Statutory Payroll Contributions In Malaysia
Employees Provident Fund
The compulsory contributions under the Employees Provident Fund (EPF) Act 1991:
|Age Group 60 years and below|
|Employers||a) Monthly wages RM5,000 and below – Minimum of 13% of the employees’ monthly wages |
b) Monthly wages exceed RM 5,000 – Minimum 12% of the employees’ monthly wages
|Employees||Minimum of 11% of the employees’ monthly wages @|
|[Third Schedule (Part A) of the EPF Act 1991]|
|Age Group 60 – 75 years and below|
|Employers||No limit for Monthly wages – 4 % of employees’ monthly wages.|
|Employees||Employees’ share of contribution will be 0%|
|[Third Schedule (Part E) of the EPF Act 1991]|
Foreign workers and expatriates
All foreign workers and expatriates and their employers are exempted from compulsory contributions. They can, however, choose to contribute and the applicable rates are as follows:
|Age Group 60 years and below|
|Employers||RM5.00 per employee per month|
|Employees||11% of the employees’ monthly wages|
|[Third Schedule (Part B) of the EPF Act 1991]|
|Age Group 60-75 years and below|
|Employers||RM5.00 per employee per month|
|Employees||5.5% of the employees’ monthly wages|
|[Third Schedule (Part D) of the EPF Act 1991]|
Age Group 60 – 75 years
|Employers||a) Monthly wages RM 5,000 and below – Minimum of 6.5% of the employees’ monthly wages|
|b) Monthly wages exceed RM 5,000 – Minimum of 6% of the employees’ monthly wages|
|Employees||Minimum of 5.5% of the employees’ monthly wages|
[Third Schedule (Part C) of the EPF Act 1991] shall apply to the following employees :
(a) employees who are not Malaysian citizens but are permanent residents in Malaysia and
(b) employees who are not Malaysian citizens who have elected to contribute before 1 August 1998.
Source: Employees Provident Fund – www.kwsp.gov.my
Social Security Organisation (SOCSO)
The Social Security Organisation (SOCSO) administers two social security schemes for workers earning wages not exceeding RM4,000 per month (Amendments with effective 1 Jun 2016). Once covered, employees remain covered irrespective of their wages. However, the maximum contribution is based on wages of RM4,000 per month (Amendments with effective 1 Jun 2016).
There are two schemes administered by SOCSO Act, namely:
- Employment Injury Scheme which provides social insurance coverage against workplace accidents, occupational diseases and commuting accidents to and from place of work.
- Invalidity Pension Scheme provides 24 hours coverage against invalidity arising from any cause and not necessarily relating to work environment.
Under these schemes workers are entitled to medical benefits; temporary and permanent disablement benefits; constant attendance allowance; dependent’s benefit or survivors pension; funeral, rehabilitation, education benefits; and invalidity pension.
The Employment Injury Scheme is funded solely by the employer with the contribution of 1.25% and the Invalidity Scheme is funded with the contribution of 1% which is shared equally by employers and employees. This rate of contribution is capped at the invaluable wage of RM4,000. This contribution is mandatory by law.
It is compulsory for all eligible employees who are Malaysian citizens and permanent residents to register. All employees who are employed under a contract of service or apprenticeship in the private sector and contractual/temporary staff of Federal / State Government, as well as Federal / State Statutory Bodies, need to be registered and covered by SOCSO.
The SOCSO EI Scheme is effective from 1 January 2019. For existing foreign workers in Malaysia who have valid Foreign Workers Compensation Scheme (FWCS), they have to be registered with SOCSO by their employers a day after the expiration of FWCS, subject to the end of the cooling-off period for FWCS on 31 December 2019. Beginning 1 January 2020, all employers shall register with SOCSO although their foreign workers are still covered under FWCS. New foreign workers entering Malaysia on or after 1 January 2019 have to register with SOCSO once they are validated by the Immigration Department of Malaysia at any gazetted port of entry.
