Malaysia payroll guide 2026–2027: EPF, SOCSO, EIS, PCB, HRDF and minimum wage

Malaysian payroll looks simple from the payslip: basic pay, allowances, a few deductions, net pay. Behind it sit five statutory schemes, a monthly tax deduction with its own formula, the Employment Act, and year-end forms that depend on every month being right. This guide brings the current rules together, as at November 2026.

Monthly payroll at a glance

Wages themselves must be paid no later than the 7th day after the end of each wage period.

EPF (KWSP)

• Malaysians and PRs under 60: employee 11%; employer 13% where monthly wages are RM5,000 or less, and 12% above RM5,000. Amounts follow the Third Schedule for wages up to RM20,000.
• Aged 60 and above (Malaysians): employee 0%, employer 4%.
• Non-Malaysian employees: since October 2025 wages, EPF is mandatory for non-citizens with a valid passport and employment pass or permit — 2% employee and 2% employer. Domestic servants are excluded. See KWSP's announcement.
• Due date: on or before the 15th of the following month. Late payment charges apply.

EPF applies to most cash remuneration, including bonuses, commissions and most allowances. Some payments are excluded — notably overtime pay, travelling allowance, gratuity and reimbursements — so check KWSP's list when setting up pay items.

SOCSO, EIS and Lindung 24 Jam (PERKESO)

SOCSO (Employment Injury and Invalidity, Act 4) covers employees with a wage ceiling of RM6,000 (since 1 October 2024).

• First Category (under 60): employer about 1.75%, employee about 0.5% of wages, using PERKESO's banded table.
• Second Category (Employment Injury only, employer about 1.25%): employees aged 60 and above, and those first entering at 55 or older with no prior contributions.

EIS (Act 800) is 0.2% employer and 0.2% employee, capped at RM6,000, for Malaysians and PRs. Foreign workers are not covered by EIS.

Lindung 24 Jam (also called SKBBK, the non-employment injury scheme) started on 1 June 2026. It's paid by the employee only — 0.75% of wages up to RM6,000 — deducted and remitted by the employer with SOCSO. On 8 July 2026 the Cabinet made it voluntary for Malaysian and PR employees (with an opt-out window that closed on 31 August 2026); it remains mandatory for foreign workers. Read our Lindung 24 Jam explainer.

PCB / MTD (monthly tax deduction)

Employers must deduct PCB from employees' remuneration each month using LHDN's computerised calculation method and remit it by the 15th through e-PCB Plus.

• LHDN's 2026 specification made no change to the MTD formula for 2026; the TP1 (reliefs) and TP3 (previous employment) forms were updated.
• Zakat paid through payroll is deducted from PCB; any excess is carried forward to later months.
• Benefits in kind and value of living accommodation are added to monthly remuneration for PCB.
• New joiners should give you a TP3 showing this year's income, EPF, PCB and zakat from their previous employer, so their PCB is calculated on the full year.
• CP38 (additional deductions instructed by LHDN) is remitted separately from PCB.

HRDF (HRD Corp) levy

Employers with 10 or more Malaysian employees must register with HRD Corp and pay a levy of 1% of monthly wages (basic pay plus fixed allowances). Employers with 5 to 9 may register voluntarily at 0.5%. Foreign workers don't count toward the headcount. The levy is due by the 15th of the following month.

Minimum wage and Employment Act basics

• Minimum wage: RM1,700 a month for all employers (since 1 February 2025 for employers with five or more employees, and since 1 August 2025 for the rest), including foreign workers.
• From June 2027: the minimum wage rises to RM2,000 under Budget 2027, with MSMEs below RM50 million annual sales exempted. Details are pending gazette — see our Budget 2027 summary.
• Working hours: maximum 45 hours a week.
• Overtime: at least 1.5× the hourly rate on normal days, 2× on rest days and 3× on public holidays — see how to calculate overtime.
• Leave: annual leave 8, 12 or 16 days and sick leave 14, 18 or 22 days by years of service, plus up to 60 days' hospitalisation leave; maternity leave 98 days; paternity leave 7 consecutive days.
• Since 2023 the Employment Act covers all employees, but some provisions — including overtime and termination benefits — don't apply to employees earning more than RM4,000 a month (other than manual workers).

What changes in 2027

Budget 2027 (tabled 9 October 2026) proposes changes that payroll teams should plan for. They take effect only once legislated and, for PCB, once LHDN publishes its 2027 specification:

• Minimum wage RM2,000 from June 2027 (MSMEs below RM50m sales exempt).
• Lower tax rates for the RM70,001–100,000 band (19% → 18%) and RM100,001–150,000 band (25% → 24%), and a higher individual relief (RM9,000 → RM12,000) from YA 2027.
• For non-MSME companies, wages will only be tax-deductible if paid through bank accounts permitted under the Employment Act.

Year-end in brief

• Form EA to every employee by the last day of February (28 February 2027).
• Form E with CP8D to LHDN by 31 March 2027.
• CP22 within 30 days of a new hire; CP22A at least 30 days before an employee leaves, unless their income was subject to PCB.

Our year-end payroll checklist walks through each step.

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