In Malaysia, running payroll involves crucial statutory deductions and contributions that are essential for managing employees’ finances. These items will typically be reflected on the employees’ payslips.
One such deduction is the Employees’ Provident Fund (EPF), a mandatory retirement savings plan. Both employers and employees are obligated to contribute to the EPF. Employees can contribute between 9–11% of their monthly salary, while the employer’s contribution 12-13% of employee’s monthly salary.
Another important element is the Social Security Organisation (SOCSO), a compulsory social insurance scheme that provides coverage in the event of employee injury or death. Employers must make monthly contributions to SOCSO for each eligible employee.
The Employment Insurance Scheme (EIS) is in place to support employees who have lost their jobs while they search for new employment. Employers are required to contribute to this scheme on a monthly basis for each employee.
Additionally, there is the Human Resources Development Fund (HRDF) levy, which is a mandatory payment made by employers in certain sectors with 10 or more employees in manufacturing, services, mining, and quarrying. The rate for this levy is 1% of each eligible employee’s monthly salary.
Monthly tax deduction (MTD) or Potongan Cukai Bulanan (PCB) in Malay is a deduction made from employees’ salaries to cover their taxes. Employers are responsible for deducting this tax before salary payment and forwarding it to the Inland Revenue Board.
To comply with regulations, employers must remit these deductions and contributions to the relevant statutory bodies no later than the 15th of the following month.