Before you hire your first employee, understand EPF, SOCSO, EIS and PCB

First, the four abbreviations. EPF: the Employees Provident Fund, retirement savings managed by KWSP. SOCSO: social security managed by PERKESO, covering work injuries and disability. EIS: the Employment Insurance System, support when an employee loses their job, also managed by PERKESO. PCB (MTD): the monthly tax deduction, personal income tax the employer withholds from the employee's salary each month and pays to LHDN on their behalf.

Which agencies must you register with before hiring your first employee?

You need to register with three agencies: KWSP (EPF), PERKESO (SOCSO and EIS) and LHDN (employer number, used for PCB deductions). Each looks after a different area, but they are usually handled together in the same month.

It is best to complete registration before the employee starts, or as soon as possible after. Each agency sets its own deadlines; check their websites for the latest information.

A Sdn Bhd and an Enterprise (sole proprietorship or partnership) are basically the same here. Once you hire someone and pay wages, you are an employer. Your business type affects your own tax return form, not your responsibilities to employees.

On a RM3,000 monthly salary, how much is deducted and paid each month?

RM330 of EPF is deducted from the employee, the employer pays a further RM390 of EPF, plus small amounts of SOCSO and EIS, and PCB depending on the employee's situation. Back to the online shop in Sitiawan: let us work through the assistant's RM3,000 salary.

The EPF rates are clear: employee 11%, employer 13% (for monthly wages of RM5,000 or less). RM3,000 × 11% = RM330, RM3,000 × 13% = RM390. KWSP actually uses a contribution table arranged by wage bands, and at the RM3,000 band, the result is these two figures.

SOCSO and EIS are charged by band according to PERKESO's official contribution schedule. You cannot simply multiply the salary by a percentage. The table below only shows approximate rates; use the official tables for the actual amounts.

Roughly speaking, the assistant's take-home pay is RM3,000 minus RM330 EPF, minus small amounts of SOCSO, EIS and any PCB. On the employer's side, the total cost is RM3,000 plus RM390 EPF, plus the employer's share of SOCSO and EIS, which comes to around RM3,450.

This number matters. Many owners only budget RM3,000 when hiring, then discover at month end that it costs a few hundred ringgit more every month. Budget for the "total employment cost" from the start. The wage ceiling for SOCSO and EIS is RM6,000; if the monthly salary is above that, contributions are still calculated on the ceiling.

Why is PCB different for everyone?

Because PCB depends on the employee's marital status, whether their spouse works, the number of children and personal reliefs. Two employees both earning RM3,000 may have completely different PCB deductions, and some may have none.

So when the employee starts, have them fill in the relevant forms and give the details to whoever does payroll. Do not skip this step.

By what date each month must EPF, SOCSO, EIS and PCB be paid? What if you are late?

All four must be paid by the 15th of the following month, and late payment may lead to penalties or interest. For example, for October's wages, payment must be completed by 15 November.

Most problems come from simply being too busy and forgetting. At the start of the month you are busy restocking and serving customers, and suddenly the 15th has passed. The more often this happens, the more trouble it is to sort out.

A steadier approach is to tie salary payment and contributions together. For example, pay salaries on the last working day of each month, and pay all four contributions in the first week of the next month. Do not leave it until the night of the 14th.

Sources: KWSP, PERKESO, LHDN (PCB)

What should you watch out for with the minimum wage and foreign workers?

The minimum wage is currently RM1,700 a month, and EPF for foreign workers is 2% each from the employer and the employee. The minimum wage took effect on 1 February 2025, and has applied to employers with fewer than 5 employees since 1 August 2025, so even if you hire just one person, you must comply.

The new EPF rule for foreign workers took effect from October 2025. Other items have separate arrangements, so it is best to check before hiring.

One more item that is often overlooked: HRD Corp. Employers in covered industries with 10 or more Malaysian employees must pay a 1% human resources development levy. It may not apply when you hire your first employee, but remember to check as the company grows.

What are the year-end EA form and Form E?

The EA form is the annual statement of income for each employee, due by the end of February. Form E is the employer's annual return to LHDN, due by 31 March. Here is what to prepare at year end.

Even if you only hired one or two people in your first year, you must still file Form E. If your monthly payroll records are kept tidy, preparing the EA forms and Form E at year end is just a matter of putting them together.

Should you do payroll yourself or hand it over?

With only one or two employees, you can handle it yourself through the KWSP, PERKESO and LHDN online systems. As headcount and changes increase, handing it to a professional team is steadier. Doing it yourself works only if you have the time and are willing to sit down and do it at a fixed time every month.

Problems usually appear when someone gets a pay rise, has unpaid leave deducted, or leaves mid-month. With every change, all four contributions have to be adjusted, and this is where mistakes happen most.

If you hand it to BookKeeper's partner professional team, the work is split like this: the team calculates salaries and statutory deductions, prepares payslips, prepares the EPF, SOCSO, EIS and PCB contribution files, and reminds you before the deadlines. You make the payments in the KWSP, PERKESO and LHDN systems, or as agreed in the service agreement.

For fees, see our payroll and EPF/SOCSO/EIS/PCB service and the pricing page. Payroll starts from RM15 per employee per month, with a minimum of RM100 a month, and the final fee follows your quotation.

Payroll is only one part of your monthly books. Salaries, EPF and other expenses must all be recorded correctly so that year-end tax filing goes smoothly. To get the whole process in order, see the Sdn Bhd monthly closing checklist, or read about our monthly bookkeeping service.