Navigating Malaysia’s Employment Insurance System (EIS)

Backed by the Malaysian Employment Act, workers in Malaysia enjoy legal benefits that protect them during employment and unemployment. The Employment Insurance System (EIS) contribution is one of these benefits. 

Like any other employment regulation, it has its requirements and processes that every employer must follow while ensuring their employees do the same. As an employer looking to grow your business legally, you must understand the financial implications of the EIS contribution. Failure to comply could result in a penalty.

Hence, this article aims to answer all your questions concerning the EIS scheme. From knowing how to determine eligible employees to understanding the contribution rate, this piece will help you navigate the EIS for proper implementation.

What is the Employment Insurance System (EIS)?

The Employment Insurance System (EIS) is a Malaysian scheme that provides financial assistance to employees who have lost their jobs. Its main aim is to serve as a makeshift source of income for retrenched employees until they find another job. 

It was established on 1 January 2018 and is managed by the governmental organization Pertubuhan Keselamatan Sosial (PERKESO), also known as the Social Security Organization (SOCSO).

This monetary support is funded by monthly contributions from employers and employees. Benefits include allowances for training and job hunting. The scheme also provides additional support, such as career counseling and job matching, so retrenched employees can find another source of income faster.

The EIS scheme is a crucial part of Malaysia’s social security framework. It provides a cushion for retrenched employees and promotes economic stability and adequate welfare in the workforce.

Who qualifies for EIS contribution?

The Employment Insurance System Act 2017 (Act 800) stipulates the requirements to qualify for an EIS contribution. 

Generally, eligible workers who qualify are:

  • Malaysian citizens, whether permanent or temporary residents.
  • Employees aged 18 – 60
  • Those who work in the private sector on a full or part-time basis
  • Those who contribute towards their EIS monthly
  • Retrenched workers

However, while the EIS contribution covers all working Malaysian citizens, some categories of employees are exempted from this scheme. 

They include:

  • Domestic employees
  • Civil servants
  • Employees in local authorities and statutory bodies 
  • Self-employed employees
  • Employees aged 57 and above who have never contributed to the Employment Insurance System. They’re also not required to contribute.
  • Employees who have reached the compulsory retirement age.
  • Workers whose fixed-term contract has expired without renewal.
  • Employees fired for disciplinary reasons out of misconduct.
  • Workers who resigned voluntarily.

Also, not all job losses are eligible for the EIS contribution. The categories of employment loss that qualifies for the Employment Insurance System in Malaysia are:

  • The usual retrenchment or redundancy
  • Voluntary/Mutual separation scheme (VSS/MSS)
  • Constructive dismissal
  • Company closure due to natural disasters or bankruptcy
  • Resignation due to sexual harassment, threats, or being ordered to carry out harmful duties that aren’t within the job scope

On the other hand, the kinds of employment loss that do not qualify for the Malaysian EIS are:

  • Dismissal due to employee misconduct
  • Voluntary resignation
  • Retirement
  • Unconditional termination or expiry of a fixed-term contract

Who is responsible for EIS contributions?

In Malaysia, all employers and employees must contribute to the EIS scheme, whether full-time, part-time, or contract. However, the employer is responsible for remitting the contribution to PERKOSO.

After registering your business and employees with SOCSO to participate in the EIS, deduct the contribution from your salary and employees’ salaries. Then, pay them all to SOCSO regularly. 

Similarly, employees should contribute a certain percentage of their income to the EIS scheme. They should also give their employers accurate and up-to-date information to ensure their correct results when calculating contributions. 

How to Pay for Employees’ EIS

Submit your company’s EIS contribution to Perkoso via the PERKOSO Assist portal. To do this:

  • Log in to the Assist Portal.
  • Click on My Sites and choose EIS-Contribution to generate an Electronic Challan cum Return (ECR).
  • Select Employer Contribution, and when it drops down, click on Add Contribution (Text file).
  • Click on the Text file, upload your EIS file, then submit it.

Once you’ve uploaded and submitted your file, complete your payment via any of these ways:

  • Internet banking.
  • Financial Process Exchange (FPX)
  • Direct Debit Authorisation (DDA)
  • Submit a money order, cheque, or postal order payable to PERKESO. The order or cheque should have your name, Employer Code, and the month and year of contribution written on the back.
  • Remit via your bank portal or counter with your ACR reference. Maybank, RHB Bank, and Public Bank are banks approved by PERKESO as collection agents.
  • Prihatin mobile app

Be sure to submit your employees’ EIS contributions by the 15th of the following month to avoid penalties. Defaulting employers may be prosecuted and punished with imprisonment for a term that may extend to two years and/or with a fine of not more than RM10,000.

What is the EIS contribution rate?

On 1 September 2022, the EIS contribution rate was capped at an insured salary of RM 5,000 monthly. This is in line with the increase of the Wage Ceiling Limit for Act 4 and Act 800 of the EIS scheme in Malaysia. Per the act, the EIS contribution rate is divided into two:

For employer

Employers should pay a total contribution of 0.4% per month. That is, 0.2% of their salary and their employees’ salary. For instance, when wages exceed RM4,000 but don’t exceed RM4,100, employees and employers will contribute RM8.10 each, making it a total of RM16.20.

For employees

Employees should also contribute 0.2% of their hourly, daily, or monthly wages to the Employment Insurance System. 

However, not all income categories are subject to EIS contribution. According to PERKESO, the employees can contribute from wages, overtime, commissions, service charges, allowances and incentives, and leave emoluments. 

The categories exempted from EIS contribution are travel allowance, Employee Provident Fund (EPF) contributions, expenses claim, gratuity or payment for dismissal, benefit in kind, and bonuses.

Read next: Your Guide to Malaysia Payroll

What are the differences between EIS and EPF?

The Employee Insurance System (EIS) and the Employees Provident Fund (EPF) are different social security schemes in Malaysia, and each serves a separate purpose.

For one, EPF is a mandatory savings scheme that helps employees save for retirement. It offers financial support to workers when they retire or can no longer work due to old age or declining health. It is also widely known as the Kumpulan Wang Simpanan Pekerja (KWSP) and is under the Ministry of Finance.

In addition, the EPF comprises about 9% to 11% of employees and 12% to 13% of employers’ monthly income. Its perks include long-term savings for retirement, potential returns on investments, tax benefits, housing and education withdrawals, and monetary support during emergencies.

On the other hand, EIS is an initiative that offers temporary financial support to laid-off employees until they find a new job. The contribution comprises 0.2% of employees’ and employers’ monthly income. Its benefits include job search allowance, training fees, and re-employment programs.

Also, EPF is withdrawable under certain conditions such as retirement age (usually 55), permanent disability, buying a house or leaving the country whereas EIS isn’t withdrawable. Employees only access the periodic payment during involuntary employment.

How do employees register for EIS and can they opt out?

Malaysian employees don’t need to register for the Employee Insurance System. Instead, the EIS contribution mandates all employers to register eligible employees as Insured Persons (IP) as part of the employers’ obligations under the Social Security Organization (SOCSO). 

But first, you must register your business with SOCSO if you haven’t done so already. Afterward, upon hiring a new employee, enroll their details via the EIS portal with these steps:

  • Click on Add Employee.
  • Complete the Employee Information fields and Employee Application Status with the employee’s details, such as their name, identification number, date of employment, salary details, etc.
  • Click on Save to proceed to the next page.
  • Fill in the necessary details on the page, then save and continue.

Employees cannot opt out of the EIS because participation is compulsory for all eligible private sector workers per the Employment Insurance System Act 2017. This is necessary to support employees financially in the event of unemployment.

How does the EIS contribution benefit employees?

EIS

The EIS contribution benefits employees in the following ways:

Temporary income support

The Employment Insurance System offers these temporary income support to retrenched employees:

Job Search Allowance (JSA): This is a replacement income for those who have lost their only job. Eligible recipients will receive the allowance for three to six months, depending on the recipient’s Contributions Qualifying Conditions. For instance, the employee must have paid their EIS contribution for a minimum number of months within a specified period.

Reduced Income Allowance (RIA): This is a financial allowance for people who have multiple jobs but lost at least one, not all. Payment rates and duration are the same as Job Search Allowance (JSA). When an insured person loses all their jobs at once, they’re entitled to both JSA and RIA.

After receiving the first installment of their allowance, employees will have to prove they’re actively searching for jobs before they receive subsequent installments.

Training Allowance (TA): This incentive is paid to training recipients to encourage them to attend training sessions. It’s paid at a daily rate of RM 10-20, depending on the employee’s previous salary. But to receive this support, recipients must prove that they have attended all training sessions.

Training Fee (TF): Training service providers receive this incentive so that successful applicants will receive up to six months of training at a maximum cost of RM 4000.

