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Malaysia’s evolving HR and payroll landscape is driving businesses to rethink their systems. With upcoming changes like EPF contributions for foreign workers and revised Employment Pass thresholds, Vice President, HRX, IFCA MSC Berhad, Eugene Teoh shares how organisations can stay compliant, manage complexity, and future-proof their workforce operations.
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00:00Right now we want to talk about Malaysia's business landscape where we see it's evolving right now
00:05and so are its human resource or HR demands.
00:09And with compliance requirements that are distinctly local in nature,
00:12many organisations are beginning to ask a question they perhaps should ask sooner,
00:17which is, for example, is the HR system running their workforce actually built for the way Malaysian businesses operate?
00:24And this question is becoming increasingly urgent.
00:27And from October 2025, EPF contributions for non-Malaysian employees will become mandatory
00:34while revised employment pass salary thresholds take effect from 1st June 2026.
00:41And at the same time, payroll in Malaysia is already highly complex
00:44where employers must manage EPF, SOCSO, EIS and also PCB calculations simultaneously,
00:51often across multi-entity structures and also diverse workforce compositions.
00:57And that includes local hires, foreign workers, contract staff and also gig workers.
01:03And requirements like itemized payslips and digital contract stamping and the administrative burden on HR teams quickly intensifies.
01:12So for businesses relying on systems not built for this environment,
01:16what once seemed cost effective can actually quickly become restrictive.
01:21So the question is no longer whether gaps exist, it's how much they're already costing the business.
01:27So joining us today to share insights is Eugene Teoh, the Vice President of HRX at IFKA MSC Berhad.
01:33Good morning, Eugene.
01:34Good morning.
01:35How are you doing?
01:36Good.
01:36Amazing, amazing.
01:37Thank you for taking the time to speak with us, Sonia Gawani.
01:39To start off, Eugene, why are HR and payroll systems becoming a bigger issue for Malaysian business right now?
01:48Right now, you can see the main concern about HR nowadays is talent acquisition and also talent retention.
01:57Unfortunately, this is a very difficult task.
02:01It's not easy to get people nowadays and getting the right people is also difficult.
02:05However, we find that a lot of organizations still have problem with the day-to-day FS, managing payroll, HR
02:13and payroll,
02:14handling their payroll computation on a monthly basis and such.
02:18So this should work like a well-oiled machine, but unfortunately, because the system that they put in place may
02:25not be fully compliant,
02:27therefore it creates a lot of problem.
02:29And they need to put in a lot of effort to rectify this issue.
02:34And when they rectify, they sometimes put a lot of double checking, a manual workaround and such.
02:42This, in some way, is not healthy in the sense that they are not concentrating on the more important tasks,
02:49which is the strategic goal of the organization, rather than firefighting day-to-day activities.
02:55And within this growing complexity, do you think SMEs are actually underestimating just how complex payroll compliance has become?
03:04Or do you have any other thoughts?
03:06Yes, surprisingly so.
03:08A lot of them think that, you know, when we process just typical, a new employee comes in, their payroll.
03:13They don't understand how complex Malaysian statutory laws is.
03:17There's, we have LHDN, we have EPF, we have SOCSO, we have EIS, we have HRDC fund, right?
03:24I think right now, maybe you also think like, wow, there's quite a lot of things.
03:28And then, understand most SMEs, they can't afford to employ a very, you say, a very experienced HR person
03:36that has like 10 or 15 years of experience in the industry.
03:39They typically get, you know, entry-level people that just understand the basics of it.
03:44These kind of things may not easily come to them.
03:48And when they use a system that is not compliant, they do not know they are making mistakes.
03:53They do not know they are not compliant with the law.
03:55And when that happens, who is at risk?
03:59The business owners themselves.
04:00Because the law says that if anything happens, if the wrong contribution is being done,
04:05the directors of the companies is the one that are liable to face the penalties.
04:09Interesting perspective.
04:10And that brings us to the systems many companies rely on today.
04:14So, what happens when businesses use global or generic HR systems that's actually not built for Malaysia?
04:22The system works itself, but sometimes when it comes to a certain compliance part,
04:27when new regulation comes in.
04:29For example, in June, Soxso just introduced a Lindung 24 program.
04:35So, it introduced a new employee contribution that needs to be deducted from the employee.
04:41For those that see the pay slip this month, they will be able to see the new contribution.
04:47We understand that some of the global, they do not know about this announcement ahead.
