. By staying informed, adopting clear policies, and utilizing technology, HR teams and business owners can ensure compliance and build stronger foundations for happier, more productive teams.

Building a Just and Equitable Work Environment

The Labor Code of the Philippines 2024 plays a crucial role in shaping a fair and equitable work environment by providing clear guidelines for employment practices. Organizations can ensure compliance with its provisions by implementing HRIS.

With Omni’s all-in-one HR solution, you can enhance transparency and communication between employers and employees. Our self-service portals empower employees to access their work related information, including payslips, leave balances and company policies, fostering trust and engagement within the team and promoting a positive workplace culture.

Omni streamlines payroll processes, reducing manual errors and reducing the administrative burden on HR. With secure and centralized employee records, HR teams can easily store, update and share employee information across departments and with employees, ensuring compliance with the Labor Code of the Philippines 2024 at every step of the way.

If you’d like to learn more about how Omni’s all-in-one HR software automates the entire end-to-end employee lifecycle, book a demo with our team.

Try out Omni for 14 days today!

Tax in Malaysia comes with varying regulations and frequent updates for individuals and businesses alike, it can be tough to keep up with these changes.

Even though some employers use all-in-one HR systems that offer compliance to stay on top of their game, as the year unfolds, one of the tax-related responsibilities Malaysian employers are required to do for their employees is preparing the EA and E form with the Inland Revenue Board, or Lembaga Hasil Dalam Negeri (LHDN).

In this article, we’ll guide you through understanding the EA Form Malaysia and Form E, it’s importance, and overall human resource development

Understanding EA Form Malaysia

As an employer operating in Malaysia, understanding the rules and regulations on payroll processes and taxation helps run your organization.

Employers or business owners are expected to prepare and provide the EA Form Malaysia for their employees as required by the Inland Revenue Board of Malaysia (IRBM).

Employers must prepare EA Form for every employee, regardless if they are full-time or part-time employees. As long as the employee has worked for more than seven days, and has received payment for their work, they are eligible for the EA Form Malaysia.

To comply with regulations, HR managers must correctly prepare the EA Form Malaysia, which should be distributed to employees before the end of February as required by the revenue board.

What is EA Form Malaysia?

The EA Form Malaysia is a statement of remuneration from employment, it is a statutory document that contains the summary of an employee’s total earnings from his/her employer for the year.

The EA Form Malaysia which can also be referred to or recognized as CP8A form or Borang EA, allows for individual tax returns to be put together and also includes statutory contributions paid from the past year.

Filling this form allows employees to file their taxes properly and enables them to accurately declare their earnings to LHDN.

What is the purpose of the EA Form?

With the EA form Malaysia, employees can determine their income tax bracket and help with the payment of personal income tax in the year.

The purpose of the EA Form is to make sure that the exact amount of earnings, deductions, contributions, exemptions, and any other taxes paid although the year is declared correctly in the employee’s income tax filing.

Another purpose of EA Form Malaysia is that it serves as a guide for tax payment and can also be used as a reference to declare or disclose the accurate amount of yearly earnings as well as deductions when filing income tax in Malaysia.

Who is in charge of preparing the EA Form?

Employers are expected to prepare EA Form Malaysia for their employees, this is required by the Inland Revenue Board of Malaysia (IRBM).

Although employers are not required to submit EA Form Malaysia to LHDN, neglecting to prepare it could lead to penalties including a fine of up to RM20,000, imprisonment for a maximum of six months, or both.

If an employee switches jobs multiple times within a year, they can have more than one EA Form. The HR manager of the organization must know how to prepare the forms correctly and distribute them to the company’s employees before the provided deadline.

What is included in the EA Form?

The EA Form Malaysia should include details on:

Employee’s gross salary
Supplemental compensation
Contributions to private pensions done by by employers
Current rebates
Commission
Bonus or other gratuities
Allowances/perquisites (e.g. travel allowance, meal allowance)
Benefits-in-kind (such as health insurance, company apartment, and car)
Value of Living Accommodation (VOLA)
Compensation for loss of employment
Additional tax deductions

Understanding Form E for Tax in Malaysia

Aside from EA Form Malaysia, companies and business owners are expected to also submit another mandatory document for tax in Malaysia, which is Form E Malaysia.

