How does Malaysia payroll tax work in 2026?
Employer EPF sits at 13% for most Malaysian employees. Add 1.75% SOCSO on top. That combined cost is higher than most markets expect, and it is the number to model before you extend an offer. Income tax has ten bands, starting at zero and rising to 30% only above RM2 million of income.
· Malaysia guide
Illustration · Kuala Lumpur, Malaysia
Malaysia employer payroll cost has two main parts. The first is EPF: 13% of the employee's monthly salary (or 12% for salaries above RM5,000). The second is SOCSO: 1.75% of wages up to a RM6,000 monthly ceiling.
The employee pays 11% EPF on their own salary. They also pay 0.5% SOCSO up to the RM6,000 ceiling. Income tax is withheld monthly through PCB. It runs across ten bands from 0% up to 30%.
Payroll is monthly. All contributions, PCB income tax, EPF, and SOCSO, are due to their respective agencies by the 15th of the following month.
What does an employer pay in Malaysia payroll contributions?
The main employer cost is EPF at 13% of the employee's monthly salary for employees earning RM5,000 or below. For employees earning above RM5,000, the employer EPF rate is 12%.
On top of EPF, the employer also pays 1.75% SOCSO on wages up to a RM6,000 monthly ceiling. There is no SOCSO contribution on earnings above that ceiling.
| Contribution | What it covers | Employer rate | Wage ceiling |
|---|---|---|---|
| EPF (standard) | Retirement savings, salary at or below RM5,000/month | 13% | No ceiling |
| EPF (higher salary) | Retirement savings, salary above RM5,000/month | 12% | No ceiling |
| SOCSO (below age 60) | Employment injury and invalidity cover | 1.75% | RM6,000 monthly wage ceiling |
Why EPF rates differ by salary level
The Employees Provident Fund (EPF, also known as KWSP) uses a tiered employer rate. At RM5,000 or below the employer contributes 13% of the employee's monthly pay. Above RM5,000 the employer rate drops to 12%. The employee contribution stays flat at 11% regardless of salary. EPF is a retirement savings scheme, not a social tax. Both employer and employee contributions go into the employee's individual EPF account.
SOCSO and the RM6,000 ceiling
SOCSO (Pertubuhan Keselamatan Sosial, also called PERKESO) covers employment injury and permanent disability. The wage ceiling for SOCSO contributions was raised from RM5,000 to RM6,000 in October 2024. Contributions are calculated as a fixed banded amount per the PERKESO contribution schedule, with 1.75% being the effective rate. Employees aged 60 and above pay no SOCSO contribution; the employer rate for that group drops to 1.25%.
Foreign workers
Foreign employees contribute 2% EPF each from the employer and employee side from October 2025. They are not eligible for Malaysian citizens' EPF withdrawal options. Foreign workers are also covered by SOCSO for the employment injury scheme only.
What does an employee pay in Malaysia payroll deductions?
Every Malaysian employee contributes 11% of their monthly salary into EPF. This applies at all salary levels below age 60.
They also pay 0.5% SOCSO on wages up to the RM6,000 monthly ceiling. Income tax is deducted monthly through PCB (Monthly Tax Deduction).
| Deduction | Employee rate | Wage ceiling |
|---|---|---|
| EPF (below age 60) | 11% | No ceiling |
| SOCSO (below age 60) | 0.5% | RM6,000 monthly |
| PCB income tax | Varies by bracket (see income tax section) | No ceiling |
The EPF employee contribution of 11% goes into the employee's personal EPF account. Employees aged 55 and above may choose to reduce their contribution rate voluntarily. At age 60 the mandatory contribution drops, and the employer rate also changes. Employees can choose to contribute more than the minimum voluntarily.
EIS (Employment Insurance System) is a separate contribution of 0.4% each from employer and employee. EIS provides short-term financial support to employees who lose their jobs involuntarily. EIS applies to Malaysian citizens and permanent residents under age 60. The 0.4% figure is not stored in the cache as a figure token; confirm the current rate with PERKESO official rate table.
Malaysia income tax bands for 2026
Malaysia has ten income tax bands. The first band (up to RM5,000 of chargeable income) is taxed at 0%. The top band above RM2 million is taxed at 30%.
