Payroll in Malaysia

Payroll in Malaysia means calculating gross-to-net salary, deducting EPF, SOCSO and EIS from each employee, applying progressive income tax through monthly withholding, paying the employer share of EPF, SOCSO, EIS and the training levy, issuing payslips, and filing with the Inland Revenue Board each month. EPF (Employees Provident Fund, known in Malay as KWSP) is the mandatory retirement savings scheme, and it carries the largest single deduction on the page at 11% from the employee and 12% to 13% from the employer.

Total employer cost for a RM 60,000 annual salary is about RM 69,570, around 16% on top of gross.

Our verdict: Fewer than 3 employees and no local entity in Malaysia: use an EOR at $199 to $650 per employee per month. At 3 or more, opening a Sdn. Bhd. (roughly $1,400 in setup costs and 6 to 12 weeks to complete) usually works out cheaper. Already running a local entity: standard payroll outsourcing is the cheaper route.

The one local complication is that several of these schemes behave differently from each other. EPF has no wage ceiling and the employer rate flips at the RM 5,000 monthly mark.

SOCSO and EIS are capped at RM 6,000 of monthly wages. Getting the ceilings and the rate tiers right in the same pay run is where first-time foreign employers slip.

Use this page if you already have, or plan to set up, a local Sdn Bhd entity in Malaysia. If you want to hire in Malaysia without becoming the legal employer, use an Employer of Record instead. See our guide to EOR in Malaysia.

Malaysia’s employer burden is moderate by regional standards. The real work sits in the scheme ceilings and the monthly MTD/PCB withholding, not in the headline rate.

Payroll in Malaysia at a Glance

Malaysian payroll runs on a monthly cycle. The table below summarises the cycle, contributions, deductions, tax treatment, the main filing and its deadline, registration, payslip rules, the entity requirement and the authority you report to.

The Inland Revenue Board (LHDN, Lembaga Hasil Dalam Negeri) is the tax office that collects income tax and receives your monthly and annual payroll filings. Keep that table close: every contribution rate below maps back to one of these rows.

How Does Payroll Work in Malaysia?

Payroll in Malaysia follows a standard monthly flow. You calculate each employee’s gross pay, deduct their EPF, SOCSO and EIS shares, withhold income tax through the Monthly Tax Deduction scheme, then pay net salary and issue a payslip.

Monthly Tax Deduction, written MTD in English and PCB (Potongan Cukai Bulanan) in Malay, is the system that collects income tax in instalments from each salary rather than in one annual bill. Your provider calculates the right amount per employee, withholds it, and remits it to LHDN by the 15th of the following month, alongside the EPF, SOCSO and EIS contributions.

You remain the employer throughout. A managed payroll provider runs the calculations, the remittances and the filings, but the employment relationship and the Sdn Bhd stay yours. If you do not have a Malaysian entity, you need an EOR rather than a payroll bureau.

What Payroll Taxes Apply in Malaysia?

Malaysian payroll carries four employer-side charges and three employee-side deductions, plus progressive income tax. The split between them, and the ceilings on some of them, is the part worth getting right before your first pay run.

Employer Payroll Contributions in Malaysia

Employers pay into the same three statutory schemes as employees, at higher rates, plus a training levy. EPF (the Employees Provident Fund, or KWSP, the mandatory retirement savings fund) is the largest: 13% of wages where the monthly wage is RM 5,000 or below, and 12% above that threshold. EPF has no wage ceiling.

SOCSO (the Social Security Organisation, or PERKESO, which runs work-injury and invalidity cover) costs the employer about 1.75% of wages, and EIS (the Employment Insurance System, the unemployment scheme also run by PERKESO) costs 0.2%. Both SOCSO and EIS are capped on the first RM 6,000 of monthly wages.

On top of these, employers pay the HRD levy (the Human Resource Development training levy) at 1% of wages, which funds employee training. Add it up and the employer burden lands roughly between 13% and 16% of gross for a citizen employee. The watch-out: EPF having no ceiling means the rate does not taper for high earners, so a senior salary carries the full 12% to 13% on every ringgit.

The true cost of employing in Malaysia

Statutory employer rates; items can apply to different wage bases or carry conditions, so lines do not always sum to the total.

