EPF, SOCSO & EIS: a Malaysian employer’s statutory contributions explained

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. 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 retirement and social-security 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. 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.

The tax stream is the one people most often want a figure for first: our free PCB calculator works it out for a single employee, including the EPF deduction that lowers it.

What is EPF / KWSP?

EPF (KWSP) is Malaysia’s compulsory retirement savings scheme — in full, the Employees Provident Fund, known in Malay as Kumpulan Wang Simpanan Pekerja. 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% at monthly wages up to RM5,000, and 12% above that.
• For Malaysian citizens aged 60 and over, the employee share is 0% and the employer share is 4%.
• Contributions are computed on KWSP’s Third Schedule wage bands rather than exact percentages at most wage levels.
• 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.
• Confirm the current rates with KWSP before you run payroll — special categories, such as non-citizens, follow different schedules.

What is SOCSO / PERKESO?

SOCSO — the Social Security Organisation, Pertubuhan Keselamatan Sosial (PERKESO) — provides social-security 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.

• The Employment Injury Scheme covers accidents arising out of and in the course of employment, including commuting accidents and occupational diseases.
• The Invalidity Scheme protects against invalidity or death from any cause, whether or not it is work-related.
• Category 2 (60 and over) is employer-only at 1.25%, covering employment injury alone.
• The RM6,000 ceiling was raised from RM5,000 on 1 October 2024.
• 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.

The percentages describe the scheme — the Jadual sets the amount

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.

What is EIS / SIP?

EIS — the Employment Insurance System, in Malay Sistem Insurans Pekerjaan (SIP) — gives temporary financial help and re-employment support to workers who lose their jobs, and is administered by PERKESO. It is the newest of the three.

• 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 (source: PERKESO).
• It is mandatory for employees aged 18 to 60.
• It provides a job-search allowance and help getting back into work, so a retrenchment does not leave an employee with nothing while they look for the next role.
• 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.
• Because EIS sits alongside SOCSO under PERKESO, it is typically registered and remitted through the same channel.
• Confirm the current figures with PERKESO before you rely on them.

EPF vs SOCSO: what is the difference?

The two get conflated because both are deducted from the same payslip, but they answer different questions. EPF is the employee’s own money, saved; SOCSO is insurance, spent on protection. The practical differences sit in a few rows:

Which payments are subject to EPF, and which to SOCSO?

The two schemes define “wages” differently, and the differences are exactly where payroll goes wrong. The best-known trap runs in opposite directions: an annual bonus attracts EPF but not SOCSO, while overtime attracts SOCSO but not EPF.

• EPF: wages include salary, bonus, allowances and commission; the EPF Act excludes service charge, overtime payments, gratuity, retirement benefits and termination payments (as at August 2026, source: KWSP — Akta KWSP 1991).
• SOCSO: wages include overtime, commission, service charge and payments for leave; annual bonus, gratuity, mileage claims and the employer’s own EPF contribution are excluded (as at August 2026, source: PERKESO).
• Allowances are the grey zone — most regular cash allowances attract both schemes, but the treatment can turn on what the payment actually is, not what it is called on the payslip.
• Both agencies publish their own wages definitions; check a payment type you are unsure of against KWSP’s and PERKESO’s current lists before the pay run, not after.

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. Check your specific situation against KWSP’s and PERKESO’s current guidance rather than assuming a blanket rule.
• 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.
• 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.

• It produces the statutory contribution files for KWSP and PERKESO, so your monthly submissions come straight from the same payroll data.
• Payslips 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, 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.
• The PCB/MTD calculation running beside these contributions is the one LHDN confirmed in writing in August 2026. What that confirmation does and does not cover is set out on the payroll software page.

Frequently asked questions

Updated August 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.

Related guides

• PCB / MTD (Monthly Tax Deduction) for Malaysian employers
• LHDN-approved payroll software in Malaysia: what the list actually means
• SST in Malaysia for SMEs: registration, sales tax vs service tax, and SST-02
• What bookkeeping costs in Malaysia: the ranges, and what moves them

Related sources

• KWSP / EPF (Employees Provident Fund)
• PERKESO / SOCSO (Social Security Organisation)