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?

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?

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.

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

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

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

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

What is overtime pay?

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

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

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

What are the types of overtime pay?

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

1. Regular day overtime 

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

2. Rest day overtime 

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

3. Special holiday overtime 

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

4. Regular holiday overtime

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

5. Emergency overtime

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

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

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

Who is eligible for overtime?

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

• Managerial employees

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

• Field personnel

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

• Retail and service establishments

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

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

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

When can employers require overtime work?

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

• National emergencies

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

• Local emergencies

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

• Urgent tasks on machines, installations, or equipment

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

• Prevent loss or damage to perishable goods

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

• Abnormal pressure of work due to special circumstances

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

• Completion of work needed before the regular 8-hour workday

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

Can employees request or refuse overtime work?

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

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

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

How to compute overtime pay Philippines?

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

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

1. Determine the regular hourly rate

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

Read next: Philippines Minimum Wage Guide for Employers

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

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

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

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

₱50,000 / 22 = ₱2272.727

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

 ₱2,272.727 / 8 = ₱284.09 

2. Identify the applicable overtime rate

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

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

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

3. Calculate the overtime hours

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

4. Compute the overtime pay

Compute the overtime pay depending on the applicable OT rate. 

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

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

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

5. Add up the total overtime pay

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

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

Calculating overtime pay for night shift employees

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

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

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

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

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

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

Ways to Ensure Responsible Overtime Practices

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

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

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

Plan and schedule work effectively

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

Compensate employees fairly

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

Maintain clear communication and accurate records

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

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

Promote healthy work-life balance

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

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

Optimize Overtime Management with HR Tools

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

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

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

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

What is the Philippine Labor Code?

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

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

Who is covered under the Labor Code?

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

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

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

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

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

What are the types of employment?

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

Regular employment

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

Project employment

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

Seasonal employment

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

Casual employment

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

Fixed-period employment

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

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

What are the key provisions of the Labor Code?

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

Minimum wage

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

Read next: Philippines Minimum Wage Guide for Employers

Working hours

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

Night shift differential

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

Rest days

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

Maternity & paternity leave

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

Parental leave

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

13th month pay

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

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

Special leaves for women

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

Service incentive leave

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

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

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

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

Termination for just cause

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

Termination for authorized cause

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

Termination based on serious diseases or health conditions

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

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

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

Ways to Stay Compliant with the Labor Code

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

Stay updated on regulations

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

Adopt clear and transparent policies

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

Leverage HR technology 

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

Read next: Top 6 HRIS Philippines for 2024

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

Building a Just and Equitable Work Environment

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

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

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

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

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

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

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

Understanding EA Form Malaysia

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

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

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

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

What is EA Form Malaysia?

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

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

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

What is the purpose of the EA Form?

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

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

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

Who is in charge of preparing the EA Form?

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

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

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

What is included in the EA Form?

The EA Form Malaysia should include details on: 

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

Understanding Form E for Tax in Malaysia 

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

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

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

What is Form E Malaysia?

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

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

What is the purpose of Form E Malaysia?

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

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

Who is in charge of preparing Form E Malaysia?

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

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

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

What is included in Form E Malaysia?

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

It also contains information such as: 

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

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

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

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

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

What are the penalties for late submission?

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

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

Legal and monetary consequences 

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

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

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

Possibility of errors in taxing 

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

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

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

Risk of employee dissatisfaction 

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

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

Empowering HR Leaders for Tax Success

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

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

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

What is LHDN/IRBM?

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

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

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

What is the purpose of PCB?

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

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

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

What is subject to PCB?

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

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

For Malaysia tax, it falls under these two categories:

Single individual: RM 2,851 and above

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

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

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

Relevant reading: Your Guide to Malaysia Payroll

What is the income tax rate for residents?

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

Tax residency status

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

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

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

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

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

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

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

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

Employer’s Responsibility for PCB

1. Register with IRBM

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

2. Monthly tax deduction

Calculate and deduct based on the schedule of MTD

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

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

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

Pay deducted MTD amount to IRBM

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

You may remit payment in any of the following channels:

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

3. Annual tax reporting

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

Form E submission

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

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

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

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

Statement of Remuneration (Form EA/EC)

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

Incentive Payment Statement (Form CP58)

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

4. Record keeping

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

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

Employee’s Responsibility for PCB

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

1. Filing income tax return

Filing deadline

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

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

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

Filing methods

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

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

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

2. Maintaining records

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

3. Understanding tax reliefs

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

4. Provide accurate information

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

5. Pay additional tax on time

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

6. Stay updated on regulations

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

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

Make Malaysia Tax Easy with Omni

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

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

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

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