Early Re-employment Allowance (ERA): This financial support is for recipients who return to work while still receiving JSA. It is worth 25% of the JSA the recipient is entitled to but hasn’t received.

Read next: How to Apply, Claim, and Select Training Programs for HRDF Malaysia

Job search assistance

The Employment Insurance System Office provides two kinds of job search assistance:

Re-employment Placement Program: Insured persons registered with the Re-employment Placement Program receive one-on-one support from a SOCSO Employment Services Officer.

Career Counseling: Here, SOCSO Employment Services Officers offer a counseling service to identify problems, such as performance gaps, that a laid-off employee may face when deciding on a future career. This counseling happens during their unemployment period or after they’re re-employed as part of the EIS active labor market program. 

Furthermore, the scheme requires insured persons to enroll with MyFutureJobs. The platform matches laid-off employees with suitable vacancies. EIS also encourages applicants to attend vocational training to improve their skills and advance in their careers.

How can employees claim EIS benefits?

Employees can apply for EIS benefits through the EIS Portal or at the nearest PERKESO office.  Here’s how it works:

Eligibility verification

To successfully apply for and claim their EIS benefits, the insured person must meet these requirements:

  • Apply within 60 days from the date of loss of employment.
  • Meet PERKOSO’s Contributions Qualifying Conditions (CQC), which involves paying their monthly contributions for a minimum number of months within a specified period.
  • Be unemployed under the categories of unemployment that qualify for EIS.

Documentation required

The documents required include:

  • A copy of your NRIC
  • Payslip for the Last six months.
  • Proof of loss of employment. For example, termination letter
  • A copy of bank account information 

Claim process

Employees should contact the EIS office to claim their benefits in person or submit their application via the SOSCO Assist portal. Once approved, the applicant will receive financial support to cushion the challenging unemployment period.

Simplify EIS Compliance with HRIS

Navigating the ever-evolving regulations when it comes to Malaysia’s Employment Insurance System (EIS) can be challenging, and staying up to date with the latest mandates is crucial for HR teams to remain compliant. That’s why it’s important to have the right tools by your side.

Omni’s all-in-one HR software helps you stay up to date with the latest laws and regulations for Malaysia’s Employment Insurance System 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 EIS contribution calculations, and instant payroll reports, Omni can help HR teams simplify their payroll processing while ensuring compliance with the Employment Insurance System Act.

Start your 14 days free trial and see how Omni can simplify the intricacies and complexities of Malaysia EIS contribution and minimize the costs associated with common errors.

What is Service Incentive Leave (SIL) in the Philippines?

In the Philippines, a common topic of discussion within organizations is the subject of Service Incentive Leave (SIL). Employers often wonder how many days they should give for SIL and how it differs from conventional sick leave and vacation days.

This article will guide you to understand what SIL is according to the Philippine Labor Code, the criteria for granting this benefit to your employees, and how it differs from other types of leave. Let’s dive into the SIL meaning and why it is compulsory in the Philippines.

What is Service Incentive Leave (SIL) and is it mandatory?

Service Incentive Leave (SIL) is a benefit your employees are entitled to after working for at least a year. The SIL entitles eligible employees who have worked for over a year to have five days of incentive leave with pay. Eligible employees can also convert their leaves to cash if they don’t use it by the end of the year.

The SIL is mandated in the Philippines under Article 95 of the Labor Code which states that offering service incentive leave to eligible employees is not optional and is a legal requirement. Additionally, service incentive leave in the Philippines is a government-mandated benefit as it gives employees a chance to maintain a better work-life balance. 

With knowledge of the SIL meaning and why it is mandatory, let us examine who is entitled to service incentive leave.

Who is entitled to SIL?

SIL

As the Labor Code mandates, your employees who have worked continuously for at least 1 year are entitled to service incentive leave. A year of service is calculated from the first day of employment, regardless of continuous or broken work schedule. It includes authorized leave and holidays.

Eligible employees are entitled to 5 days of paid incentive leave per year. According to the Philippine Labor Law, the rule is that employees are entitled to five service leave credits after the end of each work anniversary year. Also, unused leave credits should be converted to cash. 

The SIL is a general leave credit which may be used by employees for medical treatments, vacations, or any other personal reasons.

Who is not entitled to SIL?

Although SIL is mandatory to eligible employees, there are groups of people excluded from this benefit:

1. Government employees

SIL benefits apply only to employees in the private sector. Personnel employed in government-owned or controlled corporations are exempted from service incentive leave.

2. Managerial employees

Employees who perform managerial functions like managing an establishment and having the authority to hire or fire other employees of lower ranks do not qualify for SIL provisions.

3. Field personnel

Personnel who perform their duties away from the office environment and whose hours and days of work are not supervised by the employer are not entitled to service incentive leaves.

4. Domestic helpers and persons in the personal service of another

Employees in this category are not covered by the benefits of service incentive leave.

5. Employees already enjoying a similar benefit

Companies that offer their employees benefits similar to SIL, for example, providing more than five days of paid leave, are exempted from providing additional SIL to their employees.

6. Employees in establishments regularly employing less than ten workers

Small businesses with less than ten employees are exempted from providing their employees with service incentive leave.

With an understanding of who is entitled to service incentive leave, it is easier for you as an employer to design an employee benefits package that adheres to the Labor Code whilst rewarding employees for their service.

How to calculate SIL?

Scenario 1: Employee completes 1 year of service

After an employee completes one year of service, they are entitled to five days of paid Service Incentive Leave. For instance, if an employee starts working on 1 January 2023, they will be eligible for SIL from 1 January 2024. 

The calculation is simple. Your employee must receive 5 days of SIL to be used within the next year after their first work anniversary. Also, depending on your company policy, the unused leave can be carried over to the next year or converted to cash. 

Scenario 2: Employee leaves before completing 1 year

If an employee resigns or you terminate their contract before they complete their one year of service, they will not be entitled to any service incentive leave.

For example, an employee who leaves your company after 11 months of service will not be entitled to any leave benefits.

Scenario 3: Employee works for more than 1 year

Your employees who have completed one year of service must have their SIL entitlement renewed every year. For instance, if your employee has worked continuously for three years and has used up their SIL benefits from the previous years, they will be entitled to five days of SIL at the beginning of their fourth service year.

Additionally, your employees who have completed more than one year of service are entitled to prorated leave credits for any additional months worked beyond their anniversary date. This means an employee who has completed 14 months of service will be entitled to 6 days of SIL. 

Here’s the calculation:

  1. Calculate the monthly accrual rate:
    • 5 days of SIL per year divided by 12 months = 0.4167 SIL per month.
  2. Calculate total SIL for 14 months of service:
    • 12 months (first year) = 5 days of SIL.
    • Additional 2 months (second year) = 0.4167 SIL/month * 2 months = 0.8334 SIL, rounded to 1 day.

So, the employee would be entitled to:

  • 5 days of SIL for the first year (anniversary).
  • 1 additional day of SIL for the extra 2 months.

Therefore, an employee with 14 months of service will be entitled to a total of 6 days of SIL.

Omni tip for SIL: When calculating SIL, the rule of thumb is your employees must have completed one year of service. Only after they fulfill this requirement can they be entitled to service incentive leave benefits. 

Now that we understand the SIL meaning and how to calculate it, let’s address a common question.

Is SIL convertible to cash?

The answer is “yes.” Unused service incentive leave can be converted to cash. The Labor Code clearly states that any unused SIL at the end of the year can be converted to its cash equivalent.

Here’s how the calculation works:

1. Determine the daily wage of your employee: 

For example, your employee earns ₱500 per day.

2. Calculate the value of their unused SIL: 

If your employee has 5 unused SIL days, the calculation would be:

5 days * ₱500/day = ₱2,500.

Thus, your employee will receive ₱2,500 for their unused SIL days.

It’s important to note that the encashment can occur at the end of a complete service year or when eligible employees terminate their employment contract.

How does SIL differ from sick leave and vacation days?

To clearly understand the difference between service incentive leave, sick leave, and vacation days, let us briefly define what each means.

  • Service Incentive Leave (SIL): This is a mandated benefit under the Philippine Labor Code that entitles employees to five days of paid leave after completing one year of service. Service incentive leave can be used for any purpose the employee deems fit.
  • Sick leave: This type of leave entitles an employee to a certain number of days in a year to take care of any health-related issues and is separate from SIL. The Philippine Labor Code does not mandate sick leave days. However, many companies offer them as part of their employee benefits package.
  • Vacation days: Vacation days are leave days you grant your employees, allowing them to rest or have their leisure. This type of leave is mostly planned and requires approval. Additionally, similar to sick leave days, vacation days are not mandated by the law in the Philippines.

