EPF, SOCSO, EIS & PCB: Complete Malaysian Payroll Compliance Outsourcing Guide

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“I thought all employees had the same EPF employer rate. Turns out there’s a 13% rate for those earning RM5,000 and below, and 12% for those above. I’ve been calculating wrong for 8 months.” That’s what a client discovered recently during a KWSP audit. Correction cost: RM14,500 in backpay plus penalties.

“I tak tahu the deadline was 15th! I thought sama like most bills, end of month kan?” That’s what a client told us after getting her first KWSP penalty notice. She runs a small restaurant with eight employees, but also does everything herself — cooking, managing, payroll. The RM4,800 penalty felt like a punch in the gut.”

We get it, and we don’t blame them.

At Talenox, we see this pattern constantly. Good business owners, working hard, trying their best, getting blindsided by compliance requirements they didn’t know existed.

Starting a business is complicated, and it’s easy to feel buried under the sheer volume of things to manage. Besides already pouring everything into their new businesses, they’re probably also trying to carve out precious time for their families. That balancing act is a heavy lift, and it’s understandable that he might miss out on some things, especially when they seem more secondary in nature (like the HR admin stuff).

Here’s where we come in. We’re here to show you that Malaysian statutory compliance isn’t about understanding general concepts — it’s about knowing the exact contribution rates, proper calculation methods, specific form requirements, and precise deadlines that KWSP, PERKESO, and LHDN enforce. Hence, we’ve got tons of guides (including this one) that breaks down the actual statutory requirements you need to meet in 2026, with the tables, formulas, and deadlines that you must know.

EPF (KWSP): Contribution Rates, Tables, and Calculation Requirements

Understanding the Dual Employer Rate Structure

Firstly, EPF is basically forced savings for retirement. Every month, 11% of your employee’s salary goes into their EPF account. You as the employer add another 12-13% depending on salary levels.

EPF employer contributions vary based on a RM5,000 monthly wage threshold:

Monthly Wages	Employee Contribution	Employer Contribution
RM5,000 and below	11%	13%
Above RM5,000	11%	12%

This threshold applies monthly, not annually. An employee earning RM4,900 one month gets 13% employer contribution. If they earn RM5,100 the next month due to overtime, it drops to 12%. You recalculate each month based on actual wages.

The Third Schedule Calculation Formula

For employees earning RM5,000 or less:

Employee portion: Monthly wages × 11%
Employer portion: Monthly wages × 13%

For employees earning above RM5,000:

Employee portion: Monthly wages × 11%
Employer portion: Monthly wages × 12%

Rounding Requirements (Where Audits Catch Errors)

KWSP has specific rounding requirements that many employers get wrong. You calculate employee and employer portions separately using exact amounts, sum the total contributions, then round the total to the nearest ringgit. You cannot round individual portions first then add them up — the sequence matters.

Example for RM3,575 monthly wages:

Employee: RM3,575 × 11% = RM393.25
Employer: RM3,575 × 13% = RM464.75
Total: RM393.25 + RM464.75 = RM858.00 (already whole number)

But for RM3,550:

Employee: RM3,550 × 11% = RM390.50
Employer: RM3,550 × 13% = RM461.50
Total: RM390.50 + RM461.50 = RM852.00 (round to RM852)

Using incorrect rounding methods creates systematic errors that compound over months. Make sure to look out for a payroll software that will help you solve this potential problem – the good ones will make sure that you avoid this mistake.

Foreign Worker EPF (Effective Q4 2025)

Since late 2025, foreign workers require EPF contributions:

Employee contribution: 2% of monthly wages
Employer contribution: 2% of monthly wages

This applies to all foreign workers with valid work permits. According to KWSP foreign worker guidelines, contributions are calculated similarly to local employees but at the reduced 2% rate for both parties. Non-compliance means backpay for all months since implementation plus penalties and interest.

The 15th Payment Deadline

Just remember the crucial number here: 15.

Not month-end. The 15th.

Contributions must reach KWSP by the 15th of the following month. If the 15th is a weekend or public holiday, payment is due on the preceding working day (e.g. if the 15th falls on a public holiday which also falls on a Friday, then your payment deadline will be on the 18th, on Monday).

Late payment triggers EPF dividend rate plus 1% monthly interest (minimum RM10), dividend charges credited to employees’ accounts (they benefit from your late payment), and for persistent defaults, fines up to RM20,000 per employee or imprisonment up to 3 years (ouch) under Section 43 of the EPF Act 1991.

We really hope you don’t get slapped with any of the late payment consequences.

EPF Registration Requirements

Take note that if you have new employees that just joined the business, they must be registered with KWSP within 7 days of employment date. The registration details required are: the employee’s full name and ID/passport number, date of birth, employment commencement date (or hire date), and monthly wages.

SOCSO (PERKESO): Category System and Contribution Tables

The Fixed-Amount Category System

Keep in mind that SOCSO doesn’t calculate contributions as percentages. It uses a category system with fixed amounts based on monthly wage brackets. 🙂

Here’s another thing you should know — the wage ceiling is RM6,000 (increased from RM5,000 in 2024).

For your reference, here are the sample categories from the PERKESO contribution table:

Category	Monthly Wages Range	Employer	Employee	Total
1	RM30 and below	RM0.40	RM0.10	RM0.50
10	RM700.01 – RM800.00	RM11.30	RM3.25	RM14.55
20	RM1,500.01 – RM1,600.00	RM23.25	RM6.65	RM29.90
30	RM2,500.01 – RM2,600.00	RM38.90	RM11.10	RM50.00
39	RM6,000.00 and above	RM83.80	RM24.00	RM107.80

Talenox Tip: Look up the exact category matching each employee’s monthly wages and before applying the corresponding fixed amounts.

Two Schemes: Employment Injury and Invalidity

Worried about employees getting injured but can’t afford to provide fancy medical insurance? Not to worry – SOCSO provides two schemes:

Employment Injury Scheme — Covers workplace accidents, occupational diseases, and commuting accidents. Applies to all employees.

Invalidity Scheme — Covers permanent disability regardless of cause. Applies to employees under age 60.

Age-Based Coverage Rules

Employees aged 60 and above are covered under the Employment Injury scheme but not the Invalidity scheme. In addition, the contribution amounts from each scheme differs for different employees. When in doubt, check PERKESO tables for age 60+ specific rates.

Who Must Be Covered

Well, All Malaysian employees earning RM6,000 or less monthly.

This includes part-time employees earning below the RM6,000 threshold, employees with fluctuating wages (i.e. not fixed), and multiple-job employees (coverage should be done through each employer, not just one).

SOCSO Registration Deadlines

If you hire your first employee, you must register with PERKESO within 30 days of their hiring. This is done two ways: either through Borang 1 (employer registration) or Borang 2 (employee registration).

Payment Deadline

SOCSO contributions are due by the 15th of the following month, same as EPF. Late payments incur 6% annual interest calculated daily, plus penalties under the Employees’ Social Security Act 1969.

EIS: Employment Insurance System Requirements

The 0.2% Contribution Structure

Good news! You’ve powered through the first two big (and hardest) rules, and now you’re at a much easier one.

EIS is the simplest statutory contribution — both employer and employee contribute exactly 0.2% of monthly wages each, totaling 0.4%.

Here’s the calculation formula:

Employee contribution: Monthly wages × 0.2%
Employer contribution: Monthly wages × 0.2%

For example, for RM3,500 monthly wages:

Employee: RM3,500 × 0.002 = RM7.00
Employer: RM3,500 × 0.002 = RM7.00
Total: RM14.00

Coverage Requirements

EIS applies to all Malaysian employees aged 18-60 earning any amount of wages.

Additionally, there’s no wage floor or ceiling for EIS. Even employees earning RM1,000 monthly must have EIS coverage.

However, there are still some exemptions:

Employees aged 57 and above at time of implementation (2018)
Domestic servants
Self-employed persons
Civil servants

If your employees check out to fall under any of the above categories, you don’t have to provide EIS coverage for them.

Payment and Registration

It’s that magic number again… you got it — it’s 15.

EIS payments follow the same 15th monthly deadline as EPF and SOCSO. It’s also nice to know that registration occurs through PERKESO alongside the SOCSO registration — there’s no separate EIS registration process (yay, convenient).

PCB: Monthly Tax Deduction Calculation Requirements

Understanding PCB Computation Methods

You’ll hear this term a lot – PCB. It’s the short-form of “Potongan Cukai Bulanan” (Monthly Tax Deduction), which requires employers to deduct income tax monthly from employees’ salaries.

The amount depends on multiple factors: marital status (single, married spouse working, married spouse not working), number of children (each child changes calculation), other dependents (parents, disabled family members), zakat payments and approved donations, EPF contributions (these reduce taxable income), life insurance and education insurance premiums.

The PCB Calculation Tables

LHDN provides PCB calculation tables updated annually. For 2026, employers must use the current year’s tables accessible through the official LHDN website or downloadable PDF schedules. For easy calculations, you may use this free calculator.

Talenox Tip: Identify the correct table based on employee’s tax status, locate the monthly remuneration row, and apply the corresponding PCB amount.

Categories of Remuneration

PCB applies to all forms of remuneration: basic salary, fixed allowances (housing, transport, meal), overtime payments, commissions and bonuses, and benefits-in-kind (converted to cash equivalent).

The TP1, TP2, TP3, TP4 Forms

This is for the employees (phew, not you, the employer). However, you should try to remind them to complete these appropriate forms declaring their tax status:

Borang TP1 — For residents with only one employment
Borang TP2 — For residents with multiple employments
Borang TP3 — For non-residents
Borang TP4 — For directors and public entertainers

What happens after form completion? This is where you, as the employer, comes in. You’ll use the information from these forms to determine the correct PCB calculation method.

What happens if employees do not manage to submit the forms then? Well, they would automatically default to the highest tax category (no reliefs, ouch), resulting in maximum PCB deductions. 🙁

When PCB Applies

Once the monthly remuneration after EPF exceeds the threshold amount (remember to check current years’ rates), PCB deduction will kick in. Below this threshold, PCB deduction does not apply, but employees may still owe tax when filing annually.

PCB Payment to LHDN

Similar to EPF, SOCSO, and EIS, PCB collected from employees must be paid to LHDN by the 15th of the following month.

Payment methods include online via the LHDN portal, direct bank payment through approved banks, or CP39 payment forms for manual payment.

Talenox Tip: Don’t pay late! This incurs a 10% penalty on any unpaid amount, plus potential prosecution under the Income Tax Act 1967.

EA Form: Year-End Employment Income Statement Requirements

What the EA Form Reports

The EA Form, also known as Borang EA, is the annual statement of employment income showing: total remuneration paid during the year (salary, allowances, bonuses), EPF contributions (employee and employer portions), SOCSO and EIS contributions made, PCB deducted month by month, zakat payments made through employer, benefits-in-kind and perquisites provided. In a nutshell, it shows the exact amounts of what we covered in the paragraphs above.

Important —The February 28 Employee Distribution Deadline

This is a deadline you have to remember — and the magic number this time isn’t the 15th (you’d get this if you’ve been reading the first half of the article).

The magic number (and a really important one) is the 28th of February.

All employers must provide EA forms to all employees by February 28 of the following year. As an example, to report income earned in 2025 income, EA forms are due to employees by February 28, 2026. Employees should then check through the form to ensure their income is correctly reported.

If employers fail to provide the forms to the employees by February 28, the employees cannot file their tax returns by the April 30 deadline, creating problems between employer and employee.

The March 31 LHDN Submission Deadline

Employers must submit copies of all EA forms to LHDN by March 31. For example, to report 2025 income, submission to LHDN is due March 31, 2026.

Submission methods include e-submission via LHDN e-filing system (preferred), or manual submission of CP8D forms for small employers (less common).

Talenox Tip: There are three main deadlines you must remember every year — February 28, March 31, and April 30.

EA Form Penalties

We’re here to remind you again not to file your forms late, as there are both financial and legal penalties you could face. Remember how you’re supposed to provide Borang EA to employees by February 28? If you provide that late, multiple employees could file complaints with LHDN, causing potential legal issues.

In addition, late submission of forms to LHDN generally result in financial penalties ranging from RM200 to RM20,000 per form, depending on lateness severity, plus potential prosecution under Section 120 of Income Tax Act 1967.

Who Requires EA Forms

All employees of all income levels.

This includes: full-time and part-time employees, resigned employees who left during the year (receive EA for period worked), and even company directors.