Form E Malaysia is an essential report that must be submitted by the company to the LHDN. Due to recent updates, the LDHN no longer accepts manual entries from companies when filing Form E, therefore companies have to use the LHDN’s e-PCB system or an LHDN-approved payroll software.

Read next: The Top 5 Payroll Software Malaysia Teams Are Using in 2024

What is Form E Malaysia?

Form E Malaysia is a report submitted by employers to the IRB, declaring the total number of employees the company has and the list of employees’ income details yearly.

Form E Malaysia, also known as Borang E, is an annual report submitted by employers to the Malaysian Inland Revenue Board. It includes the total number of employees in the company and details of their income.

What is the purpose of Form E Malaysia?

Form E Malaysia is used by employers to report employment income, tax deductions, and other relevant information for their employees to the Inland Revenue Board of Malaysia.

It provides employees with information necessary for filing their tax returns for annual tax reporting and compliance with tax regulations.

Who is in charge of preparing Form E Malaysia?

Similar to the EA Form Malaysia, companies or employers are responsible for preparing and submitting Form E Malaysia, with the human resource department typically managing this task.

Companies registered with the Companies Commission of Malaysia (Sdn Bhd, Berhad, LLP), whether or not they have employees, as well as sole proprietors and partnerships with employees, are required to submit Form E Malaysia.

While sole proprietors and partnerships without employees are not obligated to prepare Form E Malaysia, it is advisable for them to maintain relevant details.

What is included in Form E Malaysia?

Form E Malaysia includes details of the company/employer’s name, identification number and reference number.

It also contains information such as:

Number of staff employed by the company
Amount of tax deductions annually
Employee’s salaries
Numbers of new employees hired
Amount given as compensation
Numbers of employees who have resigned and no longer work with the company.

When are the EA Form Malaysia and Form E Malaysia due?

The employer is expected to distribute the EA Form Malaysia to employees by the last day of February following the end of the financial year, which is the year immediately following the first year mentioned.

This requires employers to provide employees with an EA Form by the 28th of February of the assessment year.

Form E Malaysia, on the other hand, is submitted by companies or employers once ever year. For those who fill out the form online using the portal, the last day of submission in the succeeding year (year of assessment) is the 30th of April.

What are the penalties for late submission?

Failing to meet deadlines for tax in Malaysia can result in significant consequences, both in terms of monetary fines and other penalties. Employers are acutely aware of these implications and must prepare EA forms for their employees on time to avoid the penalties imposed for non-compliance.

Here are some of the penalties associated with both the EA Form Malaysia and Form E Malaysia:

Legal and monetary consequences

According to Section 83(1A) of the Income Tax Act 1967, Malaysian employers are mandated to prepare and submit EA Forms to their employees on the last day of February.

Companies who fail to comply with this requirement can get penalties, including monetary damages ranging from RM200 to RM20,000, and imprisonment for up to six months, or both.

When a company constantly submits late, the tax authorities will begin to closely review future submissions and it can tarnish the company’s reputation if not corrected.

Possibility of errors in taxing

Preparing the EA Form Malaysia and Form E Malaysia ahead of time gives employers ample time for thorough inspections, guaranteeing accuracy.

Data inaccuracy can lead to errors in tax calculations and payments, potentially leading to issues with tax authorities.

Employers should be reminded to also account for any change in employment status, such as promotions or resignations, and employee benefits while preparing EA Form Malaysia.

Risk of employee dissatisfaction

Submitting the EA Form Malaysia and Form E Malaysia ahead of schedule can alleviate the tax season rush for employees. It also demonstrates employers’ commitment to employee well-being and tax compliance.

When employers provide these forms early for tax in Malaysia, employees can concentrate on their tasks as planned. This enhances employee engagement and fosters trust in the employer, cultivating a more positive workplace culture.

Empowering HR Leaders for Tax Success

Timely submission of EA Form Malaysia and Form E Malaysia is crucial for both employees and employers for filing tax in Malaysia. It not only ensures compliance with tax regulations but also demonstrates an employers’ commitment to their employees’s financial security. That’s why it’s important to have the right HR tools by your side to ensure accuracy.