Most employees with a mid-level salary fall in the 11% or 19% bands. The RM9,000 individual personal relief reduces gross income before the bracket table applies.
| Chargeable income band (MYR/year) | Rate |
|---|---|
| MYR 0 to MYR 5,000 | 0% |
| MYR 5,001 to MYR 20,000 | 1% |
| MYR 20,001 to MYR 35,000 | 3% |
| MYR 35,001 to MYR 50,000 | 6% |
| MYR 50,001 to MYR 70,000 | 11% |
| MYR 70,001 to MYR 100,000 | 19% |
| MYR 100,001 to MYR 400,000 | 25% |
| MYR 400,001 to MYR 600,000 | 26% |
| MYR 600,001 to MYR 2,000,000 | 28% |
| Above MYR 2,000,001 | 30% |
How chargeable income is calculated
Gross income minus allowable deductions equals chargeable income. Every Malaysian resident individual receives a RM9,000 personal relief deduction before the bracket table applies. Additional reliefs cover medical expenses, education, lifestyle, and EPF contributions. The PCB system withholds estimated tax monthly; employees file an annual tax return to reconcile the final amount.
Non-residents
Non-resident employees are taxed at a flat rate of 30% on all Malaysian-sourced income, with no access to the relief deductions available to residents. Residency is defined by physical presence: 182 days or more in Malaysia in the tax year is the standard threshold. Teamed applies the correct treatment from day one based on the employee's tax residency status.
How does Malaysia PCB payroll filing work?
PCB stands for Potongan Cukai Bulanan, or Monthly Tax Deduction. Employers must calculate and deduct income tax from each employee's salary every month and remit it to LHDN by the 15th of the following month.
EPF and SOCSO contributions share the same 15th-of-the-following-month deadline. All three payments flow through separate online portals.
Every employer must deduct monthly income tax (PCB) from employee salaries and remit it to the Inland Revenue Board (LHDN) by the 15th of each following month. EPF contributions are remitted via the i-Akaun portal by the same date. SOCSO and EIS contributions are remitted via the ASSIST portal by the 15th.
Source: LHDN: Individual Income Tax Rate, Inland Revenue Board of Malaysia
The three statutory filings an employer runs each month:
- PCB / MTD: monthly income tax deduction, remitted to LHDN by the 15th of the following month
- EPF contribution: employer and employee shares, remitted via i-Akaun portal by the 15th of the following month
- SOCSO and EIS: employer and employee shares, remitted via ASSIST portal by the 15th of the following month
Employers also file an annual Form E (employer's return) by 31 March each year, summarising all employee income and PCB deducted. Employees receive Form EA (income details) by 28 February each year for their own annual tax return.
| Document | Deadline | What it covers |
|---|---|---|
| Form E (employer annual return) | 31 March following the tax year | Total remuneration and PCB for all employees |
| Form EA (employee income details) | 28 February following the tax year | Annual earnings, deductions, and PCB withheld per employee |
| PCB monthly remittance | 15th of the following month | Monthly income tax deducted from all employee salaries |
Teamed handles all three submission cycles. Clients see the contribution splits on every invoice but do not administer the portals directly.
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Collect salary and variable pay
Gather confirmed salary, overtime, allowances, and bonuses for the month before the payroll run closes.
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Calculate gross pay and deductions
Total all earnings. Calculate the EPF and SOCSO deductions for both employer and employee shares based on the applicable rates.
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Calculate PCB income tax
Apply the employee's LHDN-registered tax code and the PCB schedule to determine monthly income tax to withhold. Account for any approved personal reliefs.
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Produce payslips and confirm net pay
Generate payslips showing gross pay, all statutory deductions, and net take-home. Confirm before paying employees.
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Remit PCB to LHDN
Submit the monthly income tax deduction to LHDN by the 15th of the following month via the e-PCB or MyTax portal.
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Remit EPF and SOCSO by the 15th
Pay EPF contributions via the i-Akaun employer portal and SOCSO plus EIS contributions via the ASSIST portal, both by the 15th of the following month.
EPF pension contributions in the Malaysia payroll stack
EPF contributions are 13% employer plus 11% employee for salaries at or below RM5,000 a month. For salaries above RM5,000 the employer rate drops to 12%, while the employee rate stays at 11%.
There is no upper monthly salary ceiling for EPF contributions. All contributions go directly into the employee's individual EPF account.
Malaysia's EPF is not a pension fund in the traditional defined-benefit sense. It is a mandatory savings scheme. The contributions accumulate in individual member accounts and can be withdrawn at age 55 or for specific permitted purposes before that age, such as housing, education, or medical needs.
