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Employees Provident Fund (EPF)
What is EPF?
EPF is also known as KWSP or Kumpulan Wang Simpanan Pekerja in Malaysia. It is a retirement fund created as a federal statutory body managed by the Ministry of Finance in Malaysia. Both employers and employees contribute a percentage of the employee's salary to the fund.
All SSM registered Sdn Bhd or Registered Businesses such as enterprises or partnerships are required to register as an EPF employer within 7 days upon hiring their first employee.
Employer must register employees as an EPF members if they are first time workers and ensure their information is always up to date.
As an employer, your responsibilities includes paying EPF contributions in respect of any person you have engaged to work under a Contract of Service or Apprenticeship, and to ensure accurate monthly contributions are deducted from the employees’ salary and remitted to EPF.
The contribution rate for employees is generally 11% of their salary, while employers contribute 12% to 13%, depending on the employee’s income.
EPF Contribution Rate:
- Employee：Generally 11% of their salary.
- Employer：Contribute 12% to 13%, depending on the employee’s income.
The EPF contribution rates for different age groups are as follows:
Employee's Status | Monthly Salary | Below 60 years old | Above 60 years old | ||
Employer | Employee | Employer | Employee | ||
1. Malaysian 2. Permanent Resident (PR) | RM5,000 and below | 13% | 11% | 6.5% | 5.5% |
1. Malaysian 2. Permanent Resident (PR) | Above RM5,000 | 12% | 11% | 6% | 5.5% |
Non-Malaysian (Registered as EPF member from 1 August 1998) | No Limit | RM5.00 | 11% | RM5.00 | 5.5% |
Employer must make monthly payment on or before 15th of the month, otherwise a late payment fee will be imposed. The employer needs to pay both the employees’ and the employer’s share to the EPF, and deduct the employee’s share from their salary.
Social Security Organization (SOCSO)
What is SOCSO?
Social Security Organization (SOCSO), also known as Pertubuhan Keselamatan Sosial (PERKESO), is a government agency that aims to provide social security and protections to employees in Malaysia as per the Employee's Social Security Act 1969.
SOCSO provides social security protection to employees, covering work-related injuries, illnesses, and other health risks. New employer and employee must be registered with SOCSO within 30 days upon hiring a new employee.
There are 2 schemes that are governed under the Employees’ Social Security Act 1969:
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Employment Injury Scheme – It provides protection for employees against accidents or diseases related to their work.
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Invalidity Scheme – It covers employees who are unable to work due to an incurable condition, or in the event of their death.
Registration with SOCSO is mandatory for all Malaysian and permanent resident employees, except for federal and state government employees, domestic workers, and those who are self-employed. Foreign workers have also been eligible for SOCSO coverage since January 2019.
The SOCSO contribution rates for different categories of employee are as follows:
Category | Malaysian & PR age below 60 years old | Malaysian & PR age 60 years old and above | Foreign Workers |
Employer's Contribution | 1.75% | 1.25% | 1.75% |
Employee's Contribution | 0.5% | Not Required | 0.5% |
Scheme Coverage
| 1. Employment Injury Scheme | 1. Employment Injury Scheme | 1. Employment Injury Scheme |
Effective from 1 October 2024, the wage ceiling for SOCSO contributions has been increased from RM5,000 to RM6,000 per month.
Contributions payable for any month must be paid no later than the 15th day of each succeeding month, otherwise a late payment of contributions will be imposed at a rate of 6% per annum for each day of contributions not paid within the stipulated period.
Employment Insurance System (EIS)
What is EIS?
The Employment Insurance System (EIS) is a social security program administered by the Social Security Organization (SOCSO) in Malaysia. It was implemented to provide financial assistance to employees who have lost their jobs through no fault of their own, such as retrenchment, redundancy, or business closure.
All Malaysian and PR employees aged 18 – 60 years old are required to contribute EIS. The contribution rate is 0.2% of an employee’s salary for both the employers and employees, and the contribution rates are capped at an insured salary of RM6,000 per month.
The EIS contribution for employees' and employer’s share is paid together with SOCSO contribution.
Monthly Tax Deduction (MTD)
What is MTD?
Monthly Tax Deduction (MTD) also known as Potongan Cukai Bulanan (PCB) is a system where employers deduct a portion of their employees' monthly salary for income tax purposes, ensuring that tax is paid regularly throughout the year instead of in a lump sum at the end.
PCB is mandatory for employees with annual employment income exceeding RM34,000 after EPF deductions. However, the specific income threshold depends on the employees’ marital status:
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Single Individual: RM2,851 after EPF deduction
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Married Individual and Unemployed Spouses: RM3,851 after EPF deduction
Certain benefits-in-kind (BIK) and allowances provided by employers to employees can be tax-exempt, while others are subject to taxation.
How to determine resident status in Malaysia for tax?
The income tax rate for residents in Malaysia is depending on their tax residency status. In Malaysia, you are considered a tax resident if you meet any of the following criteria:
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182 Days Rule: Present in Malaysia for at least 182 days or more during a calendar year.
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Combined Year Rule: Present in Malaysia for less than 182 days in the current year, but this period is linked to another period of consecutive days total 182 days or more in the following or preceding year.
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90 days Rule: Present in Malaysia for at least 90 days during the calendar year and have been resident/present in Malaysia for 90 days in any three of the past four years.
Malaysia Office：Suite 1, Level 23, Menara KOMTAR, 80888 Ibrahim International Business District, Johor Darul Ta‘zim, Malaysia
Tel：+607 272 5827
E-mail：enquiry@fozl.sg
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