Sources: taxsummaries.pwc.com (employer contributions).

Employee Payroll Deductions in Malaysia

Employees have three statutory deductions taken before income tax. EPF is 11% of wages for a citizen under 60, with no wage ceiling. SOCSO is 0.5% and EIS is 0.2%, both capped at the first RM 6,000 of monthly wages.

Together these come to about 11.7% of gross for a typical citizen employee. Because EPF dominates and has no cap, the deduction stays proportional all the way up the salary scale. The payoff line for buyers: model gross-to-net on 11.7%, not on income tax alone, or your salary offers will overstate take-home pay.

Income Tax on Salary in Malaysia

Resident income tax is progressive, running from 0% on the first RM 5,000 of chargeable income up to 30% on income above RM 2,000,000. Most salaried employees sit in the lower-to-middle bands. Tax is collected through the MTD/PCB monthly withholding described above, then reconciled annually.

Chargeable income is gross pay minus reliefs, not gross pay itself. Every resident gets an automatic RM 9,000 individual relief, plus EPF contribution relief capped at RM 4,000. Non-residents are taxed at a flat 30%, so residency status changes the calculation entirely and must be confirmed per employee.

Payroll Tax Example: Gross Salary to Net Pay

The worked example below takes a single resident citizen and runs gross salary through every deduction to net pay, then adds the employer-side costs on top.

Simplified illustration: Single resident citizen under 60 earning RM5,000/month (below the RM6,000 SOCSO/EIS ceiling), with only the RM9,000 individual relief and RM4,000 EPF relief claimed. Employer EPF is 13% because the monthly wage is RM5,000 or below, plus the 1% HRDF training levy. Every resident gets an automatic RM9,000 individual relief, plus EPF contribution relief capped at RM4,000.

Read the example as a shape, not a payslip: a real employee with dependant or lifestyle reliefs, or a wage above the RM 6,000 SOCSO/EIS cap, lands somewhere different. The figure to take away is that on RM 60,000 gross, the employer pays roughly RM 69,570 all-in, before any provider fee.

What Payroll Filings Are Required in Malaysia?

Malaysia has one monthly remittance plus two annual returns. The monthly piece is the MTD/PCB withholding sent to LHDN with the statutory contributions; the annual pieces are Form E and Form EA.

What MTD/PCB and Form E/EA Report

The Monthly Tax Deduction (MTD/PCB) filing reports the income tax withheld from each employee that month, which the employer remits to LHDN. Alongside it, EPF, SOCSO and EIS contributions are remitted to KWSP and PERKESO.

Form E is the employer’s annual return to LHDN, summarising all remuneration paid and tax deducted across the workforce. Form EA is the individual statement each employee receives so they can complete their own tax return. Together they reconcile the year’s monthly withholding against what was actually owed.

When MTD/PCB and Form E/EA Are Due

The monthly MTD/PCB remittance and the statutory contributions are all due by the 15th of the following month. That single deadline covers tax and social contributions together, which is convenient but also means one missed date hits multiple authorities at once.

Form E and Form EA follow the annual cycle for the prior year’s remuneration. The practical rule for buyers: confirm your provider treats the 15th as a hard monthly deadline across every scheme, not just for tax.

Who Files It

The employer is legally responsible for all filings, but in a managed payroll arrangement the provider prepares and submits them on your behalf. Your provider should hold direct LHDN e-filing access and EPF and PERKESO portal integration rather than re-keying figures manually.

You stay accountable even when the provider files. Ask, in writing, whether they file directly with each authority or route through a third party, because that determines how fast errors get fixed.

What Happens If Payroll Filings Are Wrong

Late or incorrect filings carry separate penalties per authority. On the tax side, failure to remit MTD can trigger a 10% penalty on the amount in arrears, plus potential fines and, in serious cases, imprisonment.

On EPF, a late payment charge applies based on the annual dividend rate, with a minimum charge. On SOCSO and EIS, interest accrues on late contributions. The payoff for buyers: a single late pay run can generate three different penalties, so deadline discipline is the cheapest compliance control you have.

What Are the Payroll Deadlines in Malaysia?

The table below sets out each recurring obligation, how often it falls, when it is due and who is responsible. The 15th-of-month deadline is the one to anchor your calendar around.