04:53In fact, the users themselves, they don't want to have to inform this system that,
04:58hey, we have this thing in place and then you have to get it ready in time.
05:02So, therefore, it is important that a Malaysian build payroll that understand this,
05:07in fact, in close contact with the necessary statutory bodies,
05:10like in our case, we actually always keep in touch with LHDN, Soxso, EPF,
05:15throw their website and to make sure that it is always up to date,
05:18so that we know when this comes in, we advise the necessary customers to tell them that
05:25get ready in this place and we put it ready for them.
05:29I agree. And in fact, looking ahead, regulatory changes will add another layer of pressure.
05:35So, how will upcoming changes such as EPF contributions for foreign workers
05:40and also revised employee past thresholds actually affect employers?
05:45Yes.
05:46The problem is always the understanding.
05:49In our experience, when we actually come across most of our own customers themselves,
05:53we are the ones that have to inform them,
05:56hey, these are the changes that have to be put in place.
05:59They will be like, hey, I wasn't aware of this.
06:02So, that is what we find.
06:04So, a lot of times, they expect the system just runs together.
06:08They have no awareness about it.
06:10I mean, the necessary bodies also have sent out the communication on the mass media,
06:15they sent out on the website and such.
06:17But, you know, sometimes, if you don't check, you don't check.
06:20All right.
06:21So, this is where we actually does come in and help.
06:24We understand that.
06:25We have to inform.
06:26We organise sessions that actually brief the customers,
06:30and, in fact, the general public also, to how to handle these changes.
06:35All right.
06:35How complex it is, don't worry.
06:37The system will take care of it.
06:39And for many growing companies, the question is when to make a shift.
06:44So, at what point should a company consider upgrading from spreadsheets or a basic payroll system?
06:50If you find a solution that is scalable, you can do it anytime.
06:55Scalability means that it grows with you.
06:58All right.
06:58They are concerned, typically, they think that a solution that they get in place,
07:02a full compliance system, it tends to be costly to them.
07:05Not necessary.
07:06If you find a solution that can scale with you, grow with you,
07:11that will be a very good starting point.
07:13As you are small, you start on small.
07:15You don't have to pay so much.
07:16But as you move on, you need more enterprise level.
07:20You need more complex matters to be handled.
07:24In fact, we are just talking about compliance on payroll.
07:26There will be many other things, like if you have multi-companies, multi-entities,
07:30there's many things that have to be reported properly,
07:34you know, statistics updated properly and such.
07:37So, all of this, if you get a solution that can scale, can grow,
07:42and, of course, supported well,
07:44things will not be difficult.
07:47So, indeed, the goal is just more than just upgrading.
07:50It's about simplifying operations at the same time.
07:53So, how can digital HR system actually help businesses manage compliance
07:57without actually any more burden to all the HR teams?
08:02Okay.
08:02So, the most important thing is that
08:04if the system is pre-built with all this compliance in place,
08:09it's automated so that the users do not need to worry about this thing.
08:14All the rules are in place.
08:16Whenever, let's say, a change of contribution rate
08:19or, let's say, somebody grows above 60 years old,
08:23the rate of contribution change,
08:25all of this can be handled by the system.
08:27Not something that somebody on the user side
08:30or the companies have to remember,
08:32oh, somebody is 60 years old,
08:34I better go and update his settings
08:36so that his EPF is contributed more or less or something like that.
08:41So, if the system is aware of this
08:44and they already pre-built this,
08:46you shouldn't worry.
08:48And, of course, when we talk about digitalisation,
08:50as it increases AI, artificial intelligence,
08:53is becoming part of the conversation as well.
08:54So, where does AI fit into HR?
08:57And how do we ensure it supports
08:59rather than replaces human decision-making?
09:02AI is basically a tool to help decision.
09:06The decision should still be based on human.
09:08I think we have not come to a stage that
09:10we can rely on AI to make the decision.
09:14So, like in our case, in our product itself,
09:16we actually develop AI.
09:17So, when we do AI,
09:19we complement it to the users themselves.
09:22Things like recruitment.
09:23When you come to recruitment,
09:25AI helps you to filter.
09:27You may have thousands of application
09:30that wants to apply to your company.
09:32AI helps to filter who is suitable,
09:34who is not suitable.
09:35But the ultimate decision-making,
09:37who shall you employ,
09:40it's all still based on human-based.
09:42You still need to interview someone
09:44to find whether they are suitable for you.
