EPF, SOCSO & EIS: a Malaysian employer’s statutory contributions explained
Baca panduan ini dalam Bahasa Malaysia →
On top of withholding income tax from staff pay, a Malaysian employer must also make statutory contributions to three separate funds: EPF, SOCSO and EIS. These are not taxes and they are not the same thing as PCB/MTD — they are social-security and retirement contributions, each run by its own agency with its own rules. This guide explains what each scheme is, that both the employer and the employee contribute, who is covered, the monthly remittance cycle, and how payroll software keeps it all straight.
Want the number instead of the theory? Try the free PCB calculator.
How do EPF, SOCSO and EIS differ from PCB / MTD?
PCB / MTD is income tax the employer withholds from an employee’s pay and remits to LHDN. EPF, SOCSO and EIS are separate statutory contributions to retirement and social-security funds, run by KWSP and PERKESO. Unlike PCB, the employer pays its own share on top of the employee’s.
It is easy to lump every payroll deduction together, but they serve different purposes. PCB (Potongan Cukai Bulanan), also called MTD (Monthly Tax Deduction), is income tax — the employer withholds an estimate of the employee’s personal income tax and remits it to LHDN. It is the employee’s own tax, collected through payroll, and the employer adds nothing of its own.
EPF, SOCSO and EIS are different in kind. They are statutory contributions to social-security and retirement funds — not income tax — administered by separate bodies: KWSP for EPF, and PERKESO for SOCSO and EIS. Crucially, the employer pays its own share of these contributions on top of the employee’s share. It helps to think of payroll as four distinct statutory streams: income tax (PCB), retirement savings (EPF), social security (SOCSO) and employment insurance (EIS), each with its own basis, remittance channel and forms.
| Scheme | Employee share | Employer share | Wage basis |
|---|---|---|---|
| EPF (under 60) | 11% | 13% (monthly wage ≤ RM5,000) or 12% (above RM5,000) | KWSP Third Schedule wage bands |
| EPF (60 and over, Malaysian citizens) | 0% | 4% | KWSP Third Schedule wage bands |
| SOCSO — Category 1 (under 60) | 0.5% | 1.75% | Banded Jadual; wages capped at RM6,000/month |
| SOCSO — Category 2 (60 and over) | Nil | 1.25% | Wages capped at RM6,000/month |
| EIS (ages 18–60) | 0.2% | 0.2% | Banded Jadual; wages capped at RM6,000/month |
These are the standard statutory rates, applied through each agency’s official contribution schedule (wage bands rather than exact percentages at most wage levels). Special categories — non-citizens, voluntary contributors, late-career entrants — differ. Always confirm the current figures with KWSP and PERKESO before running payroll.
What is EPF / KWSP?
EPF (KWSP) is Malaysia’s compulsory retirement savings scheme. Both sides contribute a percentage of the employee’s monthly wages. As at July 2026 the standard employee share is 11%. The employer pays 13% at monthly wages up to RM5,000, and 12% above that.
In full it is the Employees Provident Fund, known in Malay as Kumpulan Wang Simpanan Pekerja (KWSP); both shares go into the employee’s EPF account, building a retirement nest egg the member can draw on under EPF’s rules.
As at July 2026, the standard employee share is 11% of monthly wages (source: KWSP). The employer pays 13% where the monthly wage is RM5,000 or less, and 12% above that. For Malaysian citizens aged 60 and over, the employee share is 0% and the employer share is 4%. Confirm the current rates with KWSP before you run payroll — special categories, such as non-citizens, follow different schedules.
The employee’s share is deducted from their pay and the employer’s share is an additional cost the employer bears; the two are remitted together to KWSP each month. Contributions are computed on KWSP’s Third Schedule wage bands rather than exact percentages at most wage levels. EPF is usually the largest of the three contributions, so getting it right and remitting on time is a core payroll duty.
What is SOCSO / PERKESO?
SOCSO (PERKESO) provides employment-injury and invalidity protection to employees. As at July 2026, Category 1 contributions are 1.75% from the employer and 0.5% from the employee, on wages capped at RM6,000 a month. It pays medical, periodic or dependants’ benefits when a covered employee is hurt.
SOCSO, the Social Security Organisation (Pertubuhan Keselamatan Sosial, PERKESO), provides social-security protection to employees. Its main pillars are the Employment Injury Scheme — covering accidents arising out of and in the course of employment, including commuting accidents and occupational diseases — and the Invalidity Scheme, which protects against invalidity or death from any cause, whether or not it is work-related.
As at July 2026, Category 1 (employees under 60) is 1.75% from the employer and 0.5% from the employee; Category 2 (60 and over) is employer-only at 1.25%, covering employment injury alone. Wages are capped at RM6,000 a month, a ceiling raised from RM5,000 on 1 October 2024. One thing those percentages do not tell you: the amount actually payable is READ FROM PERKESO’s banded Jadual Caruman, not calculated as a percentage of the wage. The Jadual applies the rate across each wage band, so at the ceiling the published employee figure is RM29.75 and the employer figure RM104.15 — not the RM30.00 and RM105.00 a straight 0.5% and 1.75% of RM6,000 would give. Take the exact amount for your employee’s wage band from the Jadual, and verify the current schedule with PERKESO before relying on any of this.
