How to run payroll in Malaysia, step by step

Malaysian payroll runs to a steady monthly rhythm, with EPF, SOCSO, EIS and monthly tax deductions all due by the 15th of the following month. What has changed is the detail: mandatory EPF for foreign workers since October 2025, a RM6,000 ceiling for SOCSO and EIS, and a minimum wage of RM1,700.

Here is the cycle for enterprise employers, step by step.

Step 1: Register with the statutory bodies

Before the first payroll, register as an employer with the Employees Provident Fund (KWSP/EPF), the Social Security Organisation (PERKESO), which administers both SOCSO and the Employment Insurance System (EIS), and the Inland Revenue Board (LHDN). If you employ 10 or more Malaysian employees in a sector covered by the Pembangunan Sumber Manusia Berhad Act 2001, registration with HRD Corp is compulsory.

Step 2: Collect employee data

Collect identity details, tax numbers, bank details and EPF and SOCSO numbers at onboarding. Employees can declare reliefs and deductions to their employer so that monthly tax deductions reflect them.

Step 3: Calculate gross pay

Gross pay includes basic salary, overtime, allowances, commissions and benefits. The national minimum wage is RM1,700 a month, and it applies to basic salary: allowances cannot be used to make up the difference.

Step 4: Apply statutory contributions

Contribution	Employer	Employee	Ceiling
EPF (wages RM5,000 and below)	13%	11%	None
EPF (wages above RM5,000)	12%	11%	None
EPF (foreign workers, since October 2025)	2%	2%	None
SOCSO	About 1.75% (table-based)	About 0.5% (table-based)	RM6,000 a month
EIS	About 0.2% (table-based)	About 0.2% (table-based)	RM6,000 a month
HRD Corp levy	1% (10 or more Malaysian employees, covered sectors)	–	–

Two points catch employers out. EPF has no wage ceiling, so senior salaries carry the full rate. SOCSO and EIS are calculated from contribution tables by wage band, not a simple percentage.

Foreign worker EPF applies to non-Malaysian citizen employees with a valid pass, excluding domestic workers. Malaysian permanent residents stay on the citizen rates.

Step 5: Calculate monthly tax deductions

Monthly tax deduction (PCB, also called MTD) is calculated using LHDN’s prescribed method and reflects the employee’s declared reliefs. It must be recalculated when pay changes, including bonuses and arrears.

Step 6: Pay and issue payslips

Pay net salary and issue payslips showing gross pay, each contribution, PCB and any other deductions.

Step 7: Remit by the 15th

EPF, SOCSO, EIS and PCB for a month’s wages are all due by the 15th of the following month. Late EPF payments attract late payment charges, so build the remittance into the payroll calendar with a named owner and a check before submission.

Step 8: Close the year

Each year, employers must give employees their annual remuneration statement (Form EA) and file the employer’s return (Form E) with LHDN. Reconcile PCB, EPF and SOCSO monthly so the annual figures match.

Step 9: Watch the edges

Two adjacent rules affect payroll in 2026. Employment income is currently exempt from e-Invoice, but staff claims, agent commissions and some director fees are not. And Employment Pass salary floors rose on 1 June 2026, so expatriate renewals may need salary adjustments before they reach payroll.

Common mistakes

• Using allowances to meet the RM1,700 minimum wage.

• Applying the wrong EPF employer rate at the RM5,000 boundary.

• Forgetting foreign worker EPF since October 2025.

• Capping EPF at RM6,000, as if it worked like SOCSO.

• Not recalculating PCB when a bonus is paid.

Where systems help

MiHCM Enterprise applies all current rules in every payroll run and produces submission-ready statutory files. MiHCM’s regional headquarters is in Kuala Lumpur, and its payroll is built for Malaysian enterprises.

Frequently Asked Questions

What are the EPF rates in Malaysia in 2026?

Employees contribute 11%. Employers contribute 13% for monthly wages of RM5,000 or below and 12% above that. Foreign workers and their employers each contribute 2%.

What is the SOCSO and EIS wage ceiling?

RM6,000 a month, since October 2024. EPF has no wage ceiling.

When are payroll contributions due in Malaysia?

EPF, SOCSO, EIS and PCB for a month’s wages are due by the 15th of the following month.

What is the minimum wage in Malaysia?

RM1,700 a month, applied to basic salary.

Do salaries need e-Invoices in Malaysia?

No. Employment income under a contract of service is currently exempt from e-Invoice, although staff claims, agent commissions and some director fees carry obligations.