Malaysia Employer Payroll Guide 2026: EPF, SOCSO and EIS Contribution Rates

Why payroll compliance trips up new directors

You registered your Sdn Bhd in KL or Petaling Jaya. First employee starts next Monday. You know you need to pay them, but EPF, SOCSO, EIS, and PCB all have separate portals, separate deadlines, and separate penalties if you get it wrong.

Most directors learn the hard way: a KWSP letter arrives six months later, backdated contribution demand included. This guide gives you the full picture upfront so you do not have to.

Three things to internalise from the start:

• Statutory contributions are not optional expenses. They are deductions withheld from the employee plus the employer's own share. Both must reach the fund by the 15th.
• Registration must happen before the first payroll run. You cannot backfill EPF or SOCSO registration retroactively without attracting a late contribution charge.
• The contribution cap matters. SOCSO and EIS are capped at RM5,000/month wages. EPF has no cap; rates just shift at RM5,000.

EPF contribution rates 2026, by salary tier and age

EPF (KWSP, Kumpulan Wang Simpanan Pekerja) is governed by the Employees Provident Fund Act 1991. Every employer with at least one employee must register.

Practical example: An employee in Shah Alam earns RM4,500/month. Employer contributes 13% = RM585. Employee contributes 11% = RM495. Total RM1,080 deposited into the employee's EPF account every month.

Contributions are calculated on wages: basic salary plus fixed allowances. Reimbursements (claims, mileage) are excluded.

SOCSO contribution rates 2026, capped at RM5,000

SOCSO (PERKESO, Pertubuhan Keselamatan Sosial) operates under the Employees' Social Security Act 1969. It covers two categories of protection:

• First Category: Employment Injury and Invalidity (for employees under 60)
• Second Category: Employment Injury only (for employees 60 and above)

SOCSO contributions follow a fixed schedule (not a simple percentage) based on wage brackets. The headline rates are:

The RM5,000 cap is firm. An employee earning RM8,000/month still has SOCSO calculated on RM5,000 only. The maximum employer SOCSO contribution is approximately RM86.65 per employee per month (the PERKESO schedule sets exact amounts per RM100 wage bracket).

Domestic servants are also exempt from SOCSO. Everyone else on a contract of service in Kuala Lumpur, Johor Bahru, Ipoh, or anywhere else in Malaysia must be covered.

EIS contribution rates 2026, 0.4% each

EIS (Employment Insurance System) came into force on 1 January 2018 under the Employment Insurance System Act 2017. It provides retrenchment benefits to covered employees who lose their jobs involuntarily.

Rates are simple:

• Employer: 0.4% of monthly wages
• Employee: 0.4% of monthly wages
• Wage cap: RM5,000/month (same as SOCSO)
• Coverage: Malaysian and PR employees aged 18 to 60

Excluded from EIS: foreign workers, domestic servants, civil servants, and employees in the Malaysian Armed Forces or Police.

EIS is administered through the same PERKESO ASSIST portal as SOCSO. There is no separate EIS registration. If you are already registered with SOCSO, you are automatically enrolled for EIS.

Monthly payment deadlines: the 15th rule

All three statutory contributions share the same deadline: the 15th of the following month. No exceptions.

If the 15th falls on a Saturday, Sunday, or public holiday, the deadline shifts to the next working day. Plan remittances at least 2 to 3 days early. KWSP and PERKESO systems experience traffic spikes near the deadline.

Registration steps: KWSP and PERKESO

You must register before the first payroll run. Backdated registration is possible but triggers late contribution calculations from the hire date.

EPF registration (KWSP):

1. Go to kwsp.gov.my, then i-Akaun Employer, then New Employer Registration
2. Submit Form KWSP 1 online: business name, SSM number, registered address, director IC
3. KWSP activates your employer account within 3 to 7 working days
4. Register each new employee using their IC number and EPF member number (or apply for a new EPF member number if it is their first job)

SOCSO and EIS registration (PERKESO):

1. Go to assist.perkeso.gov.my, then Employer Registration (Form 1)
2. Enter business details, SSM number, industry code, and expected number of employees
3. PERKESO issues your employer reference number
4. Submit Form 2 for each employee: their NRIC, date of employment, and wage rate
5. EIS enrolment is automatic. No separate form needed

Both registrations are free. You do not need an agent. A Sdn Bhd director in Penang or Ipoh can complete both online in under an hour if documents are ready.

PCB: monthly tax deduction (not a contribution, but still your job)

PCB (Potongan Cukai Bulanan) is the employee's income tax, deducted at source by the employer and remitted to LHDN monthly. It is separate from EPF/SOCSO/EIS. No fund, no member account. Just tax withheld.

Your obligations:

• Calculate PCB using LHDN's e-PCB calculator at hasil.gov.my or integrated payroll software
• Deduct from employee's monthly salary
• Remit to LHDN via e-PCB by the 15th of the following month
• Issue Form EA to every employee by the last day of February each year (the annual income statement they use for personal tax filing)

PCB is calculated on gross remuneration: basic salary, fixed allowances, bonuses, and commissions. The e-PCB calculator handles the progressive tax table automatically.

