August 2018
Mitigating regulatory risks is an important step for companies seeking to build businesses in countries that they do not reside in. Such non-resident companies need to abide by legal checks that not only affect their taxes and employee mobility; but in some cases, their right to do business in host countries.
The ASEAN is a region of great beauty and diverse culture. Lovely as it sounds, it doesn’t end there. Our region is dominated by people speaking various languages and dialects – most of which keep altering as we move across states or provinces. Surprisingly, living in the same country does not entitle one to a common law!
When it comes to business, this complexity can give rise to mammoth compliance requirements; one that needs to be understood in the local language and fulfilled within the given timeframe (which may alter from province to province).
Propay Partners is based in Malaysia but our work in global hubs like Singapore and Thailand is in keeping with regulatory policies that change with every new government ruling. We resolve to take care of every altering detail that may affect compliance in the employer’s operational environment.
For example, in Thailand, an employee needs to comply by various tax laws which includes their net taxable income, social security contribution, corporate income tax and specific business tax (SBT). Investments in Thailand which have more than 49% of shares held by foreign interest will have to comply by the rules set out in the country’s Foreign Business Act.
Employee compensation is also ruled by the country’s weekly work hours. Any extra work performed by the employee will have to be compensated by the employer in keeping with the ‘overtime’ compensation rules. Companies hiring foreign employees must also be aware that their work permits can be renewed only if a copy of their previous year’s tax submission is produced.
Malaysia, a thriving business ecosystem in the ASEAN that employs hundreds of non-resident employees every year (1.7 million as of 30th June 2017 according to the Home Ministry), is looked upon as an emerging market by many global corporations. Employers in Malaysia are legally required to register and contribute monthly to the Social Security Organization (SOCSO) when the first employee begins with the company. Employees working in Malaysia are also subject to mandatory payroll benefits including paid annual leave, statutory holidays, medical leave and benefits during termination or unemployment. And the list goes on… much like the hassle!
Outsourcing compliance is one of the best ways to avoid penalties in the long run. Hiring a payroll outsourcing company to take care of your employees’ payroll and legal needs can reduce a lot of irrelevant paperwork and save up time. These companies can also give you an overview of how foreign MNCs view employment laws, benefits, claims and taxation in their own countries or host domains.
The benefits of employing a payroll company can be many. Firstly, they can operate in the same time zone thereby making communication with statutory institutions much easier. Expertise in the local language is an added advantage that makes payroll servicing a pleasant experience for the customer.
Navigating immigration laws for resident and non-resident employees, their pay, extra hours, health benefits and enrolling employees into superannuation/pension schemes can be tricky if done without the help of any external payroll company. Companies also have to deal with severance pay which comes with its own legalities.
Form-filling is also linked to regulatory compliance. If not done within deadline, this can invite serious penalties which may prove to be a financial liability. If your business is based in the ASEAN, it would be wise to find a single payroll operator who can take charge of all your needs from a unified platform. They can ensure all Employer on Record (EOR) services are met on time without any legal glitches.