09:46AI can't interview that yet.
09:48Or if AI can do interview,
09:50I mean, we have video interviews and such
09:52that AI can access.
09:54The decision is,
09:56they will provide a sort of like a result itself
09:59that says,
10:00hey, this person is suitable?
10:02Do you want to consider?
10:04The decision is still up to the human itself.
10:07Same also for compliance.
10:08AI can help to detect anomalies,
10:12like something is not right,
10:13which is better than human.
10:15If human want to check,
10:16let's say you have hundreds of employees
10:18to check every single line itself,
10:21the human makes mistakes.
10:23AI doesn't.
10:24AI can detect that.
10:25But AI can't tell you whether it's right or wrong.
10:29AI can just say,
10:29hey, there's a difference in this person
10:32over time for this month.
10:34The human still have to make the decision.
10:36We are not taking that away.
10:38AI can never replace human intuitions.
10:40So now,
10:42we want to talk about costs,
10:43which is always a major concern,
10:45especially for SMEs,
10:47the small media enterprises.
10:48So for businesses that are watching their budgets,
10:50how can actually they justify
10:51investing in HR technology today?
10:55Okay.
10:56HR technology right now,
10:57if you find a right solution
10:59that caters for scalability,
11:03the cost is not surprisingly not very expensive.
11:06But what is important is that
11:08the system that you choose,
11:11does it grow with you?
11:13So what we see in the market right now,
11:15a lot of them,
11:15they just choose the cheapest solution on the market.
11:18But the problem that they face,
11:19if they stay small, it's okay.
11:21But when they grow,
11:23the solution that they choose
11:25does not grow with them.
11:27So in our case,
11:28our product itself,
11:30we understand that
11:31we have,
11:32we understand there's different needs.
11:34There are needs that small needs,
11:36but there is always a path
11:38for them to move on.
11:40Always a continuous path,
11:42rather than just say,
11:43hey, you're stuck there.
11:45So starting from small needs,
11:47and when they are ready to invest,
11:49what should employers look for
11:51when choosing a HR platform
11:53that's suitable for them?
11:55The important thing is actually not the solution,
11:58not the bells and whistles
11:59or the UI itself.
12:01I think you have to look
12:02at the provider themselves,
12:03the provider,
12:04how they understand HR,
12:06how they understand
12:07about all the best practice,
12:09all the challenges
12:09that is being faced by the businesses.
12:11So that itself
12:13gives you an advantage
12:14that when you come across
12:17certain issues and such,
12:19the solution is not
12:21just the software itself.
12:23It also comes from the support
12:25and the implementation
12:26and the advice
12:27that is given by the provider.
12:29So relating to your role
12:32at HRX,
12:33what is HRX actually
12:35trying to solve
12:36for Malaysian businesses
12:37when it comes to
12:38this human resource platform?
12:39So our HRX is a full digital
12:41mobile cloud solution
12:43that caters for all the aspects
12:45of HR from the administrative
12:47to the strategic perspective.
12:50And for this itself,
12:51we actually develop also
12:53an option that there is always
12:55different path of growth
12:57from our basic addition
12:59that is simple
13:00to target it to small SMEs
13:02or to enterprise level
13:04which can target
13:05to multinational companies.
13:08So our HRX itself,
13:10either the simple addition
13:12or the most premium addition,
13:14compliance is always
13:16at the core of it.
13:17Everything will work
13:19as it is,
13:20always stays up to date
13:21and in some way,
13:23what we are telling our customers
13:24is that worry free.
13:26Worry free is a keyword
13:28and what's important thing
13:29is to actually make
13:30your whole process seamless.
13:33So that's where HRX
13:34comes into play.
13:36So thank you so much,
13:37Eugene,
13:38for sharing your insights.
13:39and as Malaysia's workforce
13:40landscape continues to evolve,
13:43one thing is clear,
13:44it's about HR systems
13:45or human resource systems.
13:46There are no longer
13:47just administrative tools
13:48but critical infrastructure
13:50for businesses' growth
13:51and compliance.
13:52So for organisations,
13:54negating,
13:54increasing complexity,
13:56the right system
13:57isn't just about efficiency,
13:59it's about staying future ready.
14:01So you can find this whole discussion
14:03on all of our social media platforms
14:04and that includes
14:05s12.com
14:06and thank you again, Eugene
14:07and for you viewers,
14:09thank you for watching.
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