Failure to deduct or remit PCB is an offence under Section 107A of the Income Tax Act 1967. The penalty is a 10% surcharge on the unpaid amount, and the director can be personally liable.

What counts as wages for EPF/SOCSO/EIS purposes

Not all payments to an employee are "wages" for statutory contribution purposes. Getting this wrong leads to under-contribution (and backdated penalties) or over-contribution (wasted money).

Included in wages (must contribute):

• Basic salary
• Fixed monthly allowances (housing allowance, transport allowance, food allowance)
• Commission and incentives paid regularly
• Overtime pay

Excluded from wages (no contribution required):

• Reimbursements (actual claims for mileage, parking, meals)
• Retirement gratuity
• Service charge (F&B industry)
• Maternity benefits and gratuities

Annual bonuses are a grey area. Under EPF regulations, a bonus paid in a single lump sum may be excluded from EPF wages in some interpretations, but KWSP auditors take a dim view of creative exclusions. When in doubt, include it.

Penalties for non-compliance

KWSP and PERKESO do not send gentle reminders. They cross-reference data with LHDN and conduct employer audits. The consequences for non-compliance:

EPF non-compliance (EPF Act 1991, Section 43/44):

• Dividend charge on late contributions, calculated from the due date at the current EPF dividend rate
• Criminal prosecution: fine up to RM20,000 per employee, or imprisonment up to 3 years, or both
• KWSP can garnish the company's bank accounts to recover unpaid contributions

SOCSO non-compliance (ESS Act 1969, Section 99A):

• Fine: 3x the unpaid contribution amount, or
• Imprisonment up to 2 years, or RM10,000 fine per count

The real risk for directors: EPF and SOCSO contributions are a trust obligation. You hold the employee's share on trust for the fund. Directors can be personally liable. The limited liability of a Sdn Bhd does not shield you from this. Courts in Malaysia have convicted directors personally for unpaid EPF contributions when the company was insolvent.

Payroll software: what Malaysian SMEs use

Manual payroll spreadsheets are legal but risky. A RM200/month payroll system eliminates calculation errors and generates the contribution files directly uploadable to KWSP i-Akaun and PERKESO ASSIST.

Common choices for Malaysian SMEs:

• Kakitangan.com: Malaysian-built, cloud-based, integrates with KWSP/PERKESO/LHDN, good for Sdn Bhd with 5 to 100 staff
• Payroll Panda: strong EPF/SOCSO auto-calculation, simple UI, used by startups in KL
• SQL Payroll: popular in Johor Bahru and Penang, desktop-based, integrates with SQL Accounting
• HR2000: enterprise-grade, more setup required, common in manufacturing
• Talenox: cloud HR and payroll, good for companies managing leave and payroll together

Whichever you choose, verify that it generates EPF monthly contribution files (for i-Akaun upload), SOCSO/EIS ASSIST files, and Form EA at year-end. These are non-negotiable outputs.

Frequently Asked Questions

Who must register for EPF in Malaysia?
Every employer who hires at least one employee under a contract of service must register with KWSP within 7 days of hiring. This applies to Sdn Bhd, partnerships, and sole proprietors. Foreign workers are not mandatorily covered but can contribute voluntarily.

What is the EPF employer contribution rate in 2026?
13% for employees earning RM5,000 or below. 12% for employees above RM5,000. Employees under 60 contribute 11%. Employees aged 60 and above attract only a 4% employer rate with 0% employee contribution.

What is the SOCSO contribution rate for employers?
1.75% of wages for First Category (employees under 60), capped at RM5,000/month wages. Second Category (60+) employer rate is 1.25%. Employees contribute 0.5% under First Category. Foreign employees are exempt.

Who is exempt from SOCSO contributions?
Foreign employees (work permit holders), domestic servants, and self-employed persons under the standard scheme. Employees aged 60 and above shift to Second Category (injury only, lower rate).

What is EIS and who contributes?
EIS provides retrenchment benefits. Employer 0.4%, employee 0.4%, capped at RM5,000/month wages. Covers Malaysian and PR employees aged 18 to 60. Foreign workers, domestic servants, and civil servants are excluded.

When is the deadline to remit EPF, SOCSO, and EIS?
All three are due by the 15th of the following month. If the 15th falls on a weekend or public holiday, the deadline moves to the next working day.

What are the penalties for late EPF contribution?
Dividend charge from the due date at the EPF dividend rate, plus potential prosecution: fine up to RM20,000 per employee or 3 years imprisonment. Directors can be personally liable even for Sdn Bhd debts on statutory contributions.

Does PCB count as part of payroll contributions?
PCB is not a contribution. It is income tax deducted from the employee's salary and remitted to LHDN. Still the employer's legal obligation to deduct and remit by the 15th each month. Late remittance attracts a 10% surcharge under Section 107A ITA 1967.