Outsource Malaysian Payroll to RecruitGo.
Malaysian payroll means managing EPF retirement contributions (the largest employer cost), table-based SOCSO and EIS deductions, monthly PCB tax withholding via LHDN, and new mandatory EPF for foreign workers. This guide covers what each component costs and what your EOR handles for you.
How Malaysian Payroll Works
Malaysian payroll requires employers to calculate and remit four mandatory statutory contributions each month: EPF (KWSP) for retirement savings, SOCSO (PERKESO) for social security, EIS (SIP) for unemployment insurance, and PCB (MTD) for monthly income tax deduction. Some employers are also subject to HRDF (HRD Corp) training levies.
Pay frequency is typically monthly. EPF is by far the largest employer cost at 12 to 13% of wages for Malaysian citizens. SOCSO and EIS use table-based amounts (not flat percentages) with a wage ceiling of RM6,000. PCB is Malaysia's PAYE (pay-as-you-earn) system, where the employer withholds estimated income tax monthly and remits it to LHDN (the Inland Revenue Board).
Unlike the Philippines and Indonesia, Malaysia has no mandatory 13th month pay or religious holiday bonus. Annual bonuses are discretionary. This makes the statutory cost structure simpler in some ways, but EPF is one of the highest mandatory retirement contributions in Southeast Asia.
Major 2025 change: Since October 2025, foreign workers in Malaysia are now required to contribute to EPF at 2% employer + 2% employee (previously a flat RM5 employer contribution). This significantly increases payroll costs for companies with expatriate staff. Your EOR ensures all foreign employees are correctly registered and contributions are calculated at the new rates.
EPF / KWSP (Employees Provident Fund)
EPF is Malaysia's mandatory retirement savings scheme, governed by the EPF Act 1991. It is the single largest employer payroll cost. Contributions are based on the employee's monthly wages, with rates varying by citizenship, age, and salary level. For salaries up to RM20,000, contributions follow the Third Schedule fixed-amount table. For salaries above RM20,000, exact percentages are applied.
| Employee Category | Employer Rate | Employee Rate | Notes |
|---|---|---|---|
| Malaysian citizen / PR, under 60 | 13% (salary up to RM5,000) or 12% (above RM5,000) | 11% | Standard rate. Largest cost component. No salary ceiling. |
| Malaysian citizen / PR, age 55 to 60 | 13% / 12% | 5.5% (can opt to stay at 11%) | Reduced employee rate. Employer rate unchanged. |
| Malaysian citizen / PR, age 60+ | 4% | 0% (voluntary) | Significantly reduced. Employee contribution optional. |
| Foreign worker (since Oct 2025) | 2% | 2% | New mandatory rate. Previously flat RM5 employer only. No salary ceiling. |
EPF contributions must be remitted by the 15th of the following month. Late payments incur charges based on the EPF dividend rate plus 1% per annum, minimum RM10. Employee EPF contributions are tax-deductible up to RM4,000/year. For salaries up to RM20,000, use the Third Schedule fixed-amount table rather than exact percentage calculation.
SOCSO / PERKESO and EIS / SIP
SOCSO (Social Security Organisation)
SOCSO provides two schemes: the Employment Injury Scheme (covering work accidents and occupational diseases) and the Invalidity Scheme (covering non-work-related invalidity and death). Contributions are table-based, meaning they follow fixed amounts by salary bracket rather than exact percentages. The wage ceiling is RM6,000/month (increased from RM5,000 in October 2024).
| Category | Employer | Employee | Notes |
|---|---|---|---|
| Under 60 (both schemes) | ~1.75% of wages | ~0.5% of wages | Table-based amounts. Employer pays ~78% of total contribution. Capped at RM6,000 wage ceiling. |
| Age 60+ (Employment Injury only) | ~1.25% of wages | 0% | Invalidity Scheme no longer applies. Employer only. |
SOCSO uses a fixed contribution table published by PERKESO. Contributions are determined by the salary bracket, not by applying an exact percentage. Once an employee is registered, SOCSO contributions continue even if their salary later exceeds the RM6,000 ceiling.