Omni helps HR teams stay up to date with the latest laws and regulations while streamlining the end-to-end employee management lifecycle. Our comprehensive payroll solution is tailored to Malaysia’s specific requirements. With features like support for MYR, automated tax calculations, and instant payroll reports, Omni can help HR teams simplify the preparation of EA Form Malaysia and Form E Malaysia, while ensuring compliance.

Book a demo with us today!

Ensuring compliance with tax regulations in Malaysia is a crucial responsibility for both individuals and businesses. While tax filing can sometimes feel like a complex process, having a clear understanding of the relevant requirements can significantly reduce stress and expedite the completion of your tax return. We’ve prepared a guide that contains everything you need to know about filing Malaysia income tax.

What is LHDN/IRBM?

The Inland Revenue Board of Malaysia (IRBM) also known as Lembaga Hasil Dalam Negeri (LHDN), is the government agency responsible for managing Malaysia tax. They are directly connected to filing Malaysia tax either from individuals or businesses, and their roles include collection of taxes and administration of tax laws. Various taxes such as income tax Malaysia, corporate tax, and property tax are collected by the IRBM. They also oversee the implementation of Malaysia tax laws such as the Income Tax Act 1967.

What is Potongan Cukai Bulanan (PCB)/ Monthly Tax Deduction (MTD)?

Potongan Cukai Bulanan (PCB) refers to the monthly tax deduction for Malaysia tax. It comprises a series of monthly deductions that go towards your employment income. These monthly deductions are retained by your employer and paid over to the inland revenue board.

What is the purpose of PCB?

When it comes to filing Malaysia tax, PCB simplifies the process for both taxpayers and the government in two ways:

1. Spreading out payments: Employees can choose to file annual tax returns on their income, but instead of having a larger tax bill at the end of the year, PCB allows for a pay-as-you-earn system. In other words, employers can deduct from employees’ monthly salary. This makes tax payments more manageable and avoids a big financial burden come Malaysia tax season.

2. Ensures timely collection of taxes: By collecting Malaysia income taxes throughout the year, the IRBM receives a steady stream of income. This helps the government with budgeting and ensures they have the funds they need to operate. It reduces the risk of people neglecting or delaying Malaysia tax payments.

What is subject to PCB?

PCB is mandatory for employees whose annual employment income exceeds RM 34,000 after EPF deductions. This means you have to register for an income tax file with IRBM first. In other words, the monthly tax deduction applies to those who have registered for a tax file and whose salary surpasses the monthly threshold, which leads to the next thing — the income threshold.

The income threshold for filing for income tax Malaysia is the minimum amount of income you must earn to be required to file a tax return. The specific income threshold depends on several factors, including your filing status (single, married, filing jointly, etc) and age.

For Malaysia tax, it falls under these two categories:

Single individual: RM 2,851 and above

Married and Unemployed spouses: RM 3,851 and above.

While some items are not subject to PCB, such as certain benefits or allowances received with your salary, they are typically referred to as Benefits-in-kind (BIK) and Variable allowance (VOLA).

BIK includes benefits that cannot be converted to money such as dental benefits, childcare benefits, leave passage (subject to specific conditions, which you should consult your employer and HR department about), and free transportation. You can choose to include these benefits in your PCB deductions by informing your employer through a specific form.

Relevant reading: Your Guide to Malaysia Payroll

What is the income tax rate for residents?

The Malaysia income tax rate for residents refers to the percentage of an individual’s income that they are required to pay in Malaysia tax based on their tax residency status.

Tax residency status

In Malaysia, you are considered a tax resident if you meet any of the following criteria:

182-Day Rule: This is the most common way to qualify as a tax resident. If you spend at least 182 days physically present in Malaysia during a calendar year, you’re considered a resident for tax purposes. The days don’t have to be consecutive.

Less Than 182 Days with Ties: Even if you’re in Malaysia for less than 182 days, you might still be a resident if you have strong ties to the country. This could include having a permanent home in Malaysia, your family residing there, or being employed in Malaysia for most of the year.
90-Day Rule with History: This is a temporary rule valid until December 31st, 2026. If you’re present for at least 90 days in a year and have been resident/present for 90 days in any three of the past four years, you may be considered a resident.

