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This guide explains the purpose of each scheme and what payroll has to do. It does not state rates, wage ceilings or deadlines because those are set by the authorities and change. Use the official sources at the end of this guide, or a qualified adviser, for current figures. This is general information, not legal or tax advice.
EPF (KWSP): retirement savings
The Employees Provident Fund, known in Malay as Kumpulan Wang Simpanan Pekerja (KWSP), is a retirement savings scheme. Employers and eligible employees contribute a percentage of wages each month, and contributions are remitted to KWSP.
For payroll, this means the system must identify who is eligible, apply the correct contribution to the right wage components, show the employee and employer portions, and produce data for remittance.
SOCSO (PERKESO): social security
The Social Security Organisation, known as Pertubuhan Keselamatan Sosial (PERKESO), administers the Employees' Social Security scheme, which provides protection to employees in cases such as employment injury and invalidity. Contributions are calculated from the employee's wages and paid by employer and, depending on the category, employee.
Payroll must apply the correct category and contribution band for each employee, every month.
EIS (SIP): employment insurance
The Employment Insurance System, Sistem Insurans Pekerjaan (SIP), is administered by PERKESO and provides support to eligible employees who lose their jobs. It runs as its own contribution alongside SOCSO.
Payroll should calculate EIS separately from SOCSO and show it distinctly on payslips and reports.
PCB (MTD): monthly tax deduction
Potongan Cukai Bulanan (PCB), also called Monthly Tax Deduction (MTD), is how employers withhold an employee's estimated income tax from monthly pay and pay it to the Inland Revenue Board (LHDN). The amount depends on the employee's remuneration and personal circumstances.
A payroll process needs to hold the data PCB depends on, apply the LHDN calculation method, and keep year-end records consistent with what was deducted.
HRDF (HRD Corp): training levy
The Human Resources Development Fund is managed by HRD Corp (Pembangunan Sumber Manusia Berhad). Employers in covered sectors and above a defined size contribute a levy based on wages, and can use it to claim approved training.
Whether an employer must register depends on its sector and headcount, so check HRD Corp's current requirements before configuring payroll.
What a Malaysian payroll process should cover
- Prepare employee salary information and statutory profile for each employee.
- Review attendance for the period.
- Include approved claims and overtime.
- Process the payrun and calculate applicable statutory contributions.
- Approve the payrun and lock it.
- Generate payslips.
- Export bank payment files.
- Prepare year-end documents such as EA forms.
How BukuHR handles this
BukuHR Professional and Enterprise include Malaysian payroll with EPF, SOCSO, EIS, PCB and HRDF handling inside the payrun, payrun approval and locking, payslips, bank exports and EA and year-end processes.
Official sources
General information only. This guide is not legal, tax or financial advice. Confirm current requirements with the relevant authority or a qualified adviser.
See how BukuHR runs a payrun end to end.
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