Read next: HR’s Guide to Employee Leave Management

Now, with the understanding of the SIL meaning, sick leave, and vacation days, let us explore their key differences:

  • Purpose: Service incentive leave can be used for any purpose. However, sick leave is for health-related issues, and vacation days are for leisure or personal reasons.
  • Legal Requirement: SIL is mandated by the Philippine Labor Code, whereas sick leave and vacation days are not.
  • Conversion to Cash: Unused SIL credits can be converted to cash. However, sick leave and vacation leave can’t be converted unless permitted by the organization’s policy.

In conclusion, service incentive leave differs from sick leave and vacation days because SIL is a mandatory requirement for Philippine employers according to the Labor Code. On the other hand, sick leave and vacation days are mostly part of companies’ employee benefits packages.

What are the benefits of offering SIL?

SIL meaning

When you offer service incentive leave to your employees, you meet legal requirements and also show them you recognize and reward their contributions. Here are some other key benefits of offering SIL: 

Incentive for service

Offering service incentive leave serves as a way for you to reward your employees for their one-year work commitment. Incentive for service motivates your employees to maintain a consistent performance and stay longer with you, reducing attrition rates.

Foster work-life balance

Allowing your employees to take paid time off for rest or leisure is essential in helping them maintain their mental health and reduce burnout, which impacts their job satisfaction. Further, employees who take time to recharge will be more focused when they return to work.

Boost employee engagement and morale

​​Service incentive leave significantly boosts your employee’s engagement and morale, which can lead to an increase in efficiency. When you make your employees feel valued through benefits like SIL, they will be more motivated to do their work.

Putting Employee Well-being First

Offering SIL to your employees demonstrates how you prioritize their well-being. By providing paid leave, you show your employees you care about their health and overall quality of life. This commitment promotes a positive work environment.

Remember, offering SIL to your employees helps create a supportive and motivating workplace, which impacts their overall productivity and benefits the organization.

Additional resources: The Modern CEO’s Guide to Growth Through Company Culture

Promoting a Culture of Recognition and Reward

Employee recognition can boost employee engagement, which affects every aspect of your organization, from culture to morale, productivity to innovation, investing in your employees is a sure fire way to improve your business functions and drive growth. 

By implementing service incentive leave in the Philippines, you ensure that you’re complying to regulations and drive employee motivation. 

Omni’s time off management capabilities help managers and HR teams swiftly navigate employee leave management. Omni’s platform allows you to approve service incentive leave 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. Omni seamlessly integrates with your team’s favorite 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 SIL leave balances in real-time, and track how many vacation days they have left without having to go through HR.

If you’re not quite ready to take the leap, try leveraging some free tools to simplify your leave management efforts for free. Download Omni’s Employee Time-off Request Form Template to easily gather the information you need to manage employee time and attendance.

Navigating HR Compliance in Malaysia

Navigating compliance in Malaysia HR is vital as the business scene is always changing. With factors like technology and regulations evolving, HR leaders and employers must keep up to ensure both legal adherence and business success.This article aims to guide you through the essentials of HR Malaysia compliance. From understanding labor laws to staying updated on industry trends, we’ll cover everything you need to know to navigate HR compliance effectively. Whether you’re an experienced HR professional or a business owner, this article will provide you with the knowledge and tools to stay compliant in Malaysia’s ever-changing business landscape.

Why is HR compliance important?

In any given country or state, laws are provided by the government to regulate business operations. These laws include labor laws designed to safeguard the rights and well-being of employees, covering aspects like wages, working hours, discrimination, health, and safety in the workplace.

HR compliance ensures that these laws are understood, implemented, and followed within an organization. 

Failure to adhere to these laws are not only limited to legal issues but also reputational damage, loss of employee trust, decreased morale, and even operational disruptions. Therefore, compliance is crucial for maintaining a positive and productive work environment.

Additionally, HR compliance can vary from location to location due to differences in laws and regulations governing employment practices. For human resources in Malaysia, this involves understanding the specific requirements under HR Malaysia employment laws. This is crucial for ensuring your companies remain compliant. 

Read next: The 2024 HR Compliance Checklist: APAC Edition

What are the key employment laws for Human Resources in Malaysia?

1. Employment Act 1955

The Employment Act 1955 is the primary legislation for Human Resources in Malaysia that outlines the legal rights and responsibilities of both the employer and employees. It covers matters such as terms and conditions of employment, working hours, overtime, rest days, annual leave, and termination of employment, among others. 

The Act applies to employees engaged in manual labor, clerical work, or any other type of work, with a few exceptions such as domestic servants, certain categories of employees covered under other specific laws, and managerial or executive employees earning above a certain threshold. 

Under the Employment Act 1955, employers are required to meet the minimum standards set out for employment practices, which employers must adhere to for the benefit of their employees. 

2. Industrial Relations Act 1997

The Industrial Relations Act 1997 (IRA) is also one of the major HR Malaysia laws governing employment relationships, as well as trade unions and employers’ associations in Malaysia. The Act aims to promote and maintain industrial harmony and provide the regulation of the relations between employers, workmen and their trade unions. The IRA includes provisions addressing representation in cases of unfair dismissal, claims for recognition by trade unions, and the process of collective bargaining. 

3. Social Security (Socso) Act 1969

The Employees’ Social Security Act 1969, also known as the SOCSO Act, is a Malaysia HR law that created the Social Security Organization (SOCSO) to provide social safety nets for employees in the private sector and their dependents. 

Under this act, employees and their employers contribute to the SOCSO fund, which provides financial assistance in the event of work-related injuries, disabilities, occupational diseases, and death. SOCSO administers various schemes, including the Employment Injury Scheme, Invalidity Scheme, and Invalidity Pension Scheme, to provide benefits such as medical treatment, disability income, and rehabilitation services to eligible individuals.

4. Workers’ Minimum Wage Order

The Workers’ Minimum Wage Order is another key employment law HR leaders and employers should take note of when it comes to staying compliant with HR Malaysia laws. This is because the wage order sets a legal threshold for employee compensation. Failing to comply with the Order can result in penalties for employers. Another advantage this legislation serves is that it can help prevent disputes between employers and employees over wages. 

5. Other relevant regulations

Aside from the HR Malaysia employment laws mentioned above, some other relevant laws also include: 

  • Employment Provision Fund Act 1991: The EPF Act 1991 establishes the Employees Provident Fund, requiring both employees and employers in Malaysia to make monthly contributions. Its goal is to provide financial security for employees’ retirement through managed investments.
  • Occupational Safety and Health Act: This legislation ensures the safety, health, and welfare of employees at work.

Relevant reading: What is HRDF in Malaysia?

What are the benefits of compliance for HR Malaysia?

Malaysia HR
Malaysia HR

Malaysia HR errors cost businesses huge penalties. According to a statistical report, instances of non-compliance have led to significant fines, while employment lawsuits have seen a 200% increase over the past two decades. Compliance with HR Malaysia laws and standard practices help organizations steer clear of legal troubles. Non-compliant employers may also be subjected to audits and inspections by government authorities tasked with enforcing labor laws. These inspections can lead to further penalties and corrective actions mandated by the authorities.

Improve employee relationships and morale

Malaysia HR labor laws exist to protect the rights and well-being of employees. Compliance with HR Malaysia laws ensures that each worker is treated fairly and provided with essential rights and benefits. This includes ensuring your employees are being paid fairly and working under safe conditions within reasonable working hours. Companies who prioritize labor law compliance demonstrate their commitment to creating a supportive and respectful work environment. This in turn boosts employee morale, satisfaction, and efficiency of work

Stronger employer brand

Failure to comply with labor laws can tarnish the employer’s reputation. A negative reputation can have long-term implications on a businesses prospects and profitability. However, if the business adheres to HR Malaysia regulations, it builds a reputation of a responsible employer in Malaysia, making it more attractive to top talent in the job market. 

Improved business reputation

Nowadays, consumers, employees and stakeholders care more about businesses behaving ethically. This is because being ethical is really important for running a successful company. When a business follows HR Malaysia laws, it not only stays out of trouble but also builds a good reputation for being fair and transparent, which fosters community trust and support. 

Strategies to Stay Compliant in Malaysia HR

Now that we’ve established the importance of compliance for Human Resources in Malaysia, here are some strategies that you can implement to remain compliant with HR Malaysia laws and regulations. 

Stay informed

Staying compliant with HR Malaysia laws can be a daunting task due to the frequent changes and updates. It requires consistent effort and attention to stay informed about the latest regulations and ensure that the organization meets its legal obligations. 

Some practical ways Malaysia HR leaders and employers can stay updated on compliance laws:

  • Engage in networking activities with other HR professionals, either through formal events or informal gatherings, to exchange knowledge, share experiences, and stay informed about compliance practices.
  • Rely on media reports for updates.
  • Subscribe to updates from law firms specializing in employment law.
  • Conduct regular audits and reviews of HR Malaysia practices to ensure compliance.
  • Monitor these changes by reviewing official government websites that provide information and updates on compliance laws.