Employees Exempted From the Coverage of the Employees’ Social Security Act, 1969 Are as Follows:
- Federal and State Government permanent employees
- Domestic servants
- Self-employed (except for self-employed taxi drivers, individuals who run similar services including e-hailing such as Grab and self-employed bus drivers)
- Spouses of a sole proprietor or a partnership owner
Self-employed individuals may contribute under the Self-Employed Social Security Scheme (Act 789)
Employment Insurance System (EIS)
To provide state-of-the-art public employment services (PES), labor market information (LMI) and unemployment benefits to the Malaysian workforce with the aim of promoting full employment.
The EIS contribution rate is based on Section 18 and Schedule 2 of the Employment Insurance System Act 2017. The contribution rate is 0.2% for the employer and 0.2% for employee based on the employee’s monthly salary.
- All employers in the private sector are required to pay monthly contributions for each of their employees. (Government employees, domestic workers and the self-employed are exempted).
- An employee is defined as a person who is employed for wages under a contract of service or apprenticeship with an employer. The contract of service or apprenticeship may be expressed or implied and may be oral or in writing.
- EIS covers all workers who are Malaysian citizens / permanent residents.
- All employees aged 18 to 60 are required to contribute. However, employees aged 57 and above who have no prior contributions before the age of 57 are exempted.
- Contribution rates are capped at insured salary of RM4000.00
The EIS Act does NOT cover the self-employed, civil servants, and workers in local authorities and statutory bodies.
The Employment Insurance System Office offers two kinds of benefits, namely monetary benefits and job search assistance.
The 5 types of monetary benefits are:
- Job Search Allowance (SE)
- Reduced Income Allowance (RIA)
- Training Fee (TF)
- Training Allowance (TA)
- Early Re-Employment Allowance (ERA)
The 2 kinds of job search assistance are:
- Re-Employment Placement Program
- Career Counseling
Human Resources Development Fund (HRDF)
The Human Resource Development Fund (HRDF) operates on the basis of a levy/grant system. Employers who have paid the Human Resources Development levy will qualify for training grants from the HRDF to defray or subsidise training costs for their Malaysian employees.
Companies from Manufacturing and Mining and Quarrying* sectors covered under the Pembangunan Sumber Manusia Berhad Act, 2001 are as follows:
|Categories of Employers||Rate of Levy Contributions|
|Employers with 50 Malaysian employees and above||1% of employees’ monthly wages|
|Employers with 10 to 49 Malaysian employees with a paid-up capital of RM2.5 million and above||1% of employees’ monthly wages|
|Employers with 10 to 49 Malaysian employees with a paid-up capital of less than RM2.5 million are given the option to register with HRDF||0.5% of employees’ monthly wages|
*Effective from 1 June 2014, the coverage under the Pembangunan Sumber Manusia Berhad Act, 2001 has been extended to cover sub-sectors under the Mining and Quarrying Sector that comprises companies with the business activities of petroleum and gas extraction and mineral and stone quarrying.
Source: Pembangunan Sumber Manusia Berhad (PSMB) – www.hrdf.com.my
General DOs & DON’Ts for EPF/SOCSO/HRDF contributions and Monthly Tax Deductions (MTD) rules for submissions
- Must pay by 15th of the following month or immediate preceding day if it falls on a weekend or Public Holiday.
- Advisable to include a reasonable time frame for cheque/payment clearance. Otherwise any subsequent payments after the deadline due to payment(s) returned will subject to late payment penalty.
Summary of Employment Laws in Malaysia
Employment of Expatriates in Malaysia
Summary of Immigration Process
Company’s Paid Up Capital Requirements for Employment of Expatriate
Requirements to Apply for Expatriate Employment Pass
Approvals Required from Agencies/ Regulatory Bodies for Employment Pass Application
List of Positions Not Applicable for Expatriate Positions