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Payroll Guide: How Should I Process Payroll in Malaysia?

Updated: Aug 30, 2022

If you are starting your business in Malaysia or thinking of setting up operations in Malaysia, check out our previous articles in this payroll guide series to ensure that you know the important matters in Malaysian payroll. Once that is out of the way, let's compare the different ways of processing payroll in Malaysia.

Broadly, there are three different ways of processing payroll. You can do it in-house, use SaaS, and last but not least, you can also outsource it to the experts. Depending on your needs and resources, one method is bound to make more sense compared to others. And we are here with you to think it through.

Before we start, just remember that there are other areas in payroll processing, it's not all calculation but also:-

  1. Gathering employee information (including attendance, leaves, entitlements, etc)

  2. Calculating wages and overtime

  3. Managing deductions for things like benefit contributions

  4. Withholding and deposit appropriate taxes and other statutory requirements

  5. Printing and distributing checks or paystubs

  6. Maintaining records

Now that we have that reminder, let's start!

In House

Processing payroll in-house would mean that you can process the end-to-end payroll needs of your company in the company itself. Most payroll teams or personnel in Malaysia are within the Human Resource (HR) Departments. Otherwise, if you are in microbusinesses, the owners would be the ones who process all employees' payroll each month. Let's dive into why this can be good and bad for a team.

Advantages & Risk Factors

Is it suitable for me?

The provided list is not exhaustive but provides general pointers to the benefits and risks factors of processing payroll in-house. If your team can afford a team or at least a couple of employees whose specific role is in payroll processing, go for it!

And you might be wondering why have two employees do the same job? Now, remember that payroll processing is not just about calculation - it is also to cross-check the work that was processed by the other. From data verification, input, disbursements, and report checking.

In short, if your team has the budget, resources, and infrastructure to employ two payroll specialists, doing payroll in-house would be the best option for your team. But if you are a small business owner or start-up who is growing, doing your payroll in-house might just be a nightmare that will take up your time and energy from actually growing the business.


Now, data processing takes time. No matter how simple the process is, it takes time. And since our generation is in a rush for almost everything, Software as a Service (SaaS) in payroll was created to automate part of the payroll process. Mainly, the payroll calculation part of things. Human eyes, in this case, are meant for checking. Thus, allowing one payroll specialist to have the time to handle more data or employees.

Advantages & Risk Factors

Is it suitable for me?

SaaS can provide automation that saves your employees from doing redundant tasks - a big chunk of payroll processing. Bigger companies/groups of companies would be the ones who would ripe the benefits of SaaS implementation. This is because the reduction of processing the large headcount that justifies the investment of resources and time that would go into the building/customization and implementation of the software itself.

Imagine a system that can capture your employee's attendance, collect their proof of claims, and leave taken across departments; and then have that data processed automatically without the need for manual data input by your HR team. This would save so much time and decrease errors in processing the payroll of a large team, especially if they are located in different geographic locations.

Now, you might be thinking, that sounds amazing! Shouldn't everyone with resources invest in it? Well, no. Remember that you have other areas to invest in! So, for a small and medium-sized team that does not exactly have highly complex payroll and HR policies, you might re-think investing your heart and kidneys of the company into this. You might be better off investing those resources in other areas to grow the business.

Despite its time-efficient factor, SaaS would still require human expertise in checking as well as in keeping up and dealing with statutory requirements and other updates that might affect payroll. Not to mention the resources to be invested in the technical/software maintenance part of things.

If you are keen to know more about our SaaS or Employee Self Service (ESS) system, contact us now!

Outsourced Payroll

Outsourced Payroll happens when a company engages with an external party to operate most, if not all, payroll activities. Remember all of the pointers we spoke about earlier? Yes, your vendor will take most of those struggles away from your team. We discussed payroll outsourcing in our previous article, but refer to the summary below:

Advantages & Disadvantages

Is it suitable for me?

If you are a small or medium-sized team and are still growing, Outsourced Payroll might be the one for you. Your investment would not be as high as if you were to invest in a SaaS and yet you would still reap the benefits of time efficiency in terms of payroll processing and report extractions.

With full outsourcing, your small or medium-sized team can focus on the growth of the organization, whilst having peace of mind that the very basic needs of your employees are fulfilled.

To know more about our Payroll Service, take a look at this page or talk to us now!

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