Develop clear policies

Another way to remain compliant with Malaysia HR laws and standard practices would be to develop consistent policies and procedures that adhere to these laws. The policies you create should be clear, comprehensive, and aligned with legal requirements and industry standards. 

This is because they serve as guidelines for employees and management alike, covering various aspects such as code of conduct, health and safety, leave and attendance, training and development, and more. 

Additionally, your policies and practices should remain accessible to all employees and should be properly documented.

Maintain accurate records

In regards to HR Malaysia, employers are legally required to maintain certain types of employee records under federal and state law. For example, as outlined by the Employment Act 1995 and employment regulations, employers must maintain records of employees’ salaries, wages, allowances, bonuses, and deductions, including records of overtime worked and any other remuneration provided. 

Relevant reading: Your Guide to Malaysia Payroll

Another example would be the Personal Data Protection Act 2010 which requires employers to maintain records containing employees’ personal information such as full name, identification number (e.g. MyKad number), contact details, and residential address. The records should cover employment contracts, attendance, salary and benefits, personal information, disciplinary actions, workplace safety, training, terminations and statutory filings. 

A well maintained record is important for these two reasons: 

  • Accountability and transparency: This demonstrates fairness and accountability in employment practices. Transparent record keeping builds trust between employers and employees.
  • Audit preparedness: With proper recording keeping, employers can easily undergo audits by regulatory authorities, or internal audits. This ensures compliance with statutory requirements. 

Invest in training on regulations

Investing in ongoing training programs for leaders and managers in Human Resources in Malaysia is important to ensure your company is compliant with HR Malaysia laws.

New hires should be provided resources and receive thorough orientation to ensure they understand their rights and responsibilities within the organization. They should also know how to report non-compliance. An environment where employees feel safe is also created when you provide regular training on preventing workplace injury. This shows your employees you care about their well-being.

Additional resources: The Ultimate Employee Handbook Template

Seek professional guidance when necessary

There are employment law attorneys that can provide your company with expert guidance on HR Malaysia compliance matters. This can help you avoid costly legal disputes and maintain a positive reputation as an employer. 

Importance of Tools for Malaysia HR Compliance

Streamlined data management

Staying on top of HR Malaysia compliance laws means investing in software that automate and streamline the record keeping process. Manual record-keeping is error-prone and time-consuming. HR tools allow for secure digital storage of employee data, contracts, policies, and other crucial documents. This makes it easier to track information, find what you need quickly, and ensure accuracy.

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

Enhanced enforcement of regulations

HR software for processes such as payroll and applicant tracking include compliance measures that can make it easier for employers and HR leaders to stay compliant on HR Malaysia laws and best practices. 

  • Leave management: Managing employee leave requests can be a complex task. HR tools automate leave tracking, approvals, and balances. This saves HR time, improves transparency for employees, and minimizes errors.
  • Payroll management: Accurate and timely payroll is essential for employee morale. HR software can automate payroll calculations, deductions, and tax filings. This reduces the risk of errors and streamlines the entire payroll process.

Improved communication

HR tools enhance compliance for Human Resources in Malaysia through employee self-service portals. Announcements, policy updates, and payslip information can be easily disseminated electronically through a self-service portal. 

Aside from that, the portal streamlines processes by allowing employees to track leave balances, request time off, and access payslips from their end, reducing the burden on Human Resources in Malaysia.

Additional reading: Why an Employee Self-Service Portal is Your Silver Bullet for Engagement

Better decision making

With compliance management software, you can gain valuable insights to inform your strategic Malaysia HR and business functions. Workforce trends, performance metrics, and leave patterns can be easily analyzed for better resource allocation and talent management.

Building a Culture of Compliance with HR Technology

Human Resources in Malaysia play an important role in driving organizational success through effective talent management, compliance with labor laws, and fostering a positive company culture

Omni frees Malaysia HR teams from administrative cycles by automating the entire end-to-end employee lifecycle — from recruitment and onboarding to employee engagement and payroll — allowing you to redirect your time to strategic work that drives business growth.

Powering Asia’s fastest-growing, modern companies, Omni scales alongside your company so you can customize and leverage the system to meet your business exactly where you are — as well as where you’re going. 

With a full suite of modules to support every aspect of your business, Omni’s platform offers an intuitive and fully customizable platform that integrates with your team’s favorite tools for a seamless and timely adoption.

Book a demo with us today and learn how Omni can help you build a competitive advantage for Human Resources in Malaysia.

The Employer’s Guide to Singapore IR8A Form

As an employer in Singapore, the tax law mandates you to prepare and submit employment income details for all employees every year. Understanding the intricacies of an IR8A form and its submission process is important to maintain compliance and avoid potential penalties. 

This guide will explore what the IR8A form entails and how you can file it for your employees to the Inland Revenue Authority of Singapore (IRAS), including the crucial Auto-Inclusion Scheme (AIS).

Relevant reading: Understanding the Singapore Employment Act

What is Singapore IR8A Form?

The Singapore IR8A form documents and reports an employee’s income to the Inland Revenue Authority of Singapore (IRAS). 

As part of taxation in Singapore, every employer in Singapore must complete this document for every employee and state their earnings or income for the year. Due to its mandatory nature, the IR8A form should be a crucial component of your employee data management to ensure compliance with regulations. 

The IR8A form is then submitted to the IRAS each year along with supporting documentation if applicable.

The supporting documents to the IR8A form include: 

  • Appendix 8A
  • Appendix 8B
  • Form IR8S (if applicable).

When is the deadline for Singapore IR8A Form?

Singapore IR8A form

The IR8A form must be filled out for every employee before 1 March of the year. Failing to submit before the deadline may lead to fines under Section 94 of the Income Tax Act. 

A company can be given a fine of up to $1,000 or imprisonment of up to 6 months if found defaulting in the submission of the Singapore IR8A form. 

What information is included in the Singapore IR8A Form?

Some of the information on a typical IR8A form are:

  • Gross Salary
  • Leave Pay
  • Wages and Overtime Pay
  • Bonus 
  • Others like: director’s fees, allowances, pension and gratuity

The parts to be filled out depends on whether it applies to each employee. 

As mentioned earlier, you may also need to provide supporting paperwork with the IR8A form. This can be Appendix 8A, Appendix 8B, or Form IR8S, depending on various reasons. 

Appendix 8A

As a Singaporean employee receiving non-monetary perks, you’re required to complete Appendix 8A. The purpose of this form is to declare any “in-kind” or “non-cash” benefits outside employee salaries. The benefits can include fringe benefits like insurance, gym memberships, free parking, or educational aid, separate from your salary.

Appendix 8B

You’re required to attach Appendix 8B to your IR8A form if you’re a Singaporean employee who has participated in Employee Stock Option Plans (ESOPs). The same rule applies if you’re enrolled in other forms of Employee Share Ownership (ESOW) plans. If an employee has ESOP or ESOW plans, it means they can buy or own company stock. Any profits or gains derived from the stock option must also be taxed.

Form IR8S

Completing this form is mandatory if you’ve overpaid CPF on your employees’ salaries or if you plan to claim a refund for such excess contributions. For the latest contribution rates, please refer to the official CPF website.

Who needs a Singapore IR8A Form?

The Singapore IR8A form must be completed for all employees to report to the IRAS on the income/earnings of each employee. 

This includes:

  • Part-time employees who are Singaporean or permanent and full-time resident employees.
  • Employees who are not based in Singapore but were required to render service in Singapore during the year.
  • Employees who are receiving a pension while they are working for the company.
  • Employees who no longer work in the company but are still owed money from the year to be filled.
  • Company director of non-resident corporations.
  • Board members who are receiving Board/Committee Member Fees.
  • All local business owners and managers.

Who are those excluded from filing the IR8A form?

  • Post-clearance foreign employees who didn’t provide employee services in Singapore for the year that the form is filled.
  • Non-executive directors, not classified as employees, must be informed by AIS (Auto Inclusion Scheme) employers to report their income separately on their tax returns.
  • Employees who were based outside of Singapore for the year and supplied their services strictly outside of Singapore.
  • Those who have left the company and/or the country (a Form IR21 is sent to IRAS in this situation).

How to file the Singapore IR8A Form?

Due to the confidential nature of IR8A form to both employers and employees, it must be filed accurately. Here’s what you need to consider when filing for the Singapore IR8A form:

But before we begin, we must understand the Auto Inclusion Scheme.

What is the Auto Inclusion Scheme (AIS)?

The Auto Inclusion Scheme (AIS) was created to make income and tax filing for Singaporean employees convenient. With AIS, IR8A information for employment income can be electronically submitted, processed, and approved automatically, ensuring accurate filling of IR8A forms. 

While it is optional for businesses with five or fewer employees, AIS is mandatory for those with more than 5 employees. Providing employees with a copy of their IR8A forms is advised for record-keeping purposes.