Malaysia’s income tax rates for resident taxpayers are progressive. This means that higher-income earners pay proportionately higher taxes.

To figure out how much tax you owe, you’ll need to refer to the official tax tables published by the Inland Revenue Board of Malaysia (LHDN).

However, If you’re a non-resident individual, your income is taxed at a flat rate of 30% on the taxable income.

If you’re filing for Malaysia tax, it is important to know the types of income that are taxable and they include:

Employment income
Gains or profits from a business
Dividends, interests, or discounts
Rent, royalties, or premiums
Pensions or annuities
Any benefits offered by the employer that can be converted to cash

Employer’s Responsibility for PCB

1. Register with IRBM

Employers need to register with the Inland Revenue Board of Malaysia (IRBM) to be authorized to deduct PCB from their employees’ salaries. If your employee is newly taxable, he/she must register an income tax reference number. You can also register online via e-Daftar.

2. Monthly tax deduction

Calculate and deduct based on the schedule of MTD

Employers in Malaysia must calculate each employee’s monthly PCB income tax Malaysia using a schedule provided by the IRBM.

This schedule considers factors like the employee’s salary and eligible tax reliefs. Deducting income involves calculating the total monthly remuneration. Reimbursements (money paid back for spending), allowances (money paid by employers for specific purposes, not as income), and other statutory deductions (EPF, SOCSO, and EIS) must be deducted from the monthly pay first.

To determine the amount applicable to an employee, refer to the MTD table published periodically by LHDN.

Pay deducted MTD amount to IRBM

After the deduction is done, you may proceed with submitting the MTD statement to LHDN through e-Data PCB.

You may remit payment in any of the following channels:

FPX on the IRBM website after filing e-CP39/e-Data PCB/e-PCB
IBG at all bank counters by using PCB/CP39 account number
IBG through Internet banking by using PCB/CP39 account number (CIMB only) or
Cheque/cash/counter (CIMB only)

3. Annual tax reporting

Employers are required to submit various forms to the IRBM annually for Malaysia tax reporting purposes. These forms include:

Form E submission

Employers are required under the Income Tax Act to file an annual tax report with the authorities by March for income tax Malaysia. This report consists of Form E, which summarizes employee headcount, and Form CP8D, detailing employee earnings.

Form E is a declaration report submitted yearly to the IRBM, listing each employee’s income and deductions. It is crucial for accurate and timely submission, as it plays a critical role in reporting employee income.

Form E requires information on employees’ income, benefits, allowances received in the previous year, and deductions such as EPF contributions. The submission deadline for Form E for Malaysia income tax is usually at the end of February. Late or inaccurate filing can result in penalties for employers.

According to Section 120(1)(b) of the Malaysia Income Tax Act, employers who fail to submit Form E are liable to a fine of not less than RM200 and not more than RM20,000, or imprisonment for a term not exceeding 6 months, or both.

Statement of Remuneration (Form EA/EC)

EA Form for Malaysia tax details the salaries, wages, pensions, and other taxable benefits paid to each employee. The purpose of this form is to enable employees to file their own taxes properly and declare their earnings to LHDN. That way, it can be determined what Malaysia income tax bracket they fall under.

Incentive Payment Statement (Form CP58)

This form reports any incentive payments made to employees during the year.

4. Record keeping

Employers must maintain proper records of all PCB income tax Malaysia deductions made for their employees. These records should be kept for a minimum period as specified by the IRBM and be available for inspection by the tax authorities if needed.

Read next: The Top 5 Payroll Software Malaysia Teams Are Using in 2024

Employee’s Responsibility for PCB

When it comes to Malaysia tax, an employee’s responsibilities for PCB income tax Malaysia are different from an employer’s. Employees don’t directly handle filing the PCB, but they do have some key responsibilities to ensure a smooth tax filing process:

1. Filing income tax return

Filing deadline

Your filing deadline depends on the Malaysia income tax form you fill and this is determined by whether you’re a salaried employee, someone who carries on a business, resident/non-resident, and several other categories.

For example, those with Form BE (residents who do not carry on a business) have a deadline on the 30 April(manual filing). If you choose to e-file, you get a grace period of 15 days and the deadline for e-filing is 15 May.

