Malaysia Payroll for Employers 2026: EPF, SOCSO, EIS & PCB — Rates, Registration Deadlines, the Foreign-Worker EPF Change and the True Cost of Hiring

You have incorporated your Sdn Bhd, opened a bank account, and made your first hire in Malaysia. The moment that employee starts, your company becomes an employer — and Malaysian law attaches a set of monthly statutory duties that have nothing to do with the salary you agreed. On top of gross pay, you must register with and contribute to EPF (retirement fund), SOCSO (social security), and EIS (employment insurance), and you must deduct and remit PCB/MTD monthly income tax. Get the registrations late, the rates wrong, or the deadlines missed, and you expose the company — and its directors — to penalties from three different agencies. This guide sets out the 2026 rates, the registration steps and their deadlines, and the real cost of employing someone in Malaysia beyond the headline salary.

The four statutory pillars — who runs them

Payroll compliance in Malaysia sits on four separate schemes, each administered by a different body and each with its own registration, rate and monthly filing. A foreign employer new to Malaysia has to set up all four before the first payroll runs clean:

The first three (EPF, SOCSO, EIS) are contributions — real money the company pays on top of salary, plus a slice deducted from the employee. The fourth (PCB/MTD) is a tax deduction — the company withholds the employee's own income tax from their pay and forwards it to LHDN, so it is not an extra cost to the company, but it is an extra duty. Missing any of the four is a compliance failure in its own right.

EPF — the biggest line, and the 2026 foreign-worker change

The Employees Provident Fund (EPF / KWSP) is a compulsory retirement savings scheme and the largest statutory cost of employing someone in Malaysia. For local employees below age 60, the standard rates are:

The employer rate steps down from 13% to 12% once monthly wages pass RM5,000 — a detail payroll software handles automatically but that manual calculations often get wrong. The most important recent change for foreign-owned companies is the mandatory EPF for non-citizen employees: from 1 October 2025, EPF contributions became compulsory for foreign workers at a reduced rate of 2% each (employer and employee). Previously a foreign employee's EPF was voluntary and, in practice, rarely paid — so any foreign company employing expatriates or foreign staff in Malaysia must now factor this in and register those employees for EPF.

SOCSO and EIS — small percentages, strict rules

SOCSO (PERKESO) provides protection against workplace injury and invalidity; EIS provides income support if an employee is retrenched. Both are calculated on wages up to a ceiling of RM6,000 per month (raised from RM5,000 in October 2024) — earnings above RM6,000 are contributed on as if they were RM6,000.

Two nuances matter. First, foreign workers are covered by SOCSO under the Employment Injury Scheme only, at an employer-paid rate of 1.25% with no employee share — they are not in the Invalidity Scheme. Second, EIS does not apply to foreign workers at all; it covers Malaysian citizens and permanent residents aged 18–60. So the exact contribution stack differs depending on whether a given employee is a local or a foreigner — another reason a foreign-owned company's payroll needs to be set up with care rather than copied from a template.

PCB / MTD — deducting the employee's income tax

Monthly Tax Deduction (MTD), known in Malay as Potongan Cukai Bulanan (PCB), is the system under which the employer deducts each employee's estimated income tax directly from their monthly salary and remits it to LHDN. Unlike EPF and SOCSO, PCB is not a cost to the company — it is the employee's own tax, collected at source so that they are not hit with a large bill at year-end. But the duty to compute, deduct and remit it correctly falls on the employer.

The amount deducted depends on the employee's salary, marital status, number of children and other reliefs, following LHDN's PCB schedule or an approved computerised calculation. The employer must remit the total PCB to LHDN by the 15th of the following month, together with the CP39 listing. Related annual duties include lodging Form E (employer's return) and issuing each employee an EA form summarising their annual pay and deductions, both early in the year following.