Late filing: LHDN (Tax): Failure to remit monthly tax can lead to a 10% penalty on the amount in arrears, plus potential fines (RM200-RM20,000) and/or imprisonment. EPF (Pension): A late payment charge is imposed, calculated based on the annual dividend rate, with a minimum charge of RM10. SOCSO/EIS (Social Security): Interest on late contributions is charged at 6% per annum for each day of default.

Payroll Operations Risk in Malaysia

Employers in Malaysia file with 2 separate agencies.

Sources: mohr.gov.my (compliance), bnm.gov.my (payments).

What Payslip and Employee Record Rules Apply in Malaysia?

Payslips are mandatory in Malaysia and must be issued with each salary payment. The payslip should itemise gross pay, each statutory deduction (EPF, SOCSO, EIS), income tax withheld and net pay, so the employee can see exactly how take-home was reached.

Before the first pay run, every employee must be registered as a member with KWSP for EPF and with PERKESO for SOCSO and EIS. EPF registration is due within 7 days of the start date; SOCSO and EIS registration must be done on or before the start date.

Your provider should hold and maintain these member records, not just process the monthly numbers. The payoff line: ask who owns the KWSP and PERKESO member registrations, because a gap there blocks the very first contribution.

How Much Does Payroll Outsourcing Cost in Malaysia?

Two numbers drive the cost of running Malaysian payroll: the statutory employer contributions, which are fixed by law, and the provider’s fee, which is negotiable. They are not the same line and should never be quoted as one.

11 of the 15 EOR providers we track publish Malaysia fees; they range from $199 to $650 per employee per month.

Published list prices in USD: EOR fees are per employee per month, contractor fees per contractor per month. Providers that publish neither fee for Malaysia are not shown.

According to Whichapp’s July 2026 analysis of EOR fees across 40 countries, providers charge $199 to $650 per employee per month in Malaysia.

11 of the 15 providers we track publish Malaysia EOR fees. The lowest published rate is $199 per employee per month and the highest is $650.

Contractor management fees in Malaysia run from $6 to $49 per contractor per month.

Managed Payroll Provider Fees

Managed payroll for Malaysia typically runs in the region of USD 30 to 60 per employee per month, with the exact figure depending on headcount, complexity and whether reporting is consolidated with other countries. Smaller headcounts sit at the higher end per head; larger teams negotiate down.

This fee buys the processing and filing work, not the statutory contributions, which you pay on top. Treat the per-employee fee as the floor and ask what sits outside it.

What Payroll Provider Fees Usually Include

A standard managed payroll fee covers gross-to-net calculation, EPF, SOCSO and EIS remittance, MTD/PCB withholding, payslip generation and the monthly filings. Most providers also handle KWSP and PERKESO member registration for new hires.

What it includes day to day is usually clear; what it excludes is where surprises live. Confirm Form E and Form EA annual filings are inside the base fee, not billed separately at year-end.

Extra Payroll Costs to Ask About

Watch for setup or country-activation fees, charges for off-cycle or corrective pay runs, and separate line items for year-end Form E/EA work. Some providers also bill for foreign-worker payroll handling, which carries different EPF treatment.

The HRD levy at 1% is a statutory cost, not a provider fee, but confirm the provider calculates and remits it rather than leaving it for you. Ask for a single all-in quote that names every recurring and one-off charge.

When Payroll Outsourcing Becomes Cheaper Than EOR

Managed payroll on your own Sdn Bhd is materially cheaper per head than an EOR once you are past the first handful of employees. EOR fees carry the full employment infrastructure and liability, which is worth paying only while you have no entity.

Because a Malaysian Sdn Bhd is fast and inexpensive to register, the break-even tips earlier here than in many markets. For a team of five or more on a multi-year basis, your own entity with a managed payroll provider almost always wins on cost.

Payroll in Malaysia vs EOR in Malaysia

The table below sets the two routes side by side on the points that decide between them: who is the legal employer, whether you need an entity, relative cost, best-fit scenario, control and admin burden.

Use payroll outsourcing if you already have a local entity or are hiring enough people to justify one. Use an EOR if you need to hire before setting up an entity.

If you have not incorporated yet and need someone on the ground this month, an EOR is the route. For the full provider comparison on that path, see our guide to EOR in Malaysia.