For resident individuals who opt for Form B (individuals who carry on a business), the deadline falls on 30 June for manual filing and 15 July for e-filing.

Filing methods

Under Malaysia tax, tax returns can be filed either manually or electronically through the e-filing system provided by the IRBM.

For the e-filing method, you can file your Malaysia tax returns online through the ezHASiL portal. E-filing offers several advantages, including automatic calculations, faster processing, and easier tracking of your submission.

Manual filing involves a traditional method of filing out a physical income tax return form (ITRF) manually and submitting it to a branch of the IRBM. This method can be time-consuming and bound to errors.

2. Maintaining records

Keep copies of your payslips and any other income tax documents you receive throughout the year. This will be helpful when you review your annual Malaysia tax assessment or if there are any inquiries. Additionally, you should have your forms ready before filing Malaysia tax. The EA form (or Borang EA) should be given to you by your employer by February.

3. Understanding tax reliefs

Familiarize yourself with the various tax reliefs you might be eligible for when submitting income tax Malaysia. These can include reliefs for medical expenses, education, or dependents. You can find information about reliefs on the Inland Revenue Board of Malaysia (LHDN) website.

4. Provide accurate information

You should ensure your employer has your correct tax identification number and other relevant details. This helps them withhold the appropriate amount of Malaysia tax from your salary.

5. Pay additional tax on time

While you don’t file the PCB income tax Malaysia yourself, you may need to pay additional tax if your annual income exceeds a certain threshold and it must be paid on time to avoid a 10% penalty on the unpaid amount.

6. Stay updated on regulations

Tax regulations can change from time to time. It’s a good idea to stay updated on any Malaysia tax changes that might affect you. The LHDN website is a good resource for staying informed.

Learn more: Top 5 Challenges of Malaysia’s Tax Season and How HRIS Solutions Can Help

Make Malaysia Tax Easy with Omni

Understanding Malaysia tax regulations is crucial for businesses to fulfill their tax obligations accurately and timely. That’s why it’s important to have the right tools by your side to ease this complicated process.

Omni offers a comprehensive payroll solution tailored to Malaysia’s specific requirements. With features like support for MYR and automated tax calculations, Omni can help HR teams simplify the process for Malaysia income tax.

With our automated payroll software, digitized and secure pay slip distribution, and dedicated support teams to guide your team and ensure compliance with Malaysia income tax, Omni’s payroll processing reduces the administrative burden of your HR team and frees up valuable time to dedicate to more impactful business processes.

Book a demo today and learn how Omni can help you streamline your Malaysia tax processes and expertly navigate PCB income tax Malaysia management to ensure compliance for your organization.

Eid al-Fitr, also known as Hari Raya Puasa or Hari Raya, is celebrated by Muslims worldwide, and if your goal is to embrace workplace diversity, this is your perfect opportunity to do so. Your employees wouldn’t want to miss out on this important holiday celebration, so why not join in and make them feel appreciated and welcomed?

You must now be wondering how to celebrate Eid al-Fitr at work, and that’s precisely what this guide is for. Below, we’ll provide you with plenty of ways to celebrate Hari Raya Puasa with your employees. Best of all, they’re easy, affordable, and can help build a stronger and more inclusive workplace culture.

Download our HR Calendar 2024 for more engagement ideas!

What and when is Ramadan?

Ramadan is the ninth month of the Islamic calendar, and Muslims around the world observe it by fasting from dawn to sunset. It’s a month of spiritual reflection, self-discipline, and empathy towards those in need.

This year, Ramadan began on 12 March 2024 and is expected to end on the evening of 9 April 2024. The date is subject to change each year as the Islamic calendar is based on the lunar cycle. As such, Ramadan may end up being either 29 or 30 days long, depending on the sighting of the new moon.

What and when is Hari Raya Puasa?

Hari Raya Puasa, also referred to as Hari Raya or Eid al-Fitr, is celebrated on the first day of Shawwal, the tenth month in the Islamic calendar. Given that the literal translation of Hari Raya Puasa is “celebration of fasting”, it marks the end of the fasting month of Ramadan and the beginning of a new month filled with joy and celebration.