Steps to File Your Singapore IR8A Form

1. Join the Auto Inclusion Scheme (AIS)

To register your business for AIS, head over to the My Tax Portal. You will need the UEN (Unique Entity Number) of your business or your SingPass.

2. Link your CPF data with AIS

Linking your employees’ CPF data with AIS streamlines the submission process, authorizing IRAS to retrieve both employment income and CPF information from the CPF Board. This allows IRAS to automatically get the salary details when you’re submitting Employment Income Records via AIS, simplifying the process for you.

To link your CPF data with AIS:

  • Register for linking CPF data at the ‘CPF Data Link-up Service’ section on myTaxPortal.
  • Connect your payroll system to AIS.
  • Transfer your employees’ CPF data into AIS.
  • Generate an employer submission form in AIS and submit the form with your CPF details.

3. Gather income records 

To avoid mistakes, keep all the income records you need for submission in handy. Here are some things to remember: 

  • If you’re the owner of a business or part of the partnership, your salaries are taxed differently because you own the company. So, your income details aren’t included in AIS.
  • If an employee leaves and comes back within the same year, you need to combine their income records to show this.
  • If you have non-resident directors, you need to include their income details when you submit to AIS.
  • If your company hires trainees under an employment contract, include their income details in AIS. But if you only provide them with allowances for travel and meals, you don’t need to include that in AIS.
  • You are required to submit income details for any foreign employees on your payroll, regardless of how long they’ve worked or how much you paid them.

4. Report employee earnings

At this point, you should have filled out your IR8A form and other forms where applicable. You can do it all electronically because you have registered for AIS. No physical copies are needed, and the AIS system will automatically fill in all the data in your employees’ electronic Income Tax Returns.

5. Submit the employment income records 

The IRAS has several ways of submitting employment income records. You can choose to submit directly at the myTaxPortal or via the Provident and Tax (PAT) system.

IRAS also works with HR management software to help employers submit employment income information. To easily submit records to IRAS, you can use payroll software integrated with the AIS API service. 

Can I make changes after submission? 

It is best practice to thoroughly review all details before submitting the Singapore IR8A form and its supporting documents. However, errors may occur. If you notice mistakes in employee IDs, income deductions, or other fields, promptly submit amendment files.

For this process, you should: 

  • Include income records of the affected employees.
  • Specify any differences in amounts, if applicable.
  • Fill in only the fields you wish to change.
  • If amendments affect figures in the IR8A form, submit an IR8A amendment file along with amendments to IR8S, Appendix 8A, and Appendix 8B.

Omni Tip: To update employee identity or demographic details (like date of birth, and nationality), simply send an email to myTax Mail to get it sorted.

What are the scenarios requiring supporting documents for the Singapore IR8A Form?

Singapore IR8A

Supporting documents may be required for the Singapore IR8A form in cases like:

Employment benefits

For additional perks provided to employees beyond their salary, such as housing allowances, stock options, or bonuses. Supporting documents including official letters detailing the benefits or receipts for expenses covered by the employer might be required. 

Tax deductions

In cases of expenses that can be subtracted from an individual’s taxable income, supporting documents such as receipts or invoices may be required. 

Special allowances

There are specific payments or allowances provided to employees for particular purposes like transport or meal allowances. Documents will need to be provided showing the utilization of the allowances. 

Omni for Secure Singapore Tax Compliance 

Undoubtedly, Singapore taxation is a complex and detail-oriented process that requires a deep understanding of the region’s unique regulations and a commitment to accuracy and compliance. This is especially the case when it comes to preparing and filing the Singapore IR8A form. That’s why it’s important to have the right HR technology to make things easier. 

Omni offers a comprehensive payroll solution tailored to Singapore’s specific requirements. With features like support for SGD, automated tax calculations, and managed CPF contributions, Omni can help HR teams simplify their payroll processing and ensure easy preparation of the IR8A form. 

With secure and centralized employee records, HR teams can swiftly access employment contracts and essential documents that support the preparation and filing process for the Singapore IR8A form.

If you’re ready to take your Singapore tax compliance to the next level, start your 14 day free trial today and experience how Omni can transform your HR processes, saving you time, reducing administrative burdens, and enhancing overall efficiency.

As Singapore’s population ages and caregiving demands rise, so does the need for flexible or hybrid work models. Flexible work options (FWAs) are becoming crucial to keep people in the workforce and attract new talent in a tight labor market. This article explores the 2024 Tripartite Guidelines for FWAs, a step towards a more inclusive and productive work environment.

What are the Singapore Tripartite Guidelines?

The Singapore tripartite guidelines are a set of recommendations jointly developed by representatives from the government, the Singapore National Employers Federation (SNEF), the National Trade Union Congress (NTUC), and various union, employer, workplace fairness, and professional bodies to address employment-related issues. 

These guidelines cover areas such as employment practices and policies, wages and benefits, workplace safety and health, among others. 

In other words, the Singapore tripartite guidelines state what you must do as an employer to promote fairness and productivity in the workplace.

Read next: Understanding the Singapore Employment Act

Overview of Singapore’s 2024 Tripartite Guidelines for Flexible Work Arrangements (FWA Singapore)

The tripartite guidelines for flexible working arrangements, otherwise known as FWA Singapore, serve as a framework for employers, employees, and unions to negotiate and implement flexible work options. These guidelines focus on the processes to submit and evaluate formal requests for FWA instead of the FWA Singapore outcome.

Flexible working arrangements refer to non-traditional work schedules that offer more flexibility in how, when, and where employees work. The Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) has grouped FWA Singapore into three categories:

  • Flexi-time: staggered working hours, compressed work week.
  • Flexi-place: tele-commuting, work from home.
  • Flexi-load: part-time work, job sharing. 

The law will go into effect starting on December 1, 2024, as all employers in Singapore are required to set up a process for employees to submit a formal working arrangement. This means that workers can seek flexible work options such as a 4-day work week, work from home, flexible work locations, or whichever flexible work arrangement they find suitable for them. 

Additionally, while there is no legal requirement for companies to offer FWAs Singapore, employers are encouraged to adopt flexible work practices as part of their efforts to promote work-life balance, enhance employee well-being, and improve organizational productivity.

Failure to follow the guidelines may lead the Tripartite Alliance for Fair and Progressive Employment Practices to advise employers to comply, and the Ministry of Manpower (MOM) may issue warnings and require workshops for non-compliant employers.

Benefits of FWA Singapore

flexible work arrangements Singapore 2024

The tripartite guidelines for FWA Singapore aim to create a more balanced and productive work environment for both employers and employees. 

For employers

Enhanced employee engagement: Flexible working supports job satisfaction. It benefits employees by improving work-life harmony, which also extends to mental well-being.

Reduced cost: With more and more employees working remotely or on flexible schedules, companies can save on expenses like office space, utility bills, and equipment. 

Access to wider talent pools: 80% of job employees consider flexi work arrangements as a deciding factor when evaluating job offers. Offering FWA might just be what you need to attract diverse and top talent for your organization. 

For employees

Better work life balance: When individuals work flexibly, they have autonomy and greater control over their work. Employees can remain motivated and efficient because they can manage their responsibilities better on the personal front as well as in their careers. 

Improved productivity: A flexible working environment leads to happy and motivated employees. Engaged employees tend to produce better performance, which leads to increased efficiency for the company. 

Greater talent attraction and employee retention: As per recent studies, 74% of employees have stated that they would prefer to leave their current jobs and work for an organization that offers remote work options. Additionally, 79% of respondents said that they would be more loyal to their employers if they were presented with flexible work options. Flexible working allows employees to achieve better work-life balance, leading to higher job satisfaction. Satisfied employees are more likely to remain with their current employer rather than seek opportunities elsewhere.

Employer’s Obligations for FWA Singapore

Establish a process for employees to formally request FWA

In order to implement an effective flexible working arrangement in an organization, employers must set up a standardized process for employees to formally request FWA Singapore. 

They should provide employees with a designated channel or system, such as an online portal or paper-based form, to submit their flexi work arrangements requests.

According to the tripartite guidelines, if the options above aren’t available, that is, if the employer doesn’t have stipulated requirements or a process for their employers to make a formal request, they should consider these next steps:

  1. The request must be in writing.
  2. The request should contain the following information: 
    • Date of the request
    • The FWA requested, along with its expected frequency and duration
    • Reason for the request
    • Requested start date and end date (if relevant)

Omni Tip: It’s important to note that if the employee fails to meet the requirements above, the request will not be considered and will not be covered by the tripartite guidelines. 

Consider all FWA requests fairly based on reasonable grounds and provide response within two months 

To eliminate bias and discrimination during the consideration phase, employers should set up an evaluation process that reviews requests fairly and objectively. 

