Employers in Malaysia are legally obligated to make monthly statutory contributions for their employees. These contributions support retirement, social security, unemployment, and income tax obligations. Compliance with these requirements ensures business legitimacy and protects employee welfare. This guide breaks down the four main employer contributions in Malaysia: EPF, SOCSO, EIS, and MTD.
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
- All SSM-registered Companies or registered businesses such as Enterprises or Partnerships must 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 the 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?
To register as an EPF employer, visit the nearest EPF branch with the required documents. These include:
- 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]
This certificate must be displayed at your business premises. EPF also requires all employees to be registered, especially if they are first-time workers in Malaysia. Employers must provide monthly salary slips showing deductions. Contributions must include both the employer’s and employee’s share.
EPF is crucial for building employee retirement savings. It also provides protection through schemes like the Employee Deposit Linked Insurance. Ensuring accurate and timely EPF payments enhances employee confidence and strengthens your HR compliance.
Why is EPF Contribution Important in Malaysia?
As stated above, the intention of deducting EPF contributions monthly is to assist employees working in the private sector to save their retirement funds. This way, an employee will no longer need to be stressed about setting up a separate pension scheme with the limited funds 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 the 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% | ||
|
Malaysians below the age of 60 |
13% | 12% | 11% | |
| Permanent resident below age 60 | 13% | 12% |
11% |
|
| Permanent residents aged 60 and above | 6.5% | 6% |
5.5% |
|
| Non-Malaysians 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
SOCSO, or PERKESO, is under the Ministry of Human Resources. It provides social protection through the Employment Injury Scheme and the Invalidity Scheme. All private-sector employers must register with SOCSO within 30 days of hiring their first employee. This includes companies registered under SSM, as well as sole proprietorships and partnerships. Formed in 1971, the Social Security Organization (SOCSO) is a government agency under the jurisdiction of the Ministry of Human Resources (MHR) in Malaysia. Additionally, SOCSO is also famous as “Pertubuhan Keselamatan Sosial – PERKESO”.
SOCSO protects employees in the event of workplace accidents, disabilities, or occupational diseases. The scheme also covers death benefits. Employers must register all eligible employees with SOCSO. Deductions must be reflected clearly on monthly payslips.
The contribution rate for employees under 60 is 1.75% from the employer and 0.5% from the employee. For employees above 60, the employer contributes 1.25%, with no employee contribution. Foreign workers are covered under the Employment Injury Scheme only, with a 1.25% employer contribution.
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 terms of cash and benefits for employees deemed unable to work for some 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 employee indicating the deductions from employers as well as the 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?
Employers can register for SOCSO through the ASSIST portal. Required documents include registration forms, company profile, director’s ID, and employee passports or ICs. Incorporation documents provided by your company secretary are also mandatory. Once registered, contributions can be tracked online using employee NRIC numbers.
SOCSO payments are due by the 15th of each month. Employers can pay through the ASSIST portal, bank counters, or online banking. Late payments attract interest at 6% annually, calculated daily. Staying compliant protects employees and shields employers from enforcement action.
An employer can also 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).
Importance of SOCSO Contributions
SOCSO ensures that employees receive support if they are injured or disabled due to work-related incidents. This includes free medical treatment, hospitalization, and income replacement. It also includes compensation for dependents in the event of employee death. These benefits are crucial for maintaining workforce morale and trust.
Employers benefit from a more secure and loyal workforce. It also minimizes the risk of legal disputes or labor court cases. Ensuring prompt SOCSO contributions is a key part of employer branding and compliance. It demonstrates that your company values its employees’ safety and well-being.
What is the employer’s and employee’s contribution rate of SOCSO in the 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
EIS is a relatively new scheme launched in 2018, administered by PERKESO. It supports employees who are involuntarily unemployed. Employers must contribute on behalf of employees aged 18 to 60. Once SOCSO is registered, the EIS account is automatically created.
Both the employer and employee contribute 0.2% of the employee’s monthly salary. Contributions are made alongside SOCSO payments, by the 15th of every month. EIS provides temporary financial support, job search assistance, and training programs. This scheme is especially useful during economic downturns.
EIS is not applicable to employees aged above 60. Employers must ensure that monthly payslips reflect EIS deductions accurately. Contributions can be made through the same channels as SOCSO. These include the ASSIST portal, bank counters, and selected bank agents.
Why EIS Matters for Employers
Retrenchments can harm a company’s reputation if mishandled. EIS softens the impact by offering affected employees financial and career support. It also reduces employee stress during layoffs. This contributes to smoother workforce transitions.
By complying with EIS, employers show responsibility in managing workforce changes. It also aligns with good corporate governance practices. Ensuring compliance helps protect business credibility. Non-compliance could result in legal penalties or loss of operating licenses.
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 automatically will be created.
Why is EIS contribution important in Malaysia?
EIS is a scheme to specifically assist retrenched employees until they land another opportunity. Temporary financial assistance is for unemployed people for up to six (6) months.
What is the employer’s and employee’s contribution rate of EIS in the 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) 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. It requires employers to deduct employees’ income tax directly from monthly wages. These deductions go toward settling the employees’ annual tax liabilities. MTD ensures employees are not overwhelmed with lump-sum payments during tax season.
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.
MTD applies to all cash remuneration such as salary, bonus, allowances, and incentives. Employers must also deduct additional amounts if instructed by the Director General under Rule 4. Deductions must be paid to LHDN by the 15th of each month. Employers must also submit complete employee information.
Reason to conduct MTD in Malaysia
The Inland Revenue Board (LHDN) believes that deducting employees’ tax monthly can reduce the person’s tax liability by lowering their total taxable income. This way, taxpayers will not feel burdened with the total amount as they have started paying it every month.
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 under 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 employees); and
- Monthly Tax Deduction (MTD)/additional deductions amount.
How to Pay MTD
MTD can be paid manually using Form CP39 or CP39A at LHDN counters. Employers can also use diskette submissions at CIMB and Public Bank branches. Online payments are also accepted via LHDN’s e-PCB system or internet banking. The payment method must ensure timely delivery to avoid penalties.
Failure to deduct or submit MTD on time can lead to fines and prosecution. Employers must calculate MTD using the LHDN-provided payroll formulas or automated software. Accurate calculation and submission protect companies from enforcement actions. Always verify MTD amounts before submitting.
Why is MTD contribution deemed 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 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
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