In addition to monthly salaries, Malaysian employers are also bound to contribute to the EPF, EIS, and SOCSO accounts of their employees. This contribution is paid into Employee Provident Fund or KWSP (in Malay). In addition, contributions are also made to Social Security Organization or PERKESO (in Malay).
All such contributions are required by the Malaysian Legislation. Here, we have briefly discussed these contributions.
1. SOCSO (Social Security Organization) Contribution
Listed below are the payments, which are subject to SOCSO contribution:
- Salaries
- Overtime pay
- Commissions
- Wages for maternity leave
- Study leave
- Half-day leave
- Contractual/non-contractual payments
Employers are not bound to pay SOCSO contribution for the following monetary payments:
- Any contribution made to pension, gratuity, or provident fund
- Any payment made to reimburse the expenses incurred by the employee when on official duty
- Monetary payments such as travel allowances, bonuses, gifts, and holiday wages
When an Employer is Bound to Pay Contributions to the SOCSO?
Below are the various circumstances when it is binding over an employer to contribute to SOCSO.
- If you are an employer, you must start paying contributions to SOCSO within 30 days of employing the first employee
- Once you have registered as an employer, you must pay such contributions
Procedure Associated with SOCSO Contributions
- Enroll your employees in the SOCSO
- Keep your employee information updated
- Report any accidents (at the job site) within 48 hours
- Maintain an updated record of the personnel information of all your employees
- Collect the SOCSO contributions of your employees and submit them to SOCSO
EPF Contribution Rates by Employers and Employees
The contribution rates mentioned below aren’t applicable to new workers who are aged 55 and over. In addition, these workers must have never contributed to SOCSO. The Workplace Injury Scheme generally covers these employees. Furthermore, employees over 60 years of age are exempt from making such contributions.
| Employee’s status | Employer’s EPF contribution rate | Employee’s EPF contribution rate | ||
| Monthly salary rate | RM5,000 and below | More than RM5,000 | RM5,000 and below | More than RM5,000 |
| Malaysian age 60 and above | 4% | 0% | ||
| Malaysian below age 60 | 13% | 12% | 9% | |
| Permanent resident below age 60 | 13% | 12 | 9% | |
| Permanent resident age 60 and above | 6.5% | 6% | 5.5% | |
| Non-Malaysian below age 60 | RM5.00 | 9% | ||
| Non-Malaysian age 60 and above | RM5.00 | 5.5% | ||
When SOCSO contributions are due?
The SOCSO contributions are paid on a monthly basis. These include the portion of both the employer and employees. The contribution is paid on the 15 of each month, which is based on the pay received by the employee for that month. In case of failure to pay the SOCSO contribution in time, a 6% late payment surcharge is applicable for each day.
What are the ways to make payments SOCSO?
As an employer, you can pay SOCSO contributions by using these methods:
- Maybank
- RHB Bank
- Public Bank agents PERKESO ASSIST portal
- Internet banking
- Cheque
- Money order/postal order
- Bank counters
- SOCSO counters
2. EIS (Employment Insurance System) Contribution
EIS has specific contribution rates for both employees and employers. Here, we have mentioned the contribution rates that are not applicable to new workers who have attained 57 years of age and have never contributed.
It is essential to consider that the payment amount must be calculated by using the contribution rate mentioned in the second schedule of the Employment Insurance System Act 2017. Hence, don’t calculate using the precise percentage calculation.
The maximum monthly contribution per month is set at RM4,000. Furthermore, the contribution amount can be changed as per law.
| EIS Contribution Rates for Employee’s and Employer’s | |
| Employees Status | EIS Contribution Rates for Employee’s and Employer’s |
| Age 18 to 60 | 0.2% |
When to Pay EIS Contribution
Both employers and employees must pay EIS contributions when paying SOCSO contributions.
How to Pay EIS Contribution
The procedure for paying EIS contribution is similar to one that you follow when paying the SOCSO contribution.
3. EPF (Employees Provident Fund) Contribution
Listed below are the monetary payments that are subject to EPF contribution:
- Salaries
- Reimbursement for unused sick or yearly leave
- Bonuses
- Reimbursements (with some exceptions)
- Commission
- Incentives
- Salary arrears
- Maternity leave
- Study leave
- Half-day leave
- Other contractual and non-contractual payments
On the contrary, following monetary payments are not subject to EPF contributions.
- Gratuities
- Service expenses
- Payments for work done on public holidays or rest days
- Overtime payments
- Payments made upon voluntary retirement
- Travel allowances
- Director’s fee
EPF (Employees Provident Fund) Contribution |
||
| Contribution By | Employers | Employee |
| Below age 60 | ||
| Income up to MYR 5,000 | 12.0% | 11.0% |
| Income over MYR 5,000 | 13.0% | 11.0% |
| Age 60 and above | ||
| Income up to MYR 5,000 | Malaysian: 4.0%
Permanent resident: 6.0% |
Malaysian: 0% Permanent resident: 5.5% |
| Income over MYR 5,000 | Malaysian: 4.0%
Permanent resident: 6.5% |
|
Key Considerations when Paying EPF Contribution
- The employer must register with the EPF after 7 days of employing their first employee
- Submit as well as update the personal information of the employees in the EPF
- Give pay statements to the staff
- Collect the EPF contributions of the employees and submit these to EPF
- Pay employer’s contribution
EPF Contribution Rates for Employees and Employers
After the budget-2021, the EPF contribution rate is reduced from 11% to 9% (February 2021 to January 2022) for employees under 60 years of age. However, if the employee is willing to pay contributions at 11 % rate, he/she should fill the Borang KWSP 17A (Khas 2021). The employer should then send this form to EPF.
The contribution amount is determined depending on the contribution rate mentioned in the Third Schedule of the EPF Act 1991 (Except for those employees who are taking salaries over RM20,000.00).
When it is Binding to Pay EPF Contribution?
Both the employer’s and employee’s monthly EPF contributions should be paid on the 15th of every month. It is calculated with reference to the previous month’s wage. Failure to pay the EPF contribution within a given time, a dividend, or late payment fee is also applicable.
How to make an EPF Payment
Employers can use the following methods when it comes to paying the EPF Contributions.
- EPF counters
- e-Caruman mobile app or website
- Internet banking
- Bank Simpanan Nasional
- Maybank
- Public Bank
- RHB Bank agents
Once your business has expanded, it might be difficult for you to manage the payrolls and payments associated with EIS, SOCSO, and EPF contributions. To make things simple, it would be appropriate to opt for a payroll service provider. Such a service provider can easily manage EPF and SOCSO registration, payroll taxes, salary payment, EPF, EIS, and SOCSO contributions.