Payroll in Malaysia 2026: PCB, EPF, SOCSO and EIS

In Malaysia the employer deducts Monthly Tax Deduction (MTD or PCB) from each salary, plus the employee's EPF (11%), SOCSO (0.5%) and EIS (0.2%) contributions, and remits MTD to LHDN by the 15th of the following month. On top it pays EPF of 13% (12% above RM5,000), SOCSO 1.75%, EIS 0.2% and, where liable, the 1% HRD levy.

Malaysian payroll at a glance

EPF, SOCSO, EIS and the HRD levy

The RM6,000 ceiling. Since 1 October 2024 SOCSO and EIS contributions are charged on wages up to RM6,000 a month (previously RM5,000). PERKESO's contribution tables work in RM100 wage bands; at the ceiling the maximum is RM104.15 (employer) and RM29.75 (employee) for SOCSO, and RM11.90 each for EIS.

Who pays which SOCSO category. Employees under 60 are in the first category. Employees aged 60 or more, and new employees aged 55 who had no contributions before, are in the second category, which covers employment injury only and is paid by the employer. EIS covers private-sector employees aged 18 to 60, except those aged 57 or more with no earlier contributions.

LINDUNG 24 Jam. PERKESO's non-employment injury scheme covers accidents outside working hours. Its contribution is borne entirely by the employee: 0.75% in the first two years, rising in phases to 1.25% from the sixth year. PERKESO states that it is voluntary for local employees and mandatory for foreign workers.

Income tax and Monthly Tax Deduction (PCB)

Resident individuals pay tax on chargeable income at these rates, which LHDN publishes for YA 2023 to 2025 and which also underlie its 2026 MTD formula:

Reliefs and rebate. Every resident gets an individual relief of RM9,000. EPF contributions are deductible up to RM4,000 a year (within a combined RM7,000 limit with life insurance) and SOCSO contributions up to RM350. A resident whose chargeable income does not exceed RM35,000 gets a rebate of RM400. Non-residents are taxed at a flat 30%.

How MTD is calculated. LHDN's computerised method for 2026 projects the employee's chargeable income for the year (P), from salary to date and the estimate for the remaining months, minus EPF up to RM4,000, the individual relief and any deductions claimed. The monthly deduction is [(P − M) × R + B − (zakat + MTD already paid)] ÷ (remaining months + 1), where M, R and B come from LHDN's table for the band (B already includes the RM400 rebate where it applies). Employees can claim other reliefs through Form TP1, and new joiners report earlier employment in the year on Form TP3. Bonuses and other additional remuneration have their own MTD step. MTD is rounded up to the next 5 sen, and if it comes to less than RM10 before zakat the employer does not deduct it.

Minimum wage, working time and mandatory pay

The minimum wage is RM1,700 a month. Budget 2025 raised it from RM1,500 with effect from 1 February 2025, and employers with fewer than five employees had to pay it from 1 August 2025. Budget 2026 announced no new rate.

The Employment Act 1955, as amended in 2022, limits normal working hours to 45 a week. Employees earning more than RM4,000 a month, except manual workers, are not entitled to overtime, rest day or public holiday pay under the Act. Maternity leave is 98 days, and fathers with at least 12 months' service get 7 consecutive days of paid paternity leave.

Monthly payroll calendar and filings

When an employee stops working, dies or leaves Malaysia for good, the employer withholds money due to the employee for 90 days or until LHDN issues a tax clearance letter. Keep payroll records for 7 years and make them available to LHDN.

Worked example: RM5,000 a month

A Malaysian employee aged 30, single, earns RM5,000 a month with no other income and no Form TP1 claims.

MTD: P = 12 × 5,000 − 4,000 (EPF, capped) − 9,000 (individual relief) = RM47,000. In the RM35,001 to RM50,000 band, M = 35,000, R = 6% and B = 600, so the tax for the year is (47,000 − 35,000) × 6% + 600 = RM1,320 and MTD is RM110.00 a month. SOCSO and EIS are taken from PERKESO's tables for wages above RM4,900 and up to RM5,000.

If the employer is liable for the HRD levy, add 1% (RM50.00), for a total cost of RM5,796.55. Claiming the SOCSO relief on Form TP1 would lower the MTD slightly.

Common mistakes

1. 1Capping SOCSO and EIS at RM5,000 instead of the RM6,000 ceiling in force since October 2024.
2. 2Applying the 12% employer EPF rate to wages of RM5,000 or less, where the rate is 13%.
3. 3Leaving foreign employees out of EPF, which has been mandatory for them since October 2025.
4. 4Paying below RM1,700, including in businesses with fewer than five employees since 1 August 2025.
5. 5Working SOCSO and EIS out as a straight percentage instead of from PERKESO's wage-band tables.
6. 6Missing the 15th for MTD, or forgetting Form CP22 for new employees.

For a smooth month-end, see our month-end close checklist.

How Clientlly helps

Clientlly ships a built-in payroll profile for Malaysia: the resident tax rates with the individual, EPF and SOCSO reliefs and the RM400 rebate, EPF at 11% for the employee and 13% or 12% for the employer, SOCSO and EIS with the RM6,000 ceiling, and the RM1,700 minimum wage, checked against official sources on 1 October 2026. It calculates gross to net and the employer contributions, produces payslips, supports recurring payroll adjustments, and imports employees and payroll data; an administrator can adjust the rates in the payroll tax settings. Clientlly applies the contribution percentages directly, so compare small differences with the EPF and PERKESO wage-band tables and LHDN's MTD formula. The profile models one employee in a primary job, under 60, single, without dependants, at national level, so the HRD levy, foreign employees, other reliefs claimed on Form TP1 and personal circumstances must be checked.

The Clientlly HR module also handles leave requests and approvals with a leave calendar and keeps HR documents in one place, and attendance and time tracking records hours and overtime for you to review before payroll.