Under the guidelines, employers who receive a formal FWA Singapore 2024 request should provide a written decision within 2 months of receiving the request.

Provide written reasons for rejecting the request

Employers can reject requests on the grounds that it will result in a significant decline in productivity, a significant increase in cost, or that it is not feasible given the nature of the work. They are encouraged to provide alternatives instead. Rejection should be done in a transparent and fair manner with written reasons.

Best Practices for Developing Your FWA Singapore Policy

1. Be transparent and use clear communication

A transparent FWA Singapore policy with clear communication is key. The policy should outline available FWA options, eligibility and limitations, and the request process. 

It’s important to ensure that your FWA Singapore policy is easily accessible by employees, which can be done by incorporating it into your onboarding process or employee handbook. Using clear, concise language and open communication through Q&A sessions allows for questions and builds trust within the organization. 

2. Ensure fair and consistent FWA Singapore considerations

FWA Singapore requests must be evaluated in a just and unbiased manner, following the established guidelines set by the Singaporean government. A way to ensure this is to establish procedures with a defined set of criteria used to evaluate the flexible working arrangement requests. 

While evaluating FWA Singapore requests, employers should engage in open communication with employees, discuss any potential challenges or concerns, and explore alternative solutions that may meet both the employee’s needs and the organization’s requirements. 

Ultimately, the decision to grant or deny an FWA request should be made in a transparent and fair manner, taking into account the interests of both parties.

3. Supportive FWA implementation

It’s important to provide adequate support to both managers and employees to ensure a successful FWA Singapore implementation.
Technology and resources: With only 52% of employees who work remotely using computers provided by their company, it is important to invest in technology infrastructure and support systems that ensure employees transition seamlessly between office-based and remote work environments. These include access to laptops, secure internet connections, collaboration tools, cloud-based software, or co-working spaces (enabling them to work remotely from remote locations). Communication is a big factor when it comes to managing remote workers; invest also in collaboration tools such as Slack and Zoom to facilitate this process.

Read next: Slack Tips and Tricks for More Productive HR Teams

Performance management: To help your employees grow in their role and succeed while navigating flexi work arrangements, it is important to set clear goals from the onset. Alongside these goals, outline performance metrics and expectations for what achievement looks like. This helps to maintain accountability and ensure that business objectives are met. Additionally, feedback is key during this process. Schedule regular 1-on-1 meetings to discuss goals, progress, and challenges. Employees may encounter obstacles or challenges while working under FWA Singapore conditions. Employers must build a strong culture where workers can openly communicate with their managers. This ensures they receive the right intervention and support. 

Training and support: Offer training programs or workshops for both employees and managers on FWA Singapore policies, procedures, and best practices to ensure that everyone understands their rights, responsibilities, and the expectations surrounding FWAs. You can also provide guidance and resources for managers on how to effectively manage remote teams, communicate expectations, and address performance issues in a remote work setting.

4. Monitor and evaluate your FWA Singapore policy regularly

Regularly reviewing and updating your FWA policies and practices to make sure they remain relevant, fair, and aligned with the organization’s mission and goals. This helps to make adjustments to address any issues or concerns that arise. 

5. Additional considerations

Foster a positive workplace culture that embraces flexibility, trust, and open communication: A culture of trust and flexibility between employers and employees is important for FWA to work for both parties. 

Ensure compliance with regulations: Labour laws, regulations, and industry standards related to FWA Singapore may change. It is important to adjust your policies to remain compliant with these laws and mitigate potential legal issues.

Implement proper data security measures: All devices that connect to your company’s network must be secure. Implement data security measures to protect sensitive information and ensure compliance with data protection and regulation. Consider remote access VPN solutions to prevent hackers from accessing sensitive information. Additionally, add extra layers of security, such as multi-factor identification, SSO, and anti-virus software, to defend against cyberattacks and malware.

Communicating Your FWA Singapore Policy

Developing a comprehensive policy document

Ensure accessibility (employee handbook, HR portal, internal knowledge base): Document the organization’s FWA Singapore policies, procedures, and decisions to ensure consistency and transparency. This helps prevent misunderstandings and provides a reference point for both employers and employees. 

Ensure that the FWA Singapore policy is easily accessible by including it in the employee handbook, HR portal, and internal knowledge base. Additionally, keep the language concise and clear so that it’s easily understandable by all. 

Omni Tip: Consider translating the FWA Singapore policy into different languages or formats to cater to your diverse workforce.

Launch an awareness campaign

Company-wide email: Send out a company-wide email announcing the launch of the FWA Singapore policy. Provide a brief overview of the policy, its objectives, and how employees can access the full policy document for more information.

Town Hall announcement: Host a town hall or all-hands meeting to announce the FWA Singapore policy. Use this opportunity to explain the rationale behind the policy, address any questions or concerns from employees, and emphasize the organization’s commitment to supporting work-life balance.

Ongoing reinforcement

Manager training: Managers may lack understanding of FWA policies and procedures, leading to inconsistent evaluation of requests. Provide the right training and guidance they need for evaluation. Ensure they understand the organization’s FWA Singapore policies and procedures and can apply them consistently.

Regular updates: As time goes on, you might need to review and make some changes to your FWA Singapore policy. This is to meet any changes in regulations, employee feedback, or organizational priorities. Communicate these updates clearly to employees and managers to ensure continued compliance. 

Optimizing FWA Singapore for a Happy and Productive Workforce

tripartite guidelines on flexible work arrangements

Managing flexible work arrangements Singapore 2024 requires meticulous attention to legal requirements and thorough documentation—especially when the consequences for misfiling can cause significant penalties and troubles for your organization. You should strive to minimize human error by leveraging automation to ensure accuracy and compliance.

Omni allows your organization to securely and centrally manage employee information and FWA applications to comply with FWA Singapore regulations. Our employee-portal makes it easy for employee’s to retrieve information such as your company’s FWA Singapore policy and documents to request for flexible working arrangements, helping ensure your flexible work arrangement Singapore 2024 management meets the regulations set by the Singaporean government.

Our expert support and assistance is tailored to your businesses unique requirements and local regulations. Book a demo today and learn how Omni can help you streamline your request for flexible working arrangements and expertly navigate FWA Singapore management to ensure compliance for your organization.

Employers Guide to Singapore’s Levy for Work Permit

For many industries around the world, foreign labor is the backbone of their workforce. And it’s no different in Singapore, where sectors ranging from manufacturing to Information and Technology need a combination of both manual labor and skilled, niche experts.

But an over-reliance on foreign labor can lead to an unbalanced workforce and put the squeeze on local talent. That’s one of the reasons Singapore imposed its Foreign Workforce Levy (FWL), which regulates the number of foreign workers Singapore employers can have, and charges them accordingly. 

The FWL Singapore has a few different components, and the penalties for non-compliance can be stiff. Here, we’ll dive into the components you’ll need to consider, the details of a levy waiver for work permit, and the obligations you’ll need to meet.

What is the foreign worker levy?

The FWL Singapore is a fee employers need to pay when they hire foreign workers holding Work Permits or S Passes. In essence, this levy for work permits is meant to limit the number of foreign workers in Singapore, and incentivize employers to prioritize hiring local talent. 

Despite that, the FWL Singapore isn’t “anti foreign labor” at all–it’s more about striking a balance between local and foreign talent, with rebates and even levy waiver for work permits available for industries that require a great deal of manual labor (like construction).

And the FWL Singapore isn’t only based on the sector of an organization, its rates vary depending on factors like skill level and nationality of the foreign worker. Employers are required to pay the levy for work permit on a monthly basis to the Singaporean government. Failure to do so will incur penalties or legal repercussions—something you’ll definitely want to avoid if you’re hiring foreign labor. That’s why understanding the FWL Singapore is essential as it will directly affect your salary budget and hiring decisions.

Read next: HR’s Guide to Singapore Hiring

What are the factors affecting FWL Singapore?

As we mentioned above, the FWL Singapore has a lot of factors that determine how much you pay. 

Sector

Different industries have different levy for work permit rates based on the sector’s demand for foreign labor and its impact on the local workforce. For example, sectors that require specialized skills or expertise (like technology and healthcare) will have higher levy rates to encourage employers to hire local talent and invest in training programs.

On the other hand, industries facing labor shortages or rely heavily on foreign manpower, like construction and hospitality, will have lower levy rates to support their workforce requirements.

Worker’s skills

The FWL Singapore rates will differ based on the skill level of the foreign worker you’re looking to hire, with higher-skilled workers typically subject to lower levy rates. Skilled professionals, such as engineers or IT specialists, may earn higher salaries and possess in-demand skills, leading to lower FWL Singapore payments.

Monthly salary

The FWL Singapore rates vary depending on the monthly salary of a foreign worker, with higher salaries frequently associated with lower levy rates. If you’re offering competitive salaries to foreign workers, you’ll probably benefit from lower levy obligations, as higher wages reflect your commitment to hiring skilled and experienced professionals who contribute positively to the Singaporean economy.