New clothes, decorated houses, delicious food, and family gatherings are just some of the highlights of Eid al-Fitr. It’s a time for forgiveness, gratitude, and strengthening relationships with loved ones.

This year, Hari Raya Puasa is expected to fall on the evening of 9 April 2024. This will depend on the sighting of the new moon, so it’s important to check for updates closer to the date. For instance, if it turns out that the moon isn’t sighted on 8 April, then Hari Raya Puasa will be celebrated on 10 April instead and Muslims would fast another day for Ramadan.

It’s also worth noting that different countries and communities may celebrate Hari Raya Puasa or Eid al-Fitr for different durations. For example, in Singapore and Malaysia, festivities may extend to a whole month, while in other countries, like Egypt, it may only be celebrated for three days.

There are three misconceptions that often arise when it comes to Eid al-Fitr. The first is that it marks the Islamic New Year, which isn’t accurate. The Islamic New Year falls on the first day of Muharram, the first month in the Islamic calendar.

Secondly, some people confuse Eid al-Fitr with Eid al-Adha, another important holiday in Islam that takes place about two months later. While both Eid al-Fitr and Eid al-Adha are celebrated with prayers, feasting, and charity, they have different origins and meanings.

Lastly, some think Eid al-Fitr is another fasting period. However, fasting is actually prohibited on the day of Eid al-Fitr in Islam, and it’s meant to be a day of celebration and gratitude.

Why Should You Celebrate Hari Raya Puasa at Work?

Before planning how to celebrate Eid al-Fitr at work, it’s important to consider the reasons behind it. Celebrating Hari Raya Puasa/Eid al-Fitr at work can bring numerous benefits to both employers and employees, extending beyond just a day off. Here’s why you should start thinking about how to celebrate Eid al-Fitr at work:

Fostering diversity and inclusion

The first reason that makes celebrating Hari Raya Puasa at work such a great idea is that it promotes diversity and inclusion. Just like how companies have started to recognize other holidays, such as Christmas or Diwali, celebrating Eid al-Fitr shows that the organization values the different cultures and beliefs of its employees.

Considering that more than 76% of job seekers say that “a diverse workplace is an important factor when evaluating companies”, celebrating Hari Raya Puasa can help not only retain but also attract top talent.

You’re sending a powerful message simply by acknowledging and celebrating the holiday at work – that everyone, regardless of their background, is welcomed, respected, and valued.

Read next:10 DEI Policies Your Organization Needs and How to Implement Them

Strengthening team relationships

When you think of how to celebrate Eid al-Fitr at work and fully embrace it, you’re not only including your Muslim colleagues but also giving everyone in the office an opportunity to bond and get to know each other better.

This is because the holiday isn’t only about fasting and praying, but also about spending time with family and friends, enjoying delicious traditional food, and exchanging gifts.

By incorporating these activities into your workplace celebrations, you’re creating a social atmosphere that encourages employees to interact and build relationships beyond their usual work interactions.

Boosting employee engagement and morale

Finally, thinking of how to celebrate Eid al-Fitr at work can help boost employee engagement and morale. When your Muslim employees feel that you’re going the extra mile to make them feel included and appreciated, they’re likely to be more motivated, committed, and loyal. This can lead to improved team dynamics, increased productivity, and better overall performance.

Moreover, when non-Muslim employees are involved and also think about how to celebrate Eid al-Fitr at work, they feel more connected within the workplace. This can create a sense of unity and strengthen the overall company culture.

Ideas to Celebrate Hari Raya Puasa at Work

Now that you know the impact that celebrating Hari Raya Puasa at work can have on your team, the question is still how to celebrate Eid al-Fitr at work. Whether your team is in-office or virtual, here are some ideas to make your Hari Raya Puasa celebration a success.

For Office Teams

With in-office teams, there’s more opportunity to engage in physical activities and traditional celebrations. Some ideas to consider if you’re thinking about how to celebrate Eid al-Fitr at work:

1. Light up the office and decorate common areas

Lighting up the office with colorful lighting and decorating common areas with traditional Hari Raya Puasa decorations (such as ketupat, lanterns, and flowers) can do wonders in creating a festive atmosphere if you’re still stuck on how to celebrate Eid al-Fitr at work. Encourage employees to bring their own decorations and create a collaborative effort.

2. Organize a potluck lunch

Part of Hari Raya Puasa celebrations is always centered around food, so if you’re still lost on where to start when it comes to how to celebrate Eid al-Fitr at work, this is your answer.

Organizing a potluck lunch can be a great way to bring everyone together to bond over food and enjoy traditional dishes. The keyword here is traditional – you want your team to be mindful of catering options. You could also offer festive treats such as Kueh Raya, Ketupat, or Bandung.

3. Host a short presentation or talk

One of the best ideas on how to celebrate Eid al-Fitr at work is to raise awareness and educate your team on the celebration.

Think about inviting a speaker, possibly only of your Muslim team members, or preparing a brief presentation to educate about Hari Raya traditions, customs, and significance. This can enhance cultural understanding, appreciation, and team cohesion.

4. Organize a “Duit Raya” (Hari Raya Money) exchange

One of the most popular Eid al-Fitr celebrations is Duit Raya, where money is placed in decorative packets and given to children, family, friends, or colleagues as a symbol of blessings and generosity.

For a more inclusive way on how to celebrate Eid al-Fitr at work, consider organizing a Duit Raya exchange among team members. This doesn’t have to involve money; it could include motivational or appreciation notes, do-it-yourself (DIY) gifts, or small treats.

5. Offer flexible working arrangements

Given the significance of Hari Raya Puasa for Muslims, it’s expected that they’ll want to celebrate with family and friends. As an employer, one of the best methods on how to celebrate Eid al-Fitr at work is to show your understanding and support by offering flexible arrangements or hybrid work models during this time.

6. Adjust Meeting Schedules

Finally, it’s important to avoid scheduling meetings on festive occasions, as nobody enjoys them during celebrations.

To ensure that your Muslim team members can fully participate, try to avoid scheduling important or lengthy meetings during this period. If unavoidable, keep the meeting brief and allow for breaks for prayers or meals. This demonstrates your consideration and respect for their religious practices.

For Remote Teams

Even if your workforce is fully remote, you can still celebrate Hari Raya Puasa together. If you’re unsure how to celebrate Eid al-Fitr at work when your employees are not physically present, here are some ways to make it possible:

1. Host a virtual Eid al-Fitr gathering

To give you a headstart on how to celebrate Eid al-Fitr at work with your remote team, a simple yet effective way is by hosting a virtual gathering. This could be a video call where your Muslim employees can share how they’re celebrating, their traditional foods, and even dress up in their traditional attire.

At the same time, non-Muslim employees can join in and learn more about the festival and its significance. It’s a great way to bring everyone together and create a sense of camaraderie despite the distance.

2. Spreading care through Hari Raya packs

Along with the virtual gathering consider sending out Hari Raya packs to your Muslim employees. These could contain items that are known to be part of the traditional celebrations – such as decorative ketupat, desserts that are typically consumed during Hari Raya Puasa, or even a small amount of Duit Raya (money given as gifts during the festival).

This gesture will show your team members that you’re mindful of their culture and traditions, and it will surely be appreciated. It will go a long way in demonstrating that you thought hard and long about how to celebrate Eid al-Fitr at work.

3. Organize a virtual charity drive

Lastly, since giving back constitutes a significant part of Hari Raya Puasa celebrations, you could organize a virtual charity drive for your team.

This could be in the form of collecting donations from employees and contributing to a charitable organization that aligns with the values of Eid al-Fitr, such as Islamic Relief Worldwide, Rahma Worldwide, Penny Appeal, Zakat Foundation of America, or Muslim Food Bank.

This is a wonderful way to spread the spirit of Hari Raya Puasa and make a positive impact in your community. Your employees will feel proud and fulfilled to be part of such a meaningful initiative, and it will further strengthen their bond with your company.

Driving Inclusion and Employee Engagement with HR Innovation

Immerse yourself in the spirit of Hari Raya Puasa with these joyous celebration ideas on how to celebrate Eid al-Fitr at work.

Stay on top of every upcoming festive celebration with Omni’s customizable dashboard which allows your teams to set and manage calendars pre-loaded with country or region specific holidays and timezones.

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