Payroll in Malaysia: A Complete Guide for Employers (2026)

Quick answer: To run payroll in Malaysia, employers calculate each employee’s gross pay, deduct the employee’s share of EPF, SOCSO and EIS plus monthly tax (PCB), pay net wages within 7 days after the end of the wage period, and remit all contributions and PCB by the 15th of the following month. Each year, employers must also issue Form EA to employees by the end of February and file Form E with LHDN by 31 March.

Payroll is one of the most important, and most unforgiving, tasks for any employer in Malaysia. Employees expect to be paid accurately and on time, and statutory bodies such as KWSP (EPF), PERKESO (SOCSO) and LHDN expect contributions and tax to arrive by their deadlines. This payroll guide for Malaysia explains what you need to know in 2026, step by step.

What does payroll in Malaysia include?

A complete payroll process covers more than salary transfers. Each month you need to handle:

• Gross pay: basic salary, allowances, overtime, commission and bonuses.
• Statutory deductions: employee contributions to EPF, SOCSO and EIS.
• Monthly tax deduction (PCB / MTD): income tax withheld and paid to LHDN.
• Employer contributions: the employer’s share of EPF, SOCSO and EIS, plus the HRD Corp levy where applicable.
• Payslips and records: clear payslips for every employee and proper payroll records.

Payroll contribution rates in Malaysia for 2026

Contribution	Employer	Employee	Notes
EPF (Malaysians below 60)	13% (wages up to RM5,000) / 12% (above RM5,000)	11%	No wage ceiling
EPF (foreign employees)	2%	2%	Mandatory for wages from October 2025
SOCSO	About 1.75%	About 0.5%	Based on PERKESO wage bands, wages capped at RM6,000
EIS	About 0.2%	About 0.2%	Wages capped at RM6,000
HRD Corp levy	1% (10 or more Malaysian employees) or 0.5% (5 to 9, where registered)	None	For employers in covered sectors
PCB / MTD	None	Based on LHDN schedule	Deducted from the employee’s pay

SOCSO and EIS amounts are taken from official contribution tables rather than an exact percentage, and different rates apply to employees aged 60 and above. Always check the latest tables from KWSP, PERKESO and LHDN.

What is the minimum wage in Malaysia?

The minimum wage in Malaysia is RM1,700 a month. It took effect in February 2025 and, since August 2025, applies to all employers regardless of how many employees they have. Part-time and hourly workers are paid a pro-rated hourly equivalent. The minimum wage refers to basic wages, so allowances and overtime should not be used to make up the difference.

How to run payroll in Malaysia: step by step

1. Register as an employer. Register with KWSP, PERKESO and LHDN (and HRD Corp if required) before your first payroll.
2. Collect employee details. Keep each employee’s IC or passport number, tax number, EPF and SOCSO numbers, bank details and signed employment contract.
3. Notify LHDN of new hires. Submit Form CP22 within 30 days of an employee starting work.
4. Calculate gross pay. Add basic salary, fixed allowances, overtime, commission and any bonus for the month.
5. Calculate deductions. Work out EPF, SOCSO, EIS and PCB using the official rates and tables, plus any other agreed deductions.
6. Pay net wages on time. Under the Employment Act 1955, wages must be paid no later than the 7th day after the end of the wage period.
7. Issue payslips. Show gross pay, each deduction, employer contributions and net pay.
8. Remit contributions and PCB. Pay EPF, SOCSO, EIS, PCB and the HRD Corp levy by the 15th of the following month.
9. Keep records. Store payroll records securely and in line with the Personal Data Protection Act 2010.

Key payroll deadlines for Malaysian employers

Deadline	What is due
Within 7 days after the wage period	Pay employees’ wages
15th of every month	EPF, SOCSO, EIS, PCB and HRD Corp levy for the previous month
Within 30 days of hiring	Form CP22 to LHDN for new employees
Before an employee leaves	Form CP22A or CP22B to LHDN, where required
End of February	Form EA issued to every employee
31 March	Form E submitted to LHDN

How is overtime calculated?

For employees covered by the overtime provisions of the Employment Act (generally those earning RM4,000 a month or less, and manual workers), overtime is paid at:

• 1.5 times the hourly rate on a normal working day
• 2 times the hourly rate on a rest day
• 3 times the hourly rate on a public holiday

Overtime is capped at 104 hours a month. Make sure your payroll calculates the hourly rate correctly from the employee’s ordinary monthly pay.

Common payroll mistakes to avoid

• Late contributions: missing the 15th deadline leads to late payment charges and penalties.
• Using outdated rates: for example, not deducting EPF for foreign employees since October 2025.
• Wrong wage base: forgetting that some allowances, commission or bonuses may be subject to EPF.
• Paying below minimum wage: using allowances to make up the RM1,700 basic.
• Incorrect PCB: not updating PCB when an employee’s pay, benefits or reliefs change.
• Missing forms: forgetting CP22 for new hires or issuing Form EA late.
• Poor confidentiality: letting salary information be seen by people who should not have access.

Should you outsource payroll in Malaysia?

Many SMEs start by running payroll in-house on a spreadsheet, then outsource as the team grows. Payroll outsourcing makes sense when:

• You have no dedicated HR or payroll staff.
• Payroll takes up valuable time from owners or the finance team.
• You have had errors, late payments or penalties.
• You employ foreign staff or have more complex pay structures.
• You want salary information handled confidentially by a third party.

An outsourced payroll provider calculates pay and deductions, prepares payslips, handles statutory submissions and keeps you up to date with rule changes. To learn more, read our guide to HR outsourcing in Malaysia.

Frequently asked questions

When must salaries be paid in Malaysia?

Under the Employment Act 1955, wages must be paid no later than the 7th day after the end of each wage period. Most companies pay monthly.

What is the deadline for EPF, SOCSO and EIS payments?

Contributions for each month must be paid by the 15th of the following month. PCB and the HRD Corp levy follow the same deadline.

Do foreign employees contribute to EPF?

Yes. Since October 2025, foreign employees with a valid work pass contribute 2% and their employers contribute 2%, with some exceptions such as domestic workers.

When do I issue Form EA?

Form EA must be given to every employee by the end of February each year, showing their total remuneration and deductions for the previous year.

Get your payroll right with Polymorph Recruitment

Polymorph Recruitment is an HR outsourcing company in KL Sentral, Kuala Lumpur. Our payroll services cover monthly payroll, payslips, EPF, SOCSO, EIS and PCB submissions and year-end Form EA, so you can stay compliant without the admin. We also provide HR outsourcing and Employer of Record services. Contact us to discuss your payroll needs.

Sources: Second Talent, Malaysia Payroll, Benefits and Tax Regulations in 2026; InCorp Malaysia, Payroll Compliance 2026; KWSP. This guide is general information, correct at the time of writing; always confirm the latest rates with KWSP, PERKESO, LHDN and HRD Corp.