Dependency ratio ceiling (DRC)

The DRC refers to the maximum permitted ratio of foreign workers to the total workforce in your company. If your organization exceeds this ratio, you might face higher levy rates meant to deter your company from hiring excessive foreign labor. By imposing limits on the number of foreign workers (relative to local talent) in a company, Singapore aims for a balanced workforce which safeguards job opportunities for its locals.

With these factors in mind, you can plan your hiring strategy for a cost effective and balanced workforce. While it may seem counterintuitive, spending more to hire skilled employees at higher salaries can be a viable strategy for keeping FWL Singapore costs reasonable, and accessing high-caliber foreign talent.

What are employer obligations for FWL Singapore?

As an employer in Singapore, you are subjected to several different obligations dealing with the FWL Singapore, put in place by the government to ensure compliance with local labor laws, and promote fair work environments. Key examples include:

Timely payment

Your organization will be responsible for promptly paying the FWL Singapore via a General Interbank Recurring Order (GIRO), usually on a monthly schedule. Failure to meet payment deadlines will result in fines or even legal consequences, so making sure your company pays its levy for work permits on time should be a top priority.

Record keeping

Your organization will also need to maintain accurate records about the employment of foreign workers, including details of their work permits, residency status, and levy for work permit payments. These records are essential documentation for regulatory compliance audits and help maintain transparency in labor management practices. Having a system like an HRIS which centralizes record keeping while keeping documents secure and accessible is a great addition to your tech kit if you’re employing foreign workers in Singapore.

Compliance with DRC

As we noted above, you’ll also need to pay careful attention to the DRC.  By measuring the ratio of local to foreign workers, and abiding by the prescribed ratio, you’ll maintain a balanced workforce composition and avoid the fines and penalties associated with employing an excess of foreign labor.

By fulfilling these obligations, your organization will demonstrate its commitment to upholding ethical labor practices, maintaining regulatory compliance, and contributing positively to Singapore’s economic and social fabric. 

The key is proactivity—rather than wait until the last minute to pay the FWL Singapore, or scramble to react to an audit, HR tools can help you stay ahead of the game and keep close tabs on the makeup of your workforce, payment schedules, and essential documents.

Who is eligible for FWL Singapore rebate?

If your organization operates in the Construction, Marine Shipyard, and Process (CMP) sectors, you may be eligible to levy waiver for work permit when it comes to paying FWL Singapore. 

This rebate scheme aims to provide financial relief to employers in industries with higher reliance on foreign labor, with the intention of supporting Singaporean business sustainability and competitiveness. Here’s a breakdown of eligibility criteria and rebate details:

Rebate applicability: The levy waiver for work permit is applicable exclusively to employers operating within the CMP sectors listed above. These industries often require a significant workforce, including foreign labor, to meet the demands of their day to day operations and project requirements.

Work permit categories: The rebate amount or levy for work permit varies depending on the specific work permit category of foreign employees hired by an organization. The two primary categories include:

  • Work permit holders: Employers who hire foreign workers under the Work Permit scheme may qualify for FWL rebates based on government criteria and sector-specific considerations. For example, the rebate or levy waiver for work permits you’d qualify for in the construction sector would likely be higher due to the labor-intensiveness of construction work. Similarly, in the manufacturing sector, rebates might be higher for employers that require a greater deal of manual labor and might have better FWL rebates than those that rely on automation. 
  • S pass holders: The details are similar for S Pass holders—organizations employing foreign professionals, technical personnel, and skilled workers under the S Pass scheme may be eligible for FWL rebates or levy waiver for work permit subject to sector-specific guidelines and compliance requirements. In the IT sector, these might include rebates for companies focused on training and education, or hiring highly niche specialists from foreign talent pools.

The Singapore government offers rebates and levy waivers for work permits tailored to specific sectors and work permit categories, aimed to help with the financial burden on employers in industries vital to the nation’s economic growth and development. 

These targeted incentives and levy for work permit support the Singapore government’s workforce management objectives while also building industry resilience and sustainability, despite a diverse and change-prone business landscape.

What are the penalties for FWL Singapore?

levy waiver for work permit

Singapore is known around the world for its relatively strict legal system, and this extends to its expectation of FWL Singapore compliance. Failure to meet these requirements could result in several different penalties for organizations hiring foreign labor in Singapore. Here are the penalties you’re going to want to avoid when working with the FWL Singapore:

Late payment penalty

If your organization fails to make on-time FWL Singapore payments, it will incur late payment penalties. You’ll be charged a late payment penalty of 2% per month on your outstanding payment or a minimum of $20, whichever is higher. The total late payment fine is capped at 30% of the outstanding levy.

Cancellation of work permits

In cases of serious or repeated non-compliance with FWL Singapore regulations, authorities have the ability to cancel the work permits of foreign employees working for the offending employer. Work permit cancellations have significant implications for both employers and affected workers, including potential disruptions to operations and employment status. Compliance with FWL Singapore is extremely important as it can put your workforce and their livelihoods in jeopardy.

Denial of future work permit applications

For organizations found to be in serious or repeated breach of FWL Singapore regulations, they could face restrictions or outright denial when applying for future work permits. Authorities tend to scrutinize applications from non-compliant employers more closely, considering past compliance records and how well they’ve stuck to regulatory requirements. In other words, it is important to ensure compliance to FWL Singapore regulations as it might make it more difficult for your organization to hire foreign labor on an ongoing basis.

Ban on applying for work permits

In the most severe cases of non-compliance or persistent violations, authorities may impose bans on employers, preventing them from applying for work permits altogether. These bans serve as the most intense deterrent against repeat offenses and underscore the seriousness of regulatory breaches. 

If your organization hires foreign workers in Singapore, prioritizing compliance with FWL Singapore regulations is crucial. Adhering to payment deadlines, fulfilling reporting obligations, and staying informed about relevant changes to regulations are all essential steps to maintaining compliance.

Stay Informed and Compliant with Omni

It is clear that the FWL Singapore is a crucial aspect of managing foreign manpower and you as an employer must comply with levy for work permit regulations to avoid risk of fines and ensure smooth business operations. 

Omni’s all-in-one HR software provides a comprehensive solution for modern businesses to manage their workforce effectively, including foreign workers. By using Omni, you can automate calculations, ensure timely payments, and maintain compliance with Singapore’s regulations. With payroll solutions that support SGD and pay schedules, Omni offers an entire suite of solutions to make your payroll system Singapore seamless. 

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

Singapore’s Workplace Safety and Health Act Guide

Workplace accidents have become prevalent, as statistics show that every 15 seconds, a worker suffers from a work-related accident globally. In Singapore, organizations witnessed 11,222 workplace injuries reported in the first quarter of 2023, which is in accordance with the workplace safety and health report released by the Ministry of Manpower.

Recognizing the critical importance of safeguarding workers’ well-being, the nation prioritizes workplace safety and health through a comprehensive legal framework – the Workplace Safety and Health Act (WSH). This Act isn’t just about safeguarding employees; it empowers businesses to cultivate a culture of safety, fostering a win-win situation for all stakeholders.

This Workplace Safety and Health Act Guide serves as a resource for employers, employees, and modern HR teams who seek to understand how to navigate their WSH-mandated rights and responsibilities.

What is Singapore’s Workplace Safety and Health Act?

The Workplace Safety and Health Act (WSH) is a legislation set by the Singapore government to regulate health and safety in the workplace. 

The Act requires employers to provide a safe workplace, a process of investigation of complaints of unfair practices, and a process of workplace inspections. 

Who is covered by the Workplace Safety and Health Act?

The Workplace Safety and Health Act covers the following:

  • Safety, health, and welfare of employees at the workplace.
  • Responsibilities of stakeholders: The WSH Act outlines the responsibility of each stakeholder group — such as employees, employers, occupiers, and self-employed — in relation to maintaining and promoting a safe company culture. They are required to take practicable measures to ensure safety and health in the workplace. 
  • Hazardous substances: These are substances that pose a significant risk to a worker’s health and safety. Some of which include carcinogens, explosives, irritants, etc. By regulating and managing the use, handling, and disposal of hazardous substances in the workplace. The act aims to minimize these risks and ensure a safe working environment for employees. The Workplace Safety and Health Act has provided a list of these substances on their website. 
  • Machinery and equipment: In today’s world, workplaces utilize machinery and equipment to improve efficiency. The Workplace Safety and Health Act covers the following equipment and machinery. This requirement is in place to prioritize the safety of workers and prevent accidents or injuries caused by unsafe machinery and equipment in the workplace. Compliance with the Workplace Safety and Health Act helps to reduce risks, protect employees, and promote a safe working environment.

Why should occupational safety be a top priority for employers?

