Hiring in Malaysia goes beyond offering a competitive salary. Employers may also need to contribute to the Employees Provident Fund, Social Security Organisation, Employment Insurance System and Human Resources Development Corporation. They must also calculate and remit Monthly Tax Deduction from eligible employees’ salaries.
The varying rules for local and foreign employees often add complexity, especially for companies managing cross-border teams or hiring through an Employer of Record (EOR) partner.
Without a clear understanding of statutory contributions, businesses risk overspending or eroding employee trust when benefits like pension funds or insurance are mishandled. In a competitive market like Malaysia, compliance is more than a legal formality, it’s essential to building credibility, protecting your workforce, and managing costs effectively.
Important 2026 update: From 1 June 2026, employees covered by PERKESO must also contribute to the 24 Hour Protection Scheme. The first phase is equivalent to 0.75% of assumed monthly wages and is fully borne by the employee.
What is Statutory Contributions in Malaysia
Statutory Contributions in Malaysia refer to mandatory payments that employers and employees must make to government bodies such as the EPF, SOCSO, and EIS. These contributions fund essential benefits like retirement savings, social security, and unemployment protection, ensuring both legal compliance and employee welfare in the workplace.
Malaysia’s main payroll obligations include:
- Employees Provident Fund, known as EPF or KWSP
- Social Security Organisation, known as SOCSO or PERKESO
- Employment Insurance System, known as EIS or SIP
- Human Resources Development Corporation levy
- Monthly Tax Deduction, known as MTD or PCB
PCB is technically a tax withholding rather than an employer contribution. However, it remains an important part of an employer’s monthly payroll responsibilities.
Key Statutory Contribution Schemes in Malaysia
Below are the key statutory contributions every employer must understand when operating or hiring in Malaysia:
1. Employees’ Provident Fund (EPF) – Retirement savings
The Employees Provident Fund (EPF) serves as a retirement savings scheme for Malaysian citizens and permanent residents, where both employer and employee contributions are mandatory. Employees typically contribute 11% of their monthly wages, while employers contribute 13% for those earning RM5,000 or less, and 12% for those earning above RM5,000.
For foreign employees, contributions have been optional in the past, but beginning 1 October 2025, a new amendment makes EPF contributions mandatory at 2% each for employers and foreign employees. Employers must register with EPF, enrol employees, deduct the employee’s share, and remit the combined total by the 15th of the following month. It’s also worth noting that certain payments, such as travel allowances, gratuities, or director’s fees, are excluded from EPF contributions.
Key Takeways:
1.Contribution Rates for Local Employees
- Employee contribution: 11% of monthly wages.
- Employer contribution (amound based on 3rd Schedule) :
- 13% for employees earning RM5,000 or less.
- 12% for employees earning above RM5,000.
2.Update for Foreign Employees (Effective 1 October 2025)
- EPF contributions, which were previously optional for foreign employees, will become mandatory.
- Contribution rates:
- 2% from the employer.
- 2% from foreign employee.
3. Employer Responsibilities
- Register with EPF and enroll eligible employees.
- Deduct the employee’s share of the contribution from their salary.
- Remit the total contribution (employer + employee) by the 15th of the following month.
2. The Social Security Organisation (SOCSO) – Work Injury / Invalidity / Social Security
The Social Security Organisation (SOCSO) contribution is compulsory in Malaysia for most employees under the Employees’ Social Security Act 1969. All employers who hire one or more employees are legally required to register and make monthly SOCSO contributions to provide protection against work-related injuries, invalidity, and other social security risks. Foreign workers are also required to contribute to SOCSO at the same rate and coverage as local employees.
For employees below 60 years old, employers contribute around 1.75% of the employee’s monthly wages, while employees contribute 0.5%. Once an employee reaches 60 years of age, the employee contribution stops, and the employer continues contributing at a reduced rate of 1.25%.
Employers must register their business and employees with SOCSO, submit monthly payments promptly, and report any workplace accidents within 48 hours. As of 1 October 2024, the salary ceiling for SOCSO contributions has increased from RM5,000 to RM6,000, meaning higher coverage and contribution obligations for employers.
Key Takeways:
Contribution Rates
- For employees below 60 years old:
- Employer: 1.75% of the employee’s monthly wages.
- Employee: 0.5% of monthly wages.
- For employees aged 60 and above:
- Employee contribution stops.
- Employers continue contributing at a reduced rate of 1.25%.
Coverage for Foreign Employees
- Same contribution rate as local.
3. Employment Insurance System (EIS) – Unemployment / Re-employment Support
The EIS provides unemployment benefits and re-employment assistance to local workers who lose their jobs. Both employers and employees contribute 0.2% of monthly wages to this scheme. However, EIS coverage does not extend to foreign workers, as it is designed specifically for Malaysian citizens and permanent residents. Though small, this contribution remains a required component of total employment costs for eligible employees.
Key Takeways:
Contribution Rates
- Employers: 0.2% of the employee’s monthly wages.
- Employees: 0.2% of their monthly wages.
4. Human Resources Development Corporation (HRD Corp) Levy
The Human Resources Development Corporation (HRD Corp) levy applies to companies with ten or more local employees. Employers are required to contribute 1% of their employees’ monthly wages to the HRD Corp fund, which supports workforce training and development initiatives across industries. This contribution helps businesses upskill their workforce and maintain a competitive edge through continuous learning.
The payment must be made before the 15th of the following month through the HRD Corp online portal. Though often overlooked in cost planning, the HRD Corp levy remains a crucial part of total employment costs and compliance responsibilities for businesses operating in Malaysia.
Manage Malaysia payroll and contributions with greater confidence
Malaysia’s statutory contribution system involves different rates, contribution tables, eligibility rules and employee classifications.
A small payroll error can affect an employee’s take home pay, the employer’s workforce budget and the company’s compliance position.
Glints TalentHub helps companies employ and manage professionals in Malaysia through compliant Employer of Record support. Your team can manage employment contracts, onboarding, payroll, statutory contributions and ongoing HR administration through one partner, without first establishing a Malaysian legal entity.
Build your team in Malaysia while keeping payroll and statutory obligations under control. Speak with a Glints TalentHub specialist.
FAQ About Statutory Contribution in Malaysia
How much does an employer contribute in Malaysia?
For a Malaysian employee below age 60, the employer’s main costs commonly include 12% or 13% for EPF, the applicable SOCSO amount, 0.2% for EIS and potentially 1% for the HRD Corp levy.
The exact total depends on the employee’s salary, age, nationality, contribution category and the employer’s HRD Corp registration status.
Is EPF mandatory for foreign workers in Malaysia?
Yes. From October 2025 wages, most foreign employees and their employers must each contribute 2% to EPF.
What is the maximum salary for SOCSO and EIS contributions?
SOCSO and EIS use an assumed monthly wage ceiling of RM6,000. Employees earning above this amount are generally assessed according to the RM6,000 contribution band.
Did the SOCSO employee contribution increase in 2026?
Yes. From 1 June 2026, the 24 Hour Protection Scheme added an employee funded contribution equivalent to 0.75% of assumed monthly wages during its first phase.
Is PCB an employer cost?
No. PCB is income tax withheld from the employee’s remuneration. The employer calculates, deducts and remits it, but the amount is not an additional employer contribution.
When must statutory contributions be paid?
EPF, SOCSO, EIS, HRD Corp levy and PCB payments are generally due by the 15th of the following month. Employers should still verify the relevant agency calendar for public holidays, special extensions or procedural announcements.
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