Avoid Costly Payroll Mistakes
Karen Shares Payroll Wisdom for Modern Businesses
Payroll often flies under the radar—until something goes wrong. Yet behind the scenes, it's one of the most complex and high-stakes functions in any business. To shed light on what really goes into effective payroll management, we spoke with Karen Sim, a seasoned HR professional whose career spans multiple countries and industries. From navigating compliance across borders to handling salary disputes with tact, Karen shares how payroll is evolving—and why companies can no longer afford to treat it as just another back-office task.
Rei: Thank you for joining us today, Karen. To start, could you share a bit about your background and experience in HR and payroll?
Karen: Thank you for having me. I began my HR career in a manufacturing company, and that’s also where I first handled payroll. It was a steep learning curve—unlike anything I’d done before. I was responsible for everything from managing contract salaries and foreign worker compensation to ensuring compliance with local labor laws. Each company and industry has its own way of doing things, so adapting quickly was essential.
What really shaped my journey was the variety of roles I took on. I didn’t focus on chasing titles—I focused on learning. Over time, I moved into regional roles, managing payroll across Malaysia, Singapore, and Brunei. That experience gave me a much broader view, especially working with different statutory bodies and aligning with each country’s compliance requirements.
A turning point in my career came when I managed national payroll and benefits for a multi-level marketing company. That’s when I realized how much I enjoyed the specialization. It wasn’t just about processing salaries—it was about compensation strategy, benchmarking, and building structures that support business decisions. Today, I handle everything from payroll audits to salary analysis and benefits enhancement, often providing data-driven reports to help top management make informed decisions.
Rei: You mentioned that payroll can be complex and sometimes underestimated by businesses. What aspects do you think companies often overlook?
Karen: A lot of companies still view payroll as a purely administrative task—a back-end cost center. But in reality, it's a strategic function that directly affects financial planning, compliance, and employee trust. Payroll data feeds into budgeting, forecasting, and even talent management. If it’s not done correctly, the consequences can be serious—ranging from legal penalties to budget overruns.
Another thing that’s often overlooked is the alignment between internal HR policies and statutory requirements. Just because a company has its own set of practices doesn’t mean they’re legally compliant. At the end of the day, the Employment Act 1955 still takes precedence. So HR and payroll professionals aren’t just processing data—we’re also ensuring compliance, advising on compensation strategy, and partnering with management to make informed business decisions.
Many companies unknowingly make unlawful deductions because they’re not fully aware of the legal framework. -Karen Sim
Rei: What are some of the major payroll challenges companies face?
Karen: One of the recurring challenges is managing overtime—specifically, who qualifies, who doesn’t, and how it should be calculated. Then there’s the issue of salary deductions. Many companies unknowingly make unlawful deductions because they’re not fully aware of the legal framework. Some deductions require explicit employee consent, others don’t—and failing to get this right can lead to problems during audits.
A lot of the time, people fall back on outdated practices or informal advice. But by the time mistakes surface—usually during an audit—it’s too late. That’s why ongoing training and proper consultation are so important.
We’re also seeing new challenges emerge with the rise of remote and hybrid work. Data security and privacy have become major concerns—payroll involves sensitive information, so companies must invest in proper cybersecurity. There’s also the question of employee classification. Misclassifying someone as freelance or part-time when they should be full-time can lead to compliance issues and even legal penalties.
Technology is another double-edged sword. While it helps streamline payroll, integrating HR systems with tools like GPS-driven attendance trackers can be tricky. It requires careful planning to ensure accuracy and minimize disruptions.
And finally, remote work complicates taxation. If your workforce is spread across different states—or even countries—you need to keep up with regional tax codes and labor laws. It’s added a whole new layer of complexity to payroll that HR teams must now manage closely.
Rei: Could you share an example of how you handled salary deduction misunderstandings?
Karen: Sure. A common scenario is employees arriving late due to traffic. Some companies deduct pay for lateness directly, but that's not always legally permissible unless clear policies are in place and communicated upfront. However, situations like this is not about lack of upfront communication because it is a nonfulfillment on agreed normal working hours as stated in the contract of service.
My approach has always been to address these issues from the onboarding stage. New employees must understand working hours, conduct expectations, and consequences for non-compliance. If an issue arises, we start with counseling to understand the reason behind the behavior. If it persists, we escalate to written warnings and further action if necessary—but always following due process and documenting each step.
Rei: What communication skills are essential for handling such situations?
Karen: Tact and diplomacy are crucial. When it comes to sensitive issues like salary deductions, it’s important to communicate clearly and transparently. Always explain the reasons behind a deduction, referencing both company policy and legal guidelines, and be ready to share the relevant documents.
At the same time, give employees space to respond—sometimes misunderstandings can be resolved with a simple conversation. It’s about enforcing rules without losing empathy. If someone is facing genuine difficulties, offer support where possible, whether through flexible arrangements or helping them understand their options. Staying calm and professional, even when emotions run high, helps maintain trust and avoids escalation.
Rei: How has technology changed your work in payroll administration?
Karen: Technology has completely transformed payroll administration. Moving from manual, paper-based processes to cloud-based systems has significantly reduced errors and saved time. Tools like employee self-service portals make it easier for staff to update personal details—especially for tax accuracy—and automation has streamlined everything from attendance tracking to salary computation.
That said, new tech also brings new challenges. Cybersecurity has become a major concern with so much sensitive data online, so investing in strong security measures is essential. There's also a growing dependence on these systems, which means any technical glitch can delay payroll.
Another issue is the skill gap—HR teams now need to understand not just compliance, but also system management and data accuracy, like monthly tax deductions. And of course, with any new system, change management is key. People need support and training to adapt, especially those used to more traditional workflows. Despite all the tech, the fundamentals of payroll knowledge are still as important as ever.
Rei: What advice do you have for companies facing challenges with technology or remote work?
Karen: If you offer hybrid or remote work options, make sure you have systems in place—like daily check-ins or digital attendance tracking—to monitor performance. The level of monitoring depends on your company’s needs: some focus strictly on hours worked; others care more about results.
Regular virtual meetings—such as monthly “all-hands” sessions—help keep everyone aligned with company objectives. Clarity in expectations and good communication are crucial.
Karen’s experience reminds us that payroll is more than just numbers—it’s a strategic, compliance-driven function that shapes employee trust and organizational resilience. A few key takeaways from our conversation:
Payroll is a legal and strategic priority, not just an administrative task. Missteps can cost companies both financially and reputationally.
Clear communication and empathy are essential, especially when addressing sensitive issues like salary deductions or policy enforcement.
Technology brings efficiency but demands new skills. From cybersecurity to data accuracy, HR teams must evolve with the tools they use.
Remote work complicates compliance, making it vital to revisit internal policies and invest in systems that support transparency and accountability.
As the workplace continues to shift, HR professionals like Karen show us the value of staying curious, adaptable, and committed to the long game.
If you’ve faced similar payroll challenges or lessons in your own journey, we’d love to hear your story.
🎁🎁🎁 FREEBIES FOR OUR READERS:
Sign up for SIMeduc’s annual consultation plan at a snazzy RM 10,800 (thanks to a nifty 10% discount off the original RM 12,000 fee) and score a bonus training session on “Year 2025 Tax Relief” to sharpen your tax-planning skills like a pro! Use this promo code “ILOVESIMEDUC25’ to claim it. Promo ends by 31st May 2025.