Best Payroll Providers for Malaysia

The six providers below all run compliant Malaysian payroll. The differences that matter are integration depth and where each one is strongest, so each card names a payroll fit and a Malaysia-specific watch-out. Ask every one whether they have direct LHDN e-filing and EPF and PERKESO portal integration, not just whether they claim Malaysian coverage.

Deel for Payroll in Malaysia

Deel runs managed payroll in Malaysia through a registered local entity, handling EPF tiering, SOCSO, EIS and MTD/PCB withholding in ringgit. Its strength is ASEAN breadth: if Malaysia sits alongside Singapore, Indonesia or Thailand in your stack, one vendor covers the region and cuts management overhead.

The limitation is that platform-led providers can be thinner on hands-on local support than a domestic bureau. Malaysia watch-out: confirm Deel applies the correct EPF rate tier at the RM 5,000 wage line for each employee.

Remote for Payroll in Malaysia

Remote offers Malaysian payroll on owned-entity infrastructure, which gives a direct compliance chain to KWSP, PERKESO and LHDN. Its strength is depth across Malaysia’s separate statutory streams, including Form E and Form EA annual filings.

The limitation is narrower country coverage than the largest aggregators if you are scaling into many markets at once. Malaysia watch-out: verify Remote handles the SOCSO and EIS RM 6,000 monthly ceiling correctly for higher earners.

Papaya Global for Payroll in Malaysia

Papaya Global covers Malaysia with a focus on multi-country payroll consolidation and finance-grade reporting. Its strength is the unified dashboard: if Malaysia is one of many countries, the employer and employee cost split surfaces cleanly for finance teams.

The limitation is that it targets mid-market to enterprise, so very small teams may find it heavier than needed. Malaysia watch-out: confirm whether Papaya runs through its own Malaysian entity or a local partner bureau.

Rippling for Payroll in Malaysia

Rippling handles Malaysian payroll inside its combined HR, IT and payroll platform, with automated accounting journal entries. Its strength is consolidation for companies that want payroll, HR and device management in one system.

The limitation is that a platform-first vendor may offer less specialist Malaysian compliance depth than a local-focused provider. Malaysia watch-out: check that MTD/PCB withholding and the HRD levy are both calculated and remitted, not left as manual steps.

Multiplier for Payroll in Malaysia

Multiplier covers the core Malaysian payroll cycle and tends to suit smaller headcounts where price predictability matters. Its strength is cost-effective coverage for one to five employees without volume commitments.

The limitation is that flexibility for complex or off-cycle adjustments can be narrower than with enterprise-grade platforms. Malaysia watch-out: confirm Multiplier registers each new hire with KWSP and PERKESO within the EPF 7-day and SOCSO/EIS start-date windows.

Safeguard Global for Payroll in Malaysia

Safeguard Global runs managed payroll across many countries including Malaysia, with a services-led model rather than a self-serve platform. Its strength is hands-on payroll operations for companies that want a managed-service relationship over software.

The limitation is that pricing and onboarding are less transparent than platform-native competitors and quoted case by case. Malaysia watch-out: ask how it handles foreign-worker EPF, which differs from the citizen rate, if your team is not all Malaysian.

Check providers that match this market

4 providers · links may include affiliate referrals

Deel

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Remote

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Papaya Global

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Rippling

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How to Choose a Payroll Provider in Malaysia

The right provider for Malaysia is the one that handles the local filings cleanly and tells you plainly who carries the risk when something goes wrong. Work through the questions below before signing.

Can They Handle MTD/PCB and Form E/EA?

Ask whether the provider calculates Monthly Tax Deduction per employee and remits it to LHDN by the 15th, and whether the annual Form E and Form EA filings are inside the base fee. A provider that treats year-end as an add-on is one to price carefully.

Direct LHDN e-filing access is the signal to look for. Manual re-keying is where late filings and reconciliation errors start.

Do They Manage EPF, SOCSO and EIS Registration?

Each new hire must be registered as a member with KWSP for EPF and PERKESO for SOCSO and EIS, within tight windows. Confirm the provider owns these registrations and meets the EPF 7-day and SOCSO/EIS start-date deadlines.