Registration — the deadlines that start the clock

Each scheme has its own registration channel, and each expects the employer to register promptly after taking on the first employee. Doing this late is itself an offence, separate from any missed contribution:

To register, you generally need the company's SSM incorporation documents, the authorised signatory's identification, the company bank-account details, and the first employee's particulars. SOCSO and EIS are convenient in that a single registration on the PERKESO ASSIST portal enrols the employer in both schemes at once. All monthly contributions and deductions — EPF, SOCSO, EIS and PCB — share the same payment deadline: the 15th of the following month.

What it actually costs to employ someone

The number that matters to a foreign owner planning headcount is the true cost per employee, not the salary line. On top of gross pay, the employer's statutory contributions (EPF employer share, SOCSO employer share, EIS employer share) typically add roughly 13–15% for a local employee earning within the ceilings. Consider a Malaysian employee earning RM5,000 a month:

So an RM5,000 salary really costs the company around RM5,750 a month before any benefits, bonus or PCB administration. Separately, the employee sees deductions from their own pay — EPF 11%, SOCSO 0.5%, EIS 0.2%, plus PCB — which reduce take-home but are not an extra cost to the company (except PCB, which the company merely passes through). Budgeting on the bare salary figure is the single most common planning error foreign employers make when modelling a Malaysian team.

The annual layer — and the joining/leaving forms

Monthly contributions are only part of the picture. Malaysian payroll carries an annual reporting layer that catches employers who assumed their duties ended once the 15th-of-the-month payments were made. Two documents fall due early each year: Form E, the employer's annual return to LHDN declaring the total remuneration paid and PCB deducted for all employees, and the EA form, a per-employee statement of the previous year's pay and deductions that the employer must issue to each staff member so they can file their own personal tax return. Form E is generally due by 31 March, and EA forms must reach employees by the end of February.

There is also a set of event-driven forms that many foreign employers overlook. When an employee joins, the employer notifies LHDN via Form CP22; when an employee leaves or is about to leave the country, the employer must file Form CP22A (or CP21 for someone leaving Malaysia) — and, critically, may be required to withhold the departing employee's final payments until LHDN issues tax clearance. This last point matters most for expatriates: releasing an Employment Pass holder's final salary without tax clearance can leave the company liable for their unpaid tax. Building these forms into your onboarding and offboarding checklist prevents a departing hire from becoming a tax problem for the company.

Common mistakes foreign employers make

• Budgeting on gross salary alone. Add ~13–15% employer contributions to every local headcount before you commit.
• Assuming foreigners are exempt from EPF. No longer true — 2% each is mandatory from October 2025.
• Applying local rates to foreign staff. Foreign workers get SOCSO injury-only (1.25% employer) and no EIS — a different stack from locals.
• Registering late. EPF within 7 days, SOCSO/EIS within 30 days — the deadlines run from the first hire, not from when you get around to it.
• Missing the 15th. One late payroll can trigger penalties from EPF, SOCSO and LHDN at once.
• Forgetting the annual layer. Form E and EA forms are due early each year; skipping them is a separate LHDN offence.

Getting payroll right from the first hire

Payroll is where a foreign-owned company first meets Malaysia's regulators as an employer rather than just a taxpayer — and it is unusually easy to get wrong because four agencies, three registration channels and two different rate stacks (local vs. foreign) all converge on one monthly run. ONEKEY BIZ sets it up correctly from day one: registering the company with EPF, SOCSO/EIS and LHDN as an employer; classifying each hire as local or foreign and applying the right rate stack; running monthly payroll with accurate EPF, SOCSO, EIS and PCB; remitting everything by the 15th; and handling the annual Form E and EA forms. For a company hiring its first Malaysian staff, that turns a four-agency compliance maze into a single monthly figure you can budget around.

Payroll is one piece of running a compliant Malaysian company. See our guides on corporate tax & SST compliance, the company secretary and annual return, and Employment Pass requirements for bringing in foreign staff. When you are ready to hire, talk to ONEKEY about payroll setup or explore our monthly bookkeeping & payroll service. WhatsApp us at +60 12-321 1349.

This article is general information only, not legal, tax or immigration advice. Policies, thresholds and official fees are set by the relevant Malaysian authorities and may change. Talk to our consultants about your specific situation.