Malaysia Payroll Compliance Guide 2026: EPF, SOCSO, EIS, PCB & e-Invoicing
The definitive reference for Malaysian employers and HR teams, covering every statutory obligation and what your payroll process must look like to stay fully compliant.
Table of Contents
Malaysia Payroll Compliance: An Overview
Running payroll in Malaysia involves far more than calculating salaries and transferring money. Employers are legally required to deduct and remit contributions to four separate government bodies every single month. For companies managing both Malaysian and foreign employees, the complexity doubles: different EPF rates, different SOCSO applicability rules, Employment Pass implications, and now the incoming e-Invoicing mandate that touches every payroll-related transaction.
This guide covers every component of Malaysian payroll compliance in 2026. Whether you are running payroll in-house or evaluating whether to outsource, this is the reference you need.
EPF (Employees Provident Fund): 2026 Rates & Foreign Worker Changes
The Employees Provident Fund (EPF), administered by KWSP, is Malaysia’s mandatory retirement savings scheme. All employers must register with KWSP and remit contributions by the 15th of the following month.
EPF Contribution Rates — Malaysian Citizens & Permanent Residents
| Employee Monthly Wage | Employee Contribution | Employer Contribution |
|---|---|---|
| RM5,000 and below | 11% | 13% |
| Above RM5,000 | 11% | 12% |
| Employees aged 60 and above | 5.5% | 6.5% (age 60–75) / 4% (age 75+) |
EPF for Foreign Workers — The 2025 Change You Must Know
This is the single most significant payroll compliance change affecting employers with foreign staff in 2025–2026. Effective from wages earned in October 2025, mandatory EPF contributions apply to all non-Malaysian citizens and non-permanent residents holding valid work passes in Malaysia.
| Employee Type | Employee Rate | Employer Rate |
|---|---|---|
| Foreign Workers (non-PR) | 2% | 2% |
What this means in practice: if a foreign employee earns RM8,000/month, RM160 is deducted from their salary and RM160 is contributed by the employer — totalling RM320 per month remitted to KWSP. Employers who fail to register foreign employees for EPF face fines and back-payment obligations.
Registration and contribution submission via i-Akaun portal
SOCSO: Employment Injury & Invalidity Scheme
SOCSO (Social Security Organisation), administered by PERKESO, covers two protection schemes for employees in Malaysia. All private sector employers must register with PERKESO and contribute monthly.
The Two SOCSO Schemes
- Employment Injury Scheme (EIS-SOCSO) — covers work-related injuries, occupational diseases, and deaths. Applies to employees of all ages.
- Invalidity Scheme — provides invalidity pension and survivors’ pension. Applies to employees below age 60 only.
SOCSO Contribution Rates
| Employee Monthly Wage | Employee Contribution | Employer Contribution | Applicable Scheme |
|---|---|---|---|
| Up to RM6,000 (insured ceiling) | Per PERKESO schedule | Per PERKESO schedule | Both schemes (under age 60) |
| Employees aged 60 and above | Per PERKESO schedule (reduced) | Per PERKESO schedule (reduced) | Employment Injury Scheme only |
Refer to the PERKESO website for the full contribution schedule table, as rates are banded across 64 wage brackets from RM30 to RM6,000. SOCSO applies to both Malaysian employees and foreign workers holding valid work passes. The insured salary is capped at RM6,000 regardless of actual salary — meaning the SOCSO contribution does not increase above the RM6,000 ceiling amount.
EIS (Employment Insurance System)
EIS (Employment Insurance System), also administered by PERKESO, was introduced in 2018 to provide temporary financial support to employees who are retrenched. It is a separate contribution from SOCSO.
Employment Pass Categories
| Contribution | Employee Rate | Employer Rate | Salary Ceiling |
|---|---|---|---|
| EIS | 0.2% of insured salary | 0.2% of insured salary | RM6,000/month |
EIS applies to Malaysian citizens and permanent residents. Foreign workers are generally not covered under EIS, as the scheme is designed for employees eligible for Malaysian retrenchment benefits. Confirm applicability with PERKESO for any ambiguous cases involving PR holders.
PCB / Monthly Tax Deduction (MTD): How It Works
PCB (Potongan Cukai Berjadual), also known as MTD (Monthly Tax Deduction), is the monthly income tax withheld from employee salaries by employers and remitted to LHDN (Inland Revenue Board). It is the mechanism by which Malaysian employees pay their income tax on a pay-as-you-earn basis throughout the year.
How PCB Is Calculated
PCB is calculated based on an employee’s annual projected income, including all allowances and benefits-in-kind, less eligible personal reliefs declared by the employee. LHDN provides a PCB calculator and the e-PCB system for employers to manage monthly submissions.
PCB Rates — Resident Individual Tax Brackets
| Chargeable income* (RM) | 2026 | |
|---|---|---|
| Tax (RM) | % on excess | |
| 5,000 | 0 | 1 |
| 20,000 | 150 | 3 |
| 35,000 | 600 | 6 |
| 50,000 | 1500 | 11 |
| 70,000 | 3,700 | 19 |
| 100,000 | 9,400 | 25 |
| 400,000 | 84,400 | 26 |
| 600,000 | 136,400 | 28 |
| 2,000,000 | 528,400 | 30 |
For non-resident employees (including foreign workers on Employment Pass who have not met the 182-day residency threshold in a calendar year), a flat rate of 30% applies on all income with no reliefs allowed. This is an important distinction — a foreign employee who joins mid-year may be taxed at 30% for their first partial year.
