Pay as Low as RM5 a Day — Avoid Costly Payroll & Compliance Penalties
Many SMEs believe payroll mistakes are small administrative issues.
In reality, payroll and statutory errors can result in fines, legal action, and director-level consequences under Malaysian law.
For most SMEs, these mistakes don’t happen due to negligence — they happen because payroll is handled manually, rushed, or managed without a proper system.
This article explains:
The real penalties SMEs face for non-compliance
Why manual payroll is risky
How paying as low as RM5/day can help SMEs avoid thousands in fines
Why Manual Payroll Puts SMEs at Risk
Common SME payroll practices include:
Calculating payroll in Excel
Tracking attendance and OT manually
Updating statutory rates by memory
Doing payroll after office hours or near deadlines
These practices increase the risk of:
Incorrect statutory contributions
Late submissions
Inaccurate PCB calculations
Missing or incomplete records during audits
Under Malaysian law, “unintentional” errors are still offences.
EPF (KWSP) Penalties SMEs Should Know
Below are actual penalties under the EPF Act 1991 that apply to employers and directors.
|
Section |
Offences |
Penalty/ Legal Action |
|
41(1) |
An employer who fails to register with EPF within 7 days from the date he employs an employee. |
Imprisonment term not exceeding 3 years or to a fine not exceeding RM10,000 or both. |
|
43(2) |
Failure to make contribution on or before the 15th day of the month. |
Imprisonment term not exceeding 3 years or to a fine not exceeding RM10,000 or both. |
|
59(a) |
Make false statement orally or in writing. |
Imprisonment term not exceeding 3 years or to a fine not exceeding RM10,000 or both. |
|
48(3) |
Deducts the employee's share of contributions from the wages and fails to pay to EPF. |
Imprisonment term not exceeding 6 years or a fine not exceeding RM20,000 or both. |
|
47(1) & 47(2) |
Deducts from the wages of any employee as part of the employer's share of contribution. |
Imprisonment term not exceeding 6 years or a fine not exceeding RM20,000 or both. |
|
41(3) |
Fails to notify the EPF within 30 days from the date he ceased to have any employee. |
Imprisonment term not exceeding 6 months or a fine not exceeding RM2,000 or both. |
|
42(1) |
Fails to furnish the statement of wages to his employee. |
Imprisonment term not exceeding 6 months or a fine not exceeding RM2,000 or both. |
|
46(1) |
Failure of the Company's Director, Partner of the Firm or an Association of Persons to pay the outstanding EPF contribution. |
Claims may be filed
in court and actions that can be taken against you: |
EPF arrears can result in personal action against company directors, not just the company.
For more information on fines related to EPF, please refer to https://www.kwsp.gov.my/en/employer/responsibilities/compliance.
LHDN Payroll & Tax Penalties
Payroll errors also expose SMEs to income tax offences under the Income Tax Act 1967.
LHDN Payroll & Tax Penalties
Payroll errors also expose SMEs to income tax offences under the Income Tax Act 1967.
|
Type Of Offences |
Provisions Under ITA 1967 |
Amount Of Fine (RM) |
|
Failure (without reasonable excuse) to furnish an Income Tax Return Form. |
112(1) |
200.00 to 20,000.00 / Imprisonment for a term not exceeding 6 months / Both |
|
Failure (without reasonable excuse) to give notice of chargeability to tax. |
112(1) |
200.00 to 20,000.00 / Imprisonment for a term not exceeding 6 months / Both |
|
Make an incorrect tax return by omitting or understating any income. |
113(1)(a) |
1,000.00 to 10,000.00 and 200% of tax undercharged |
|
Give any incorrect information in matters affecting the tax liability of a taxpayer or any other person. |
113(1)(b) |
1,000.00 to 10,000.00 and 200% of tax undercharged |
|
Wilfully and with intent to evade or assist any other person to evade tax. |
114(1) |
1,000.00 to 20,000.00 / Imprisonment for a term not exceeding 3 years / Both and 300% of tax undercharged |
|
Assist or advise (without reasonable care) others to under declare their income |
114(1A) |
2,000.00 to 20,000.00 / Imprisonment for a term not exceeding 3 years / Both |
|
Attempt to leave the country without payment of tax. |
115(1) |
200.00 to 20,000.00 / Imprisonment for a term not exceeding 6 months / Both |
|
Obstruct any authorized officer of IRBM in carrying out his duties. |
116 |
1,000.00 to 10,000.00 / Imprisonment for a term not exceeding 1 year / Both |
|
Fails (without reasonable excuse) to comply with an order to keep proper records and documentation. |
119A |
300.00 to 10,000.00 / Imprisonment for a term not exceeding 1 year / Both |
|
Fails (without reasonable excuse) to comply with a notice asking for certain information as required by IRBM. |
120(1) |
200.00 to 20,000.00 / Imprisonment for a term not exceeding 6 months / Both |
|
Fails (without reasonable excuse) to give notice on changes of address within 3 months. |
120(1) |
200.00 to 20,000.00 / Imprisonment for a term not exceeding 6 months / Both |
These penalties are far more expensive than the cost of using a compliant payroll system.
For more information on fines related to LHDN, please refer to https://www.hasil.gov.my/en/legislation/offences-fines-and-penalties/.
Small Payroll Errors Become Expensive Problems
What starts as:
One wrong OT calculation
One late submission
One missed update
Can escalate into:
Backdated payments
Penalties and fines
Audits and investigations
Director liability
Loss of staff trust
This is why SMEs need accuracy and consistency, not more manual effort.
RM5 a Day vs Thousands in Fines
HR2eazy SME packages start from RM150/month —that’s as low as RM5 per day.
With HR2eazy, SMEs get:
Automated payroll calculations
Accurate EPF, SOCSO, EIS & PCB computation
Proper payroll records
Reduced risk of statutory errors
Compliance peace of mind
View HR2eazy SME Packages
See How Payroll Automation Works
How HR2eazy Helps SMEs Stay Compliant
HR2eazy is built specifically for Malaysian SMEs to:
Reduce manual payroll work
Minimise human error
Maintain statutory compliance
Protect business owners from unnecessary risk
No enterprise complexity.
No unnecessary features.
Just what SMEs actually need.
Explore HR2eazy for SMEs
Book a Free 10-Minute Demo
Get Started — Without the Risk
Paying RM5 a day is not about buying software.
It’s about avoiding penalties that can cost thousands, protecting your business, and keeping payroll compliant.
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