EIS / SIP (Employment Insurance System)
EIS provides financial assistance and re-employment support to workers who lose their jobs through retrenchment. It is administered by PERKESO alongside SOCSO. Contributions are approximately 0.2% each for employer and employee, following a table-based schedule with the same RM6,000 wage ceiling. EIS applies to employees aged 18 to 60.
| Monthly Salary | Employer (~0.2%) | Employee (~0.2%) | Total |
|---|---|---|---|
| RM2,000 | RM3.90 | RM3.90 | RM7.80 |
| RM4,000 | RM7.90 | RM7.90 | RM15.80 |
| RM6,000 or above | RM11.90 | RM11.90 | RM23.80 |
PCB / MTD (Monthly Tax Deduction)
Malaysia operates a PAYE (pay-as-you-earn) system called PCB (Potongan Cukai Bulanan) or MTD (Monthly Tax Deduction). Employers calculate, deduct, and remit estimated income tax from each employee's monthly salary to LHDN (the Inland Revenue Board). PCB amounts depend on gross income, marital status, number of dependents, EPF contributions, and other allowable reliefs.
Unlike a simple bracket lookup, PCB calculation considers the employee's full annual projected income and applies progressive rates, then divides by 12 for the monthly deduction. Employers can use LHDN's official PCB tables, the computerized calculation method, or the e-PCB online calculator.
| Annual Chargeable Income (RM) | Tax Rate |
|---|---|
| RM 0 to 5,000 | 0% |
| RM 5,001 to 20,000 | 1% |
| RM 20,001 to 35,000 | 3% |
| RM 35,001 to 50,000 | 6% |
| RM 50,001 to 70,000 | 11% |
| RM 70,001 to 100,000 | 19% |
| RM 100,001 to 400,000 | 25% |
| RM 400,001 to 600,000 | 26% |
| RM 600,001 to 2,000,000 | 28% |
| RM Over 2,000,000 | 30% |
Key tax reliefs that reduce PCB: Employee EPF contributions (up to RM4,000/year), life insurance and takaful (up to RM3,000/year), SOCSO contributions, medical expenses, education fees, and dependent reliefs. These are factored into the monthly PCB calculation to avoid over-withholding. At year-end, employees file a personal tax return (Form BE by April 30) to reconcile actual tax liability against PCB deducted throughout the year.
What It Actually Costs to Employ Someone
Complete monthly payroll breakdown for a Malaysian citizen earning RM8,000/month gross (~USD 1,780). This shows the employer's total cost, employee deductions, and approximate net take-home pay.
| Component | Employer Pays | Employee Pays | Notes |
|---|---|---|---|
| EPF / KWSP | RM 960 | RM 880 | 12% ER (salary > RM5K) + 11% EE |
| SOCSO / PERKESO | RM ~69.05 | RM ~19.75 | Table-based. Both schemes. Capped at RM6K ceiling. |
| EIS / SIP | RM ~11.90 | RM ~11.90 | Table-based. ~0.2% each. Capped at RM6K ceiling. |
| PCB / MTD (Income Tax) | RM — | RM ~115 | Monthly estimate. Depends on reliefs and dependents. |
| Totals | RM ~9,041 | RM ~1,027 | Employer cost ~113% of gross. Employee take-home ~RM6,973. |
PCB is approximate and depends on marital status, dependents, and tax reliefs claimed. SOCSO and EIS use table-based amounts from the PERKESO contribution schedule, not exact percentages. No mandatory 13th month or THR in Malaysia. EOR management fee not included above.
Deadlines, Portals, and Common Mistakes
Monthly remittance deadlines
| Contribution | Deadline | Portal / Method |
|---|---|---|
| EPF / KWSP | 15th of the following month | i-Akaun (Employer) portal or authorized banks |
| SOCSO / PERKESO | 15th of the following month | PERKESO ASSIST portal via FPX or Direct Debit |
| EIS / SIP | 15th of the following month (with SOCSO) | Submitted together with SOCSO via ASSIST |
| PCB / MTD | 15th of the following month | e-PCB, e-CP39, or e-Data PCB via LHDN MyTax portal |
Key annual obligations
| Obligation | Deadline |
|---|---|
| Form EA (annual remuneration statement per employee) | End of February of the following year |
| Form E (employer's annual return to LHDN) | 31 March of the following year (e-Filing) |
| Employee personal tax return (Form BE) | 30 April of the following year (e-Filing) |
| Minimum wage review | Annually (national minimum wage currently RM1,500/month) |
| HRDF / HRD Corp levy | Monthly, 15th of the following month (if applicable) |
Common payroll mistakes
You Pay One Invoice. We Handle the Rest.
