Malaysia payroll involves four mandatory contributions. EPF (Employees Provident Fund) is the largest at 12-13% employer share. SOCSO covers employment injury and invalidity at approximately 1.75%. EIS (Employment Insurance System) adds 0.2% employer share. PCB (Monthly Tax Deduction) is the withholding mechanism for income tax. All contributions are due by the 15th of the following month.
What Are the EPF Contribution Rates in Malaysia?
EPF contributions are mandatory for Malaysian citizens and PRs. Foreign workers are exempt from mandatory EPF but can voluntarily contribute. The EPF employer contribution increased from 12% to 13% for employees earning RM 5,000 and below effective February 2024. There is no contribution cap: EPF applies to total monthly wages.
What Does SOCSO Cover and What Are the Rates?
SOCSO provides two schemes. The Employment Injury Scheme covers work-related accidents, occupational diseases, and death. The Invalidity Scheme covers invalidity not related to employment. Combined employer contribution: approximately 1.75% of insured wages. Employee contribution: 0.5% of insured wages. SOCSO applies to all employees earning up to RM 6,000/month.
Employees aged 60 and above contribute to the Employment Injury Scheme only (no invalidity). SOCSO registration must be completed within 30 days of the employee's start date. Aniday's outsourced payroll Malaysia (Aniday Outsourced Payroll Malaysia) handles all SOCSO calculations and submissions.
What Is the EIS and How Does It Work?
EIS (Employment Insurance System) launched in 2018 under the Employment Insurance System Act 2017. Both employer and employee contribute 0.2% of monthly wages (total 0.4%). The insured wage cap is RM 6,000/month. EIS provides retrenched workers with temporary financial assistance (up to 80% of insured wages for up to 6 months), job search allowance, and training allowance.
EIS applies to all employees under age 60 earning monthly wages of at least RM 30. Foreign workers and domestic workers are exempt. Employers with at least 1 employee must register with EIS. Contributions are submitted together with SOCSO by the 15th of the following month.
For companies managing Malaysia compliance obligations in-house, an HR software for Malaysia like Omni HR automates EIS, EPF, SOCSO, and PCB calculations, processes payroll, and generates compliant payment files ahead of the 15th deadline.
How Does PCB (Monthly Tax Deduction) Work?
PCB is Malaysia's PAYE (Pay As You Earn) system for income tax withholding. The employer calculates monthly tax deduction using LHDN's MTD schedule or the Computerised Calculation method. PCB is remitted to LHDN by the 15th of the following month using Form CP39. Non-residents are subject to a flat 30% withholding rate on employment income.
Personal reliefs reduce taxable income: individual relief RM 9,000, spouse relief RM 4,000, child relief RM 2,000-$8,000, EPF contributions (up to RM 4,000), medical insurance (up to RM 3,000), and education fees. The EOR calculates PCB incorporating applicable reliefs as declared by the employee. Aniday provides payroll outsourcing in Malaysia (payroll outsourcing in Malaysia) for companies hiring here.
What Are the Payroll Filing Deadlines?
Frequently Asked Questions
Is HRDF mandatory for all employers in Malaysia?
HRDF (Human Resources Development Fund) is mandatory for employers with 10 or more Malaysian employees in specified industries (manufacturing, services, mining, etc.). The levy is 1% of monthly payroll. Employers with 5-9 employees can register voluntarily. HRDF funds are used for employee training programs. Non-payment triggers penalties of 15% of outstanding amounts.
Do foreign workers contribute to EPF?
Foreign workers are not required to contribute to EPF. Voluntary contribution is possible if both employer and employee agree. If the employer elects to contribute for a foreign worker, the minimum employer contribution is RM 5/month (not the standard 12-13%). The foreign employee would contribute 11% of wages if participating voluntarily.
What happens to EPF upon employee termination?
EPF contributions cease from the last day of employment. The employer must submit the final contribution by the 15th of the following month. Employees can withdraw EPF savings at age 55 (Account 2 earlier for specific purposes: housing, education, medical). Upon leaving Malaysia permanently, foreign workers can withdraw their voluntary EPF contributions.
How is overtime calculated under Malaysian payroll?
Overtime for employees covered by the Employment Act (all employees regardless of salary since 2022 amendments): normal day OT: 1.5x hourly rate, rest day OT: 2x, public holiday OT: 3x. Overtime applies to employees earning RM 4,000/month or below. Employees above RM 4,000 are covered by the Employment Act but Part XII overtime provisions do not apply.
What is the payroll cycle in Malaysia?
Malaysia uses a monthly payroll cycle. The Employment Act requires wages to be paid within 7 days after the last day of any wage period. Most companies pay on the last working day of the month or the 25th-28th. Semi-monthly or weekly payroll is permitted but monthly is the standard practice.
