How to run monthly payroll in Malaysia

You need complete, approved inputs for the month before you calculate anything. Payroll errors usually start with a missing or late input, not with the calculation itself.

• Employee master data: name, IC or passport number, KWSP, PERKESO and income tax reference numbers, bank account
• Attendance, leave and unpaid leave records
• Overtime, allowances, commissions and claims approved by the right person
• New joiners, leavers and approved salary changes
• Any authorised deductions, such as loans or advances

Set a monthly cut-off date for inputