Employer EPF in Malaysia guide. For employees working in Malaysia-registered entities, be they locals or foreigners on a work visa, it is a norm to see in their monthly pay slip indications of monthly contributions deducted from their monthly salary as well as their employer’s. This article will detail the monthly deductions and explain why the Employment Act of 1955 requires them.
Employee Provident Fund (EPF) in Malaysia
The Employee’s Provident Fund (EPF) or otherwise known as “Kumpulan Wang Simpanan Kerja – KWSP” is technically a federal statutory body under the purview of the Ministry of Finance (MOF) in Malaysia. It is responsible for managing compulsory savings plans and retirement planning for private sector workers here in Malaysia.
Objectives of EPF in Malaysia
There are three different objectives that EPF strives for. They are:
- Accumulation of retirement benefits.
- Employee pension scheme (EPS) where the fund will generate pensions for employees after the age of 58 years.
- Employee Deposit Linked Insurance Scheme (EDLI) where will cover an employee as a life insurance.
Employer’s responsibilities under EPF monthly contribution
- It is mandatory for all SSM-registered Companies or registered businesses such as Enterprises or Partnerships to register EPF as an employer within 7 working days of hiring the first employee
- Must register the employees as EPF members (if they are first-time workers) and ensure their information is up to date
- Provide monthly salary statements or pay slips to each employee indicating the deductions from employers as well as employee’s salary
- Collect employee’s and employer’s share of EPF contribution and submit to EPF monthly
How can an employer register for an EPF account?
Employers can register its EPF account by visiting the nearest EPF branch. Employers need to bring along:
- FormKWSP 1 – retrieved via this link
Certified copy of director NRIC or Passport - Company business profile [Will be given by Company Secretary]
- Section 14 – Superform [Will be given by Company Secretary]
- Section 15 – Notice of Registration [Will be given by Company Secretary]
- Section 17 – Certificate of Incorporation [Will be given by Company Secretary]
Once registered, employers will receive these items as confirmation of successful registration:
- Employer’s reference number
- Notice of employer’s registration
- Employer’s registration certificate [To be displayed at business premise]
Why is EPF contribution important in Malaysia?
As stated above, the intention of deducting EPF contribution monthly is to assist employees working in the private sector to save their retirement fund. This way, an employee will no longer need to be stressful about setting up a separate pension scheme with the limited fund they have. It is also useful in the scenario where an employee is temporarily or no longer fit to work.
What is the employer’s and employee’s contribution rate of EPF in year 2023?
The EPF contribution rate table is as below:
|
Employee’s status |
Employer’s EPF contribution rate | Employee’s EPF contribution rate | ||
|
Monthly salary rate |
RM5,000 and below | More than RM5,000 | RM5,000 and below | More than RM5,000 |
|
Malaysian age 60 and above |
4% | 0% | ||
|
Malaysian below age 60 |
13% | 12% | 11% | |
| Permanent resident below age 60 | 13% | 12% |
11% |
|
| Permanent resident age 60 and above | 6.5% | 6% |
5.5% |
|
| Non-Malaysian below age 60 | RM5.00 |
11% |
||
| Non-Malaysian age 60 and above | RM5.00 |
5.5% |
||
How can employers make their EPF contribution payments?
Both the employee and employer will deduct EPF contributions from their funds and must make payments every 15th of each month. Failure to do so will result in the imposition of a late payment charge or dividend.
There are a few channels EPF have disclosed on where employers may auto deduct from:
- E-Caruman website or mobile application
- Internet banking
- Bank agents of Bank Simpanan Nasional (BSN), Maybank, Public Bank and RHB Bank
- EPF counters/kiosks nationwide
Social Security Organization (SOCSO) in Malaysia
Formed in 1971, the Social Security Organization (SOCSO) is a government agency under the jurisdiction of the Ministry of Human Resources (MHR) in Malaysia. Additionaly, SOCSO is also known as “Pertubuhan Keselamatan Sosial – PERKESO“.
Function of SOCSO in Malaysia
The main objective of the SOCSO contribution in Malaysia is to provide social security protection to employees and their dependents through the Employment Injury Scheme and the Invalidity Scheme.
The protection is in term of cash and benefits for employees deemed unable to work for a period of time due to workplace injuries, emergencies, occupational sickness and death.
Employer’s responsibilities under SOCSO monthly contribution
- It is mandatory for all SSM to register Companies or to register businesses such as Enterprises or Partnerships to register SOCSO as an employer within 30 working days of hiring the first employee
- Must register the employees as SOCSO members (if they are first time workers) and ensure their information is up to date
- Provide monthly salary statements or pay slips to each employees indicating the deductions from employers as well as employee’s salary
- Collect employee’s and employer’s share of SOCSO contribution and submit to SOCSO monthly
How can employer register their SOCSO account?
An employer is able to register for its SOCSO account by visiting the main SOCSO portal.
- Register ASSIST portal by emailing the completed form to idportal@perkeso.gov.my
- Complete registration forms 1 and 2
- Certified copy of director NRIC or Passport
- Certified copy of employee NRIC or Passport & Work Pass
- Company business profile [Will be given by Company Secretary]
- Section 14 – Superform [Will be given by Company Secretary]
- Section 15 – Notice of Registration [Will be given by Company Secretary]
- Section 17 – Certificate of Incorporation [Will be given by Company Secretary]
Once registered, employers and employees are able to check their contributions online by using their Identity Card Number (NRIC).
Why is SOCSO’s contribution important in Malaysia?
SOCSO’s contribution is to protect employees working in Malaysia by way of compensating them in the event that they suffer from work-related injuries. Any medical treatment as well as follow-up treatments due to work-related injuries will be covered fully by SOCSO.
What is the employer’s and employee’s contribution rate of SOCSO in year 2021?
The SOSCO contribution rate table is as below:
| Employee’s status | Employer’s SOCSO contribution rate | Employee’s SOCSO contribution rate |
|---|---|---|
| Age 60 and above | 1.25% (Employment Injury Scheme only) | 0% |
| Age below 60 | 1.75% (Employment Injury Scheme and Invalidity Scheme) | 0.5% |
| Foreign workers | 1.25% (Employment Injury Scheme only) | 0% |
How can employers make their SOCSO contribution payments?
Similar to EPF, both the employee and employer in Malaysia will deduct SOCSO contributions from their funds and must make payments every 15th of each month. Failure to do so will result in the imposition of a late payment interest rate of 6% per year for each day the contribution is not paid on time.
There are a few channels SOCSO have disclosed on where employers may auto deduct from:
- PERKESO ASSIST portal
- Internet banking
- Cheque, money order, or postal order
- Bank counters
- Bank agents of Maybank, RHB Bank, and Public Bank
- SOCSO counters nationwide
Employment Insurance System (EIS) in Malaysia
PERKESO itself first implemented the Employment Insurance System (EIS) in January 2018, making it relatively new compared to EPF and SOCSO schemes. Both employees and employers deduct contributions monthly from an employee’s salary as well as their funds.
Goal of EIS in Malaysia
The EIS scheme requires assisting employees who have lost their jobs until they can secure a new position. It collects contributions in a fund to offer financial assistance to retrenched employees.
Employer’s responsibility for EIS monthly contribution
Employers do not need to register separately as members since EIS falls under the same roof as SOCSO. Once the employer registers its SOCSO profile, the EIS profile will be automatically created.
Why is EIS contribution important in Malaysia?
EIS is a scheme to specifically assist retrenched employees until they land another opportunity. The temporary financial assistance is given to unemployed people for up to six (6) months.
What is the employer’s and employee’s contribution rate of EIS in year 2021?
The EIS contribution rate table is as below:
| Employee’s status | Employer’s and employee’s EIS contribution rate |
|---|---|
| Age 18 to 60 | 0.2% |
How can employers make their EIS contribution payments?
The EIS contribution makes a deduction the same way as SOCSO which is on the 15th of each month. There are a few channels EIS have disclosed on where employers may auto deduct from:
- PERKESO ASSIST portal
- Internet banking
- Cheque, money order, or postal order
- Bank counters
- Bank agents of Maybank, RHB Bank, and Public Bank
- SOCSO counters nationwide
Monthly Tax Deduction (MTD) in Malaysia
The monthly tax deduction (MTD) or otherwise known as “Potongan Cukai Bulanan – PCB” is a mechanism that requires an employer to deduct individual income tax from their employee’s monthly salaries.
Calculate the MTD based solely on cash remuneration. Tax all other benefits-in-kind and taxable reimbursements when the individual submits their annual filing return.
Reason to conduct MTD in Malaysia
The Inland Revenue Board (LHDN) believes that deducting employees’ tax monthly is able to reduce the person’s tax liability by lowering their total taxable income. This way, taxpayers will not feel burdened at the total amount as they have started paying it on a monthly basis.
Employer’s responsibilities under MTD monthly contribution
- Deducts the Monthly Tax Deductions (MTD) from employee’s monthly salaries
- Makes additional deductions from employee’s remuneration in accordance with the direction given by the Director General under Rule 4 of Monthly Tax Deductions (MTD) Rules
- Every 15th of each month, the employer shall pay the Director General the total amount of tax deducted or that should have been deducted from the remuneration of employees during the preceding calendar month.
- Furnishes complete and accurate employee information of the following in a return when submitting Monthly Tax Deductions (MTD) payments/additional deductions:
- income tax number (if any);
- name as stated on the identity card or passport;
- new and old identity card number/police number/army number or passport number (for foreign employee); and
- Monthly Tax Deduction (MTD)/additional deductions amount.
Why is MTD contribution deem important in Malaysia
The MTD scheme is to lower the burden of taxpayers. It is also to avoid issues that come with requiring payment of a large sum of income tax when the individual files for their annual tax filing with LHDN.
What is the contribution rate of MTD in the year 2022?
Different from the normal EPF, SOCSO, and EIS standard table rate, the calculation of MTD can be a bit complicated. Hence, LHDN has assisted in furnishing the specification for MTD calculations using computerised calculations for the year 2022. It is available via this link. It also shows the example calculation to ensure employers calculate the amount accurately.
How can employers make their MTD contribution payments?
There are several options that available by LHDN for employers to auto-deduct their MTD payments monthly. They are:
- Manual payment – Through form CP39 / CP39A at LHDN counter
- Payments using diskette – To be made at CIMB Bank / Public Bank Berhad Malaysia counters
- Online payments
FAQs
You may report the case straight to each government agencies and to consult with Department of Labour of Peninsular, Malaysia.
Yes, employees are allowed to do so by registering an online profile in each of the portals available. They are also able to contact each government agencies to ensure all the contributions are done accurately.
No. Any employers who deems failed to make those contributions every 15th of each month will be convicted and liable to imprisonment for a term not exceeding three years and a fine not exceeding MYR 10,000.
There are mainly four (4) types of mandatory contributions that must be deducted by employers and employees monthly. They are EPF, SOCSO, EIS and MTD.