A missed registration blocks the first contribution and exposes you to penalties before the employee has even been paid. Make registration ownership explicit in the contract.

Can They Model Gross-to-Net Salary Accurately?

Malaysia’s mix of an uncapped EPF and capped SOCSO and EIS means a naive percentage model overstates deductions for higher earners. Ask the provider to run a sample gross-to-net at a salary above RM 6,000 a month and check the ceilings apply.

Also confirm they apply the correct EPF employer tier at the RM 5,000 line. Get the model right before you make salary offers, not after.

How Do They Update for Payroll Law Changes?

Malaysian rates and rules shift with each budget cycle, including EPF treatment and the income tax bands. Ask how the provider rolls out statutory changes and whether updates are automatic or require your sign-off.

A provider that cannot describe its update process is a provider that will eventually run a stale rate. Build this into your due diligence.

Who Is Liable for Payroll Errors?

When a contribution or withholding is wrong, the penalties land on the employer first. Ask, in writing, who bears the cost of a provider-side error and what the correction process and timeline look like.

Strong providers cover penalties caused by their own mistakes. Weaker ones point to indemnity clauses and leave you managing LHDN, KWSP and PERKESO yourself.

Can They Support Multi-Country Reporting?

If Malaysia is one of several countries you run, ask whether the provider consolidates Malaysian data into a single dashboard. The useful test is whether the reporting shows the employer cost and employee deduction split cleanly per country.

Consolidation matters most for finance teams comparing true employment cost across markets. If Malaysia is standalone, this carries less weight.

What Support Do They Offer During Terminations or Audits?

Termination pay and final EPF, SOCSO and EIS settlements have their own rules, and an LHDN query can arrive long after an employee leaves. Ask what support the provider gives during terminations and audits, and whether it is included or billed.

The answer tells you whether you have a payroll processor or a payroll partner. For Malaysia, where penalties stack across three authorities, that distinction is worth paying for.

What Does Terminating an Employee Cost in Malaysia?

Severance: Termination & Lay-Off Benefits Regulations 1980: 10 days’ wages per year of service for under 2 years; 15 days/year for 2 to under 5 years; 20 days/year for 5+ years. Statutory benefit covers Employment Act employees (post-2023 wage ceiling RM4,000/month) with at least 12 months’ continuous service.

Statutory leave: 8 days of paid annual leave plus 12 public holidays a year.

Sources: lom.agc.gov.my (severance), mohr.gov.my (leave).

Malaysia Payroll Checklist Before Hiring

Run through this list before your first Malaysian pay run. It maps directly to the obligations covered above.

• Confirm whether you need payroll or an EOR
• Check your local entity status
• Model gross-to-net salary for your offers
• Confirm employer contribution rate (employer EPF/SOCSO/EIS)
• Confirm employee deductions (EPF, SOCSO, EIS)
• Confirm income tax treatment
• Check who files MTD/PCB + Form E/EA and by when
• Confirm EPF/SOCSO/EIS registration is handled
• Confirm the payslip process
• Check leave, sick pay and termination workflows
• Ask who carries liability for calculation errors
• Confirm provider pricing and any extra fees

If you are weighing employees against contractors for any of these roles, see our guide to contractor management in Malaysia. For the full country picture, start at the Malaysia hiring hub.

FAQs About Payroll in Malaysia

Methodology and Disclosure

Whichapp is an independent comparison site. We do not sell payroll, EOR, or contractor services.

Payroll rates and thresholds are based on EPF (KWSP) contribution schedules, SOCSO and EIS rates published by PERKESO, and LHDN guidance on Monthly Tax Deduction and Form E/EA reporting. Provider details are based on publicly available information and may vary by volume, contract terms, and negotiation.

We may earn a commission from provider links. This does not constitute legal or tax advice. Consult a Malaysian employment lawyer or tax adviser for specific employment law questions.

Last reviewed: July 2026

Primary sources

• Income tax and employee contributions: taxsummaries.pwc.com
• Employer contributions: taxsummaries.pwc.com
• Minimum wage: lom.agc.gov.my
• Payroll filing deadlines: hasil.gov.my
• Notice periods and leave: mohr.gov.my
• Severance rules: lom.agc.gov.my
• Entity setup benchmark: mida.gov.my