SOCSO is the safety net that pays medical benefits, periodic payments or dependants’ benefits if a covered employee is injured, becomes invalid or dies. That is why correct registration and contribution matter.
What is EIS / SIP?
EIS (SIP) gives temporary financial help and re-employment support to workers who lose their jobs, and is administered by PERKESO. As at July 2026, contributions are 0.2% from the employer and 0.2% from the employee, on wages capped at RM6,000 a month, for employees aged 18 to 60.
The Employment Insurance System (EIS), in Malay Sistem Insurans Pekerjaan (SIP), is the newest of the three and is also administered by PERKESO. It provides temporary financial assistance and re-employment support — for example, a job-search allowance and help getting back into work — to workers who lose their jobs, so a retrenchment does not leave an employee with nothing while they look for the next role.
As at July 2026, EIS contributions are 0.2% from the employer and 0.2% from the employee, on wages capped at RM6,000 per month (source: PERKESO), and are mandatory for employees aged 18 to 60. As with SOCSO, the payable amount comes from PERKESO’s banded schedule rather than from multiplying the wage: at the ceiling the published figure is RM11.90 each side, not the RM12.00 a straight 0.2% of RM6,000 would give. Confirm the current figures with PERKESO before you rely on them.
Because EIS sits alongside SOCSO under PERKESO, it is typically registered and remitted through the same channel. For most employees the EIS amount is modest next to EPF and SOCSO, but it is still a mandatory monthly contribution for covered employers.
Who must contribute, and how does the monthly cycle work?
An employer with staff engaged under a contract of service must register with KWSP and PERKESO and contribute for eligible employees. The cycle is monthly: calculate the employer and employee shares, deduct the employee shares from pay, and remit the combined amounts by the statutory deadline.
The precise coverage rules — including how foreign workers, certain age groups and the self-employed are treated — are defined by each agency and have changed over time, so check your specific situation against KWSP’s and PERKESO’s current guidance rather than assuming a blanket rule.
The rhythm is monthly. For each pay run you calculate the employer and employee shares of EPF, SOCSO and EIS, deduct the employee shares from pay, and remit the combined amounts to the respective agency by the statutory monthly deadline. As with PCB, late payment can attract penalties, so the deadline matters as much as the amount.
Each scheme has its own remittance and reporting forms and electronic channels, and you record the contributions in your books as both a payroll cost and a liability until you pay them over. Keeping those records clean is what makes month-end and year-end reconcile.
How Taokeh payroll automates EPF, SOCSO & EIS
Taokeh, the Malaysian SME accounting software by Enya Venture, calculates the employer and employee shares of EPF, SOCSO and EIS for every employee on each pay run, alongside PCB/MTD, HRDF and zakat — so you are not maintaining separate spreadsheets or contribution tables by hand for each scheme.
It produces the statutory contribution files for KWSP and PERKESO so your monthly submissions come straight from the same payroll data, and it generates payslips that show each deduction clearly. Every contribution posts to the ledger as a cost and a liability, so your books reflect what you owe each agency until you remit it.
Because payroll sits on the same double-entry ledger as the rest of your accounting in Taokeh, your salaries, statutory contributions and the cash you pay over all reconcile from one source rather than being stitched together from separate tools. Your first 2 staff are included in the base plan, so there is no separate payroll subscription to bolt on.
Frequently asked questions
Are EPF, SOCSO and EIS the same as PCB / MTD?
No. PCB/MTD is income tax the employer withholds from an employee’s pay and remits to LHDN. EPF, SOCSO and EIS are separate statutory contributions to retirement and social-security funds administered by KWSP and PERKESO — and unlike PCB, the employer pays its own share on top of the employee’s.
Does the employer pay as well as the employee?
Yes. EPF, SOCSO and EIS are each shared contributions — the employee’s share is deducted from pay and the employer adds its own share on top, with the two remitted together to the relevant agency each month. The exact split differs by scheme.
What does each scheme cover?
EPF (KWSP) is compulsory retirement savings. SOCSO (PERKESO) provides employment-injury and invalidity protection. EIS (SIP, also under PERKESO) gives temporary financial help and re-employment support to workers who lose their jobs.
What are the current contribution rates and wage ceilings?
As at July 2026: EPF is 11% employee and 13% employer, or 12% employer where the monthly wage exceeds RM5,000. SOCSO Category 1 is 1.75% employer and 0.5% employee; EIS is 0.2% each — both on wages capped at RM6,000 a month (sources: KWSP, PERKESO). Rates differ for workers aged 60 and over and other special categories. Always confirm the current figures with KWSP (for EPF) and PERKESO (for SOCSO and EIS) before relying on them.
Updated July 2026
This guide is general information for Malaysian SMEs, not tax, legal or accounting advice. Always confirm current rules and figures with the relevant authority or your own adviser.
See payroll in Taokeh
Run the books for your Malaysian SME on one ledger — accounting, payroll and selling channels.
Related guides
- PCB / MTD (Monthly Tax Deduction) for Malaysian employers
- SST in Malaysia for SMEs: registration, sales tax vs service tax, and SST-02