When you hire in Malaysia through RecruitGo's Employer of Record, all payroll processing is managed by our local team. You do not interact with KWSP, PERKESO, LHDN, or HRD Corp directly.
We calculate gross-to-net pay, deduct EPF, SOCSO, EIS, and PCB employee contributions, and pay your employees in Malaysian Ringgit on the agreed pay date. Compliant payslips issued monthly.
We register each employee with KWSP, PERKESO (SOCSO + EIS), and LHDN. Monthly contributions remitted by the 15th via each agency's official portal. Correct table lookups for SOCSO and EIS, correct EPF rates by category.
We calculate monthly PCB using the LHDN computerized method, factoring in marital status, dependents, EPF deductions, and declared reliefs. Filed electronically via e-PCB. Form EA issued to each employee annually.
We register foreign employees with EPF at the mandatory 2% + 2% rate, handle the registration process (now largely automated for employment pass holders), and ensure contributions are correctly calculated and remitted.
You receive a single consolidated invoice covering gross salary, all employer statutory contributions, and EOR fee. No MYR bank accounts, no multi-agency payments, no FX management needed on your end.
We monitor annual minimum wage reviews, EPF rate changes, SOCSO ceiling adjustments, PCB table updates, and HRDF requirements. When regulations change, we update payroll calculations automatically and advise on any cost impact.
Frequently Asked Questions
For a Malaysian citizen earning RM5,000 to RM10,000/month, employer statutory contributions add approximately 13 to 15% above gross salary. This is primarily driven by EPF (12 to 13%). SOCSO and EIS add roughly 2% combined but are capped at the RM6,000 wage ceiling. There is no mandatory 13th month or THR in Malaysia, so the total statutory burden is lower than the Philippines or Indonesia when including those countries' mandatory bonus obligations.
No. Malaysia does not have a statutory 13th month pay, THR (religious holiday bonus), or any other mandatory annual bonus. Annual bonuses, performance bonuses, and profit sharing are entirely at the employer's discretion. This is a significant difference from the Philippines (mandatory 13th month) and Indonesia (mandatory THR). However, many Malaysian employers do pay discretionary annual bonuses, and market expectations should be factored into compensation planning.
Since October 2025, all non-Malaysian employees under age 75 with a valid work pass (employment pass, professional visitor pass, residence pass) must be registered as EPF members. Both employer and employee contribute 2% of monthly wages. There is no salary ceiling. Foreign workers can withdraw their EPF savings upon returning to their home country with proof of employment termination. This replaces the previous system where employers paid a flat RM5/month.
SOCSO and EIS contributions follow fixed-amount tables published by PERKESO, where each salary bracket has a set contribution amount for employer and employee. This means the effective rate is approximately 1.75% employer and 0.5% employee for SOCSO, and 0.2% each for EIS, but the actual ringgit amounts are predetermined by the table. Employers must look up the bracket, not calculate a percentage. This is different from EPF, which does use percentage-based calculation.
HRDF (now HRD Corp) is a training levy of 1% of monthly payroll. It is mandatory for companies in specified industries (manufacturing, services, mining, etc.) with 10 or more Malaysian employees, and optional for those with 5 to 9 employees in covered sectors. Foreign companies with Malaysian employees through an EOR may be subject to HRDF depending on the EOR entity's industry classification. The levy funds employee training programs.
This page focuses specifically on payroll mechanics: EPF contribution rates and categories, SOCSO and EIS table-based calculations, PCB monthly tax deduction, compliance deadlines, and common mistakes. The EOR Malaysia page covers the broader employment picture: employment contracts under the Employment Act 1955, termination and severance, leave entitlements, minimum wage compliance, and the full cost of hiring through an EOR.
Malaysia uses a true PAYE (pay-as-you-earn) system where the employer withholds estimated income tax monthly and remits it to LHDN. This is similar to the UK model. The Philippines also has employer withholding but uses an annualize/de-annualize method each period. Indonesia introduced the TER effective rate system in 2024. Hong Kong has no PAYE at all. Malaysia's PCB is relatively straightforward but requires correct input of employee reliefs and dependents to avoid over- or under-withholding.