What Must Be Reported

All remuneration components require reporting. This includes:

Monthly salaries and wages
Fixed and variable allowances
Overtime payments
Commissions earned
Bonuses and AWS payments
Gratuities and tips
Payment in lieu of notice
Benefits-in-kind (company car, housing, club membership), and
Employer EPF/SOCSO contributions.

Talenox Tip: Don’t underreport income even if it seems tempting. This would create tax assessment issues and potential penalties.

How Professional Payroll Systems Handle Complex Compliance

Automatic Rate Application

Professional payroll systems apply the correct EPF rate (12% or 13%) automatically based on monthly wages. They also look up precise SOCSO categories matching wage brackets, calculating the exact EIS amounts at 0.2% each, and determine appropriate PCB using current year tables. All these done automatically in one system.

To put it into context — if you have an employee who earns a different amount every month (could be due to sales commissions), them earning RM4,900 one month and RM5,100 the next would more likely get correct EPF rates applied automatically each month without manual checking.

Built-In Calculation Validation

A good system would have built-in validation, such as:

EPF rounding follows KWSP requirements
SOCSO categories match contribution tables exactly
EIS calculations apply to correct employee ages (18-60), and
PCB uses appropriate tables based on employee tax status

Deadline Tracking Across Multiple Agencies

Good payroll systems track that EPF/SOCSO/EIS payments are processed by the 15th monthly, PCB payments reach LHDN by the 15th, EA forms generate by February 28 for employee distribution yearly, and finally, the EA form submission to LHDN is completed by March 31.

Even if it’s not all done automatically, a good system should be able to remind you of these deadlines if manual review or submission by you is required.

Year-Round EA Data Compilation

Rather than scrambling in February, professional systems compile EA data automatically throughout the year, making sure everything is taken account.

For example, a good system should be tracking all remuneration components (wages, commissions, allowances, etc) monthly, recording EPF/SOCSO/EIS contributions as they occur, logging PCB deductions month by month, and capturing benefits-in-kind when provided.

When February finally arrives, EA forms generate automatically with complete, accurate data that’s taken from the entire year.

Regulatory Update Implementation

We know what happens when another Malaysia Budget gets announced.

When wage ceilings change (like SOCSO’s RM5,000 to RM6,000 increase in 2024), or when new requirements emerge (like foreign worker EPF in Q4 2025), a good payroll system should implement updates automatically before their effective dates.

Making Compliance Manageable in 2026

If you feel like there are already a lot of dates and numbers you can’t quite remember from above, perhaps it would be wise to get some help.

This is where the question lies – should you go for a professional service, a software, or perhaps take on a hybrid approach?

For businesses wanting control while ensuring accuracy, HR software handles all calculations automatically.

A software like Talenox includes all Malaysian statutory requirements built-in — EPF dual rates, SOCSO category lookup, EIS calculations, PCB tables for all years, and EA form generation. Calculations stay accurate as regulations update.

For businesses preferring hands-off statutory management, compliance specialists handle monthly EPF/SOCSO/EIS/PCB calculations and submissions, maintain proper documentation for audits, prepare and distribute EA forms annually, and respond to KWSP/PERKESO/LHDN queries. Look for “Payroll Outsourcing Providers” in your search.

Lastly, there are also many businesses that prefer a hybrid approach — using software for monthly calculations, while engaging specialists for year-end Borang EA preparation, or audit support when agencies request sensitive information.

What Matters for Compliance

Still unsure? Well, the right approach depends on your level of understanding of statutory requirements. There’s also the level of comfort with calculation tables and deadlines, coupled with the willingness to track regulatory changes as they happen.

Compliance should protect your business through accurate calculations and timely submissions — not create anxiety about whether you’ve applied the right rates or met the deadlines.

At the end of the day, it’s our advice to give but your decision. We’re not going to tell you that outsourcing is the only answer, because that would be dishonest. Some businesses do fine with good software and dedicated internal people managing it. Others need full outsourcing to sleep at night. Most benefit from something in between.

If you like what you read so far and feel that you need help with Malaysian statutory compliance, contact us to discuss whether the Talenox software, professional outsourcing support, or a hybrid approach works best for your specific compliance situation. No hard sell, just real talk about what would actually solve your compliance headaches.