The contribution structure by salary band:
| Employee salary | Employer EPF rate | Employee EPF rate |
|---|---|---|
| RM5,000 per month or below | 13% | 11% |
| Above RM5,000 per month | 12% | 11% |
Because EPF is a savings scheme rather than a social insurance tax, the contributions it generates are an asset on the employee's balance sheet. This changes how employees typically think about gross versus net pay. A Malaysian employee earning RM6,000 gross sees a significant portion of their cost going into a fund they own and will eventually draw down.
Voluntary contributions
Employees can contribute above the 11% minimum voluntarily. Employers can also increase their contribution rate above the mandatory floor. Additional employee contributions attract income tax relief up to the prevailing annual cap, making voluntary top-ups a tax-efficient benefit where salary allows.
Employees below age 60 with reduced contributions
Employees who have reached age 55 but not yet 60 may elect to reduce their EPF contribution rate below the standard 11%. From age 60, mandatory contribution rates change: the employee rate drops and the employer rate adjusts to a lower tier. Teamed applies the correct contribution rate based on each employee's date of birth and employment status from the first payroll run.
How does Teamed handle Malaysia payroll for you?
Teamed becomes your legal employer of record in Malaysia for from $599 per employee per month, with zero FX mark-up in any currency.
Payroll, EPF, SOCSO, EIS, PCB filing, and the full Malaysia employment law stack run on one platform.
Real HR and legal experts handle your Malaysia hires, from the first offer letter through every monthly PCB remittance and annual Form E submission. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Malaysia contractor who converts to an employment contract keeps their record. That same employee can graduate from EOR to your own Malaysia entity without switching systems. Run the Employer Cost Calculator to model the full EPF plus SOCSO picture before you extend an offer. EOR is the right model for a first Malaysia hire, until it isn't. Start from the Malaysia hiring overview.
Key sources: LHDN: Individual Income Tax Rate, PERKESO: Rate of Contribution, and KWSP: Employer Mandatory EPF Contribution.
Frequently asked questions
What is the EPF employer contribution rate in Malaysia in 2026?
The employer EPF rate is 13% for employees earning RM5,000 or below per month. For employees earning above RM5,000, the rate is 12%. The employee always contributes 11% regardless of salary level. There is no upper salary ceiling for EPF contributions. Foreign employees contribute at a different rate of 2% each.
What is the SOCSO contribution rate in Malaysia?
The SOCSO employer rate is 1.75% of the employee's monthly wages, capped at a RM6,000 monthly wage ceiling. The employee pays 0.5% on the same capped wages. Employees aged 60 and above are exempt from the employee SOCSO contribution, and the employer rate drops to 1.25% for that group.
What are the Malaysia income tax rates in 2026?
Malaysia has ten income tax bands for 2026. The rates run from 0% on the first RM5,000 of chargeable income up through 11% (RM50,001 to RM70,000), 19% (RM70,001 to RM100,000), 25% (RM100,001 to RM400,000), and 30% above RM2 million. A RM9,000 individual personal relief reduces taxable income before the bracket table applies.
When must Malaysia employers remit PCB and EPF each month?
All three monthly payroll filings share the same deadline: the 15th of the following month. PCB income tax goes to LHDN via the MyTax or e-PCB portal. EPF contributions go via the KWSP i-Akaun employer portal. SOCSO and EIS contributions go via the PERKESO ASSIST portal. Missing the 15th deadline attracts penalties from the respective authorities.
What is the national minimum wage in Malaysia?
The national minimum wage is RM1,700 per month as of 2026, with an hourly equivalent of RM8.72. The rate applies to all employers and all states. It has been in effect for all employers, including micro-enterprises with fewer than five staff, since August 2025.
The EPF rate split catches employers every time. They quote a gross salary, forget to model the 13% employer contribution on top, and then the first invoice lands and the cost is higher than the budget said. Run the full stack before the offer goes out. EPF, SOCSO, EIS, all three, not just salary.
Malaysia EPF employer contribution is 13% for most staff. Add 1.75% SOCSO, and the combined on-cost is larger than most forecasts allow for.
Ten income-tax bands with PCB filed monthly by the 15th. The filing deadlines are tight and consistent.
Model the full employer cost before the offer. Then get it running cleanly from day one.