In a bid to achieve a safer and more productive workplace, the Singaporean government published a WSH 2028 report outlining strategies and outcomes that will be taken to achieve this goal.

The said report shows that in the past, there have been more workplace accidents linked to dizziness or loss of consciousness that stem from poorly managed chronic conditions such as diabetes, hypertension (high blood pressure), and hyperlipidemia (high LDL cholesterol).

Ill health and poor health management in the workplace impact safety, and this is because employees who experience dizziness or loss of consciousness due to poorly managed chronic conditions are at risk of injury to themselves and others. These accidents can result in serious harm, medical expenses, and potential legal liabilities for the employer. 

In addition, workplace accidents can lead to productivity loss as these accidents disrupt workflow. Employees are therefore unable to work if they suffer from injuries or health-related issues. The reputation of the company is tarnished when there is negative publicity surrounding safety accidents. This can deter potential employees, clients, and investors. 

These issues can be prevented by making employee health and safety a top concern. Prioritizing safety demonstrates care for employees’ well-being, fosters a positive work culture, and improves morale. Employees are more likely to remain loyal to companies that prioritize their safety and well-being. They can also mitigate legal issues and costs, as failure to comply with this legislation can result in paying fines, and in some cases, imprisonment. 

Overall, prioritizing occupational safety not only protects employees from harm but also benefits employers by avoiding financial losses, maintaining a positive reputation, and fostering a productive work environment.

Relevant reads: Leveraging Singapore’s Mental Well-Being Programs to Improve Employee Mental Health

Key Duties of Stakeholders

The Workplace Safety and Health Act has outlined the duties of each stakeholder, holding them accountable to the most stringent standards for ensuring a safe and healthy workplace, these include: 

Employers

  • Risk management: This involves identifying risk hazards and implementing control measures to mitigate the risk to the health and safety of your workers.
  • Safe work procedures: In line with the Workplace Safety and Health Act, employers are responsible for making the workplace safe by following safe work procedures.
  • Training and information: Training and information empower employees to recognize and respond to workplace hazards effectively, enhancing their safety awareness and preparedness. Employers should provide adequate training materials and information on occupational health and safety procedures.
  • Supervision and maintenance: Employers are to ensure proper supervision of work activities and maintain equipment, machinery, and facilities in a safe working condition. This helps to prevent malfunctions, breakdowns, and accidents, preserving a safe working environment for employees.
  • Incident reporting: The Workplace Safety and Health Act states that there should be systems set up for reporting and investigating workplace incidents, injuries, near misses, and hazards to prevent such occurrences in the future. Employers should work towards creating an environment where every employee can freely discuss safety problems and report incidents. 

Employees

  • Adhere to safe work procedures: Employees are to follow established work procedures and protocols for each task or activity. They should also be allowed to take responsibility for their own safety and the safety of their coworkers by adhering to safety rules at all times.
  • Use of Personal Protective Equipment (PPE): The Workplace Safety and Health Act states that employees are also required to use appropriate personal protective equipment to protect themselves from workplace hazards. This minimizes the likelihood of injuries or exposure to harmful substances. 
  • Report unsafe conditions: If there is any occurrence of hazards, unsafe conditions, or near misses, employees should report to the supervisor or safety personnel available. 
  • Take reasonable care: Employees are to exercise reasonable care for their health and safety and also to that of others who may be affected by their actions or omissions in the workplace. This also includes deliberate actions towards following safety instructions and guidelines provided by supervisors. In addition, to also improve their safety knowledge and skills, they should participate in safety and training programs. 

These duties are essential for promoting a culture of safety, preventing accidents and injuries, and ensuring compliance with occupational health and safety regulations. Collaboration between employers and employees is crucial to creating and maintaining a safe and healthy work environment.

What is the right to refuse unsafe work?

The right to refuse unsafe work means you, as an employee, can say no to a task if you reasonably believe it poses a danger to yourself or others. This is protected by the Workplace Safety and Health Act.

Here, we’ll break down what this means and the steps to take if you encounter an unsafe situation at work.

Employee’s right

If an employee perceives that their health and safety are threatened in the workplace, they reserve the right to report any unsafe conditions to their supervisors, health and safety personnel, or authorities. According to the Workplace Safety and Health Act, employees have the right to request information about occupational safety and health standards if they aren’t sure what they’re entitled to.

Work refusals for safety and health reasons may be carried out by one worker acting alone, or they may be taken by any number of workers. It is important to know that reporting unsafe work isn’t just about protecting yourself; the lives of other workers are also at risk when unsafe practices go unnoticed in the workplace. This is an important step that leads to an improved work environment for every employee to thrive and feel safe.

Employees might be unwilling to take action due to the fear of being terminated. This is where the WSH Act comes in. It protects employees from retaliation, discrimination, or punishment by their employers.

Conditions for refusal

  • Reasonable belief of danger: Employees have the right to refuse work if they genuinely believe that performing the task or being in the work environment poses a threat to their health or safety. This belief must be reasonable, meaning there should be evidence or circumstances that support the concern. For example, if there is a clear risk of injury due to malfunctioning equipment or hazardous conditions, the belief would likely be considered reasonable.
  • Reporting the refusal: Once an employee decides to refuse unsafe work, the next step would be to report this refusal to their employer or immediate supervisor. This reporting ensures that the employer is aware of the situation and can take appropriate action to address the concern. Reporting procedures may vary depending on company policies or relevant regulations, but they often involve documenting the refusal and the reasons behind it. This documentation is crucial for maintaining transparency and accountability in the workplace. 

Employer’s obligation

  • Investigation: The employer’s response to this right is to make sure the work environment is safe and healthy. One way to do this would be to investigate as soon as they receive the report. In the process of investigation, they should address any risk or hazard that may arise to respect the worker’s decision to refuse work and not to retaliate or discriminate against the worker for exercising their right. 
  • Addressing the risk: This involves implementing corrective action, which is taking steps to resolve the identified hazard. It could involve implementing new safety measures, providing additional training, or making necessary repairs to equipment or facilities. 
  • No reprisals: No employee should be threatened with discipline; instead, the employer must provide them with alternative work that is safe and suitable or pay them regular wages until the incident is resolved. 

General process

The general process involves employees raising concerns when they observe any dangerous, unethical, or illegal acts in the workplace. The employee has the right to refuse unsafe work and report their findings to their employers or supervisors. 

From there, employers can assess the situation, identify the root cause, and determine the next corrective steps. After the resolution of the hazard, employers should reassess the workplace to ensure that the safety concern has been effectively addressed. Follow-up communication with the workers is crucial to confirm that the corrective actions have been implemented successfully. 

What are the penalties for non-compliance?

Workplace Safety and Health Act

What happens to employers who fail to adhere to the Workplace Safety and Health Act? 

The Workplace Safety and Health Act has made a provision of penalties that serve as a deterrent against non-compliance. 

This is to hold employers accountable for maintaining safe working conditions. By imposing consequences for violations, the act reinforces the obligation of employers to take proactive measures to prevent workplace accidents and injuries.

Types of penalties

Fines: Companies can face monetary fines for violating safety regulations. The amount of the fine depends on the severity of the offense.

Imprisonment: In severe cases of non-compliance, individuals responsible for safety breaches may face imprisonment.

Determining the penalty

Nature of offense: The severity of the violation and its potential impact on workplace safety.

History of offenses: Previous violations and whether the company has a history of non-compliance.

Degree of culpability: whether the violation was intentional or due to negligence.

Additional consequences

Stop-work orders: Authorities may issue orders to halt operations until safety concerns are addressed, therefore impacting productivity and revenue.

Damage to reputation: Non-compliance can tarnish a company’s reputation, leading to a loss of trust among stakeholders, customers, and the public.

Empowering Employees for a Safer Work Environment

Workplace Safety and Health Act

HR managers have their hands full, and the ever changing Workplace Safety and Health Act adds yet another layer of responsibility to their already existing workload. 

Omni’s all-in-one HR solution helps make these tasks streamlined and free of manual error to reduce the administrative burden on HR. Organizations can track and monitor its compliance with Singapore’s safety regulations as well as analyze data to identify and address safety risks.

With Omni’s secure and centralized records, HR teams are empowered to make better decisions, proactive risk management, and continuous improvement in workplace safety practices.

Start your 14-day free trial and learn how Omni can help you remain compliant with regulations like the Workplace Safety and Health Act and reduce your administrative workload for all of your People management needs.

Malaysia Parental Leave Guide

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?

labor law 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

maternity leave Malaysia

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. 

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.

How to Compute Overtime Pay in the Philippines

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?

overtime pay formula

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:

 â‚±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

how to compute overtime pay Philippines

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.

The Employer’s Guide to Labor Codes in the Philippines

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?

Labor Code of the Philippines 2024

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

Labor Code of the Philippines 2024

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.

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