PCB must be remitted to LHDN by the 15th of the following month via the e-PCB portal.
Minimum Wage 2026: RM1,700 Nationally
Malaysia’s national minimum wage is RM1,700 per month, effective August 2025, as gazetted under the Minimum Wages Order 2022 (Amendment 2025) by the Ministry of Human Resources. This applies nationally across all sectors and all states.
Employers who pay below the minimum wage face enforcement action from the Department of Labour. Fines for non-compliance are substantial, and the Department of Labour conducts regular inspections particularly in sectors employing foreign workers. Review all salary structures to ensure compliance, including part-time and contract employees whose effective rate must meet the minimum wage equivalent.
e-Invoicing Mandate: What Employers Must Do Before July 2026
Malaysia’s e-Invoicing mandate is the most operationally significant compliance change of 2026 for employers and payroll service providers. Administered by LHDN through the MyInvois system, it requires all businesses to issue electronic invoices for transactions — replacing paper and PDF invoices with real-time validated e-Invoices.
Implementation Timeline
| Phase | Businesses Covered | Effective Date |
|---|---|---|
| Phase 1 | Annual turnover > RM100 million | 1 August 2024 |
| Phase 2 | Annual turnover RM25 million – RM100 million | 1 January 2025 |
| Phase 3 | Annual turnover or revenue of up to RM5 million | 1 January 2026 |
What This Means for Payroll
For employers, e-Invoicing affects any payroll-related billing — including invoices from payroll outsourcing providers, EOR service fee invoices, and employee expense reimbursement documentation. All payroll service providers you work with must be e-Invoice compliant by July 2026. If you are currently receiving paper or PDF invoices for payroll services, ask your provider about their e-Invoice readiness now.
Payroll Submission Deadlines at a Glance
| Contribution | Submission Deadline | Portal |
|---|---|---|
| EPF | 15th of following month | i-Akaun Employer (KWSP) |
| SOCSO & EIS | 15th of following month | ASSIST Portal (PERKESO) |
| PCB (Income Tax) | 15th of following month | e-PCB via MyTax Portal |
| HRDF (Levy) | 15th of following month | HRDCorp eTRiS Portal |
What will be the penalties of late payment to this four statutory payment bodies?
- EPF (KWSP): Under EPF Act 1991 Section 43(2), failure to make contribution on or before the 15th day of the month will face imprisonment term not exceeding 3 years or to a fine not exceeding RM10,000 or both.
- SOCSO & EIS: Interest on late payment of contributions will be imposed at a rate of 6% per annum for each day of contributions not paid within the stipulated period.
- PCB: A late payment of 10% will be imposed on the balance of tax not paid after April 30th/May 15th (Individual: Non-Business) or June 30th / July 15th (Individual: Business)
- HRDF: Section 13(1) of the PSMB Act Failure in making the levy payment before the stipulated timeline (by every 15th of the month) will result in:
- Fine not exceeding RM20,000 (Ringgit Malaysia) or imprisonment for a term not exceeding two (2) years or both (on conviction).
- Yearly interest of 10% (per cent) in respect of each day of default/delay in payment.
When to Outsource Payroll in Malaysia
In-house payroll makes sense when you have a dedicated HR or finance team, consistent headcount, and all employees under a straightforward salary structure. It stops making sense the moment any of the following conditions apply:
- You have a mix of Malaysian and foreign employees with different EPF rates, PCB residency status, and SOCSO eligibility
- Your team does not have bandwidth to monitor regulatory changes in real time
- You are approaching the e-Invoicing deadline without a compliant invoicing system
- You have employees across multiple ASEAN countries requiring different payroll frameworks
- You have experienced late submission penalties or compliance notices in the past 12 months
GotPaid.asia’s payroll outsourcing service handles all four monthly submission portals, manages the EPF changes for foreign workers, and is fully e-Invoice compliant across all five markets we operate in.
The team is knowledgeable, responsive, and consistently delivers reliable support.
Need Help with Malaysia Payroll Compliance?
for companies across Malaysia and 4 other ASEAN markets.
Get a free consultation today.
Frequently Asked Questions
What is the EPF contribution rate for foreign workers in Malaysia in 2026?
As of wages earned from October 2025, foreign workers are subject to mandatory EPF contributions of 2% from the employee and 2% from the employer. Previously, foreign workers could opt out. This change applies to all non-Malaysian citizens holding valid work passes. Employers who fail to register foreign employees for EPF face penalties from KWSP.
What is PCB (Potongan Cukai Berjadual) and how does it work in Malaysia?
PCB is the monthly income tax deducted from employee salaries by employers and remitted to LHDN. It is calculated based on annual projected income less personal reliefs. Employers submit PCB via LHDN’s e-PCB portal by the 15th of each following month. Non-resident employees are taxed at a flat 30% rate without reliefs.
What is the Malaysia minimum wage in 2026?
What is the e-Invoicing mandate in Malaysia and how does it affect employers?
What are SOCSO and EIS contributions in Malaysia?
When must Malaysian employers submit monthly payroll contributions?
What happens if an employer fails to comply with Malaysia payroll regulations?
Non-compliance carries serious penalties:
- EPF (KWSP): Late contributions may result in fines up to RM10,000 and/or imprisonment (up to 3 years).
- SOCSO & EIS: Late payments incur 6% annual interest.
- PCB (Tax): Late remittance triggers a 10% penalty on unpaid tax.
- HRDF: Non-payment may lead to fines up to RM20,000, imprisonment (up to 2 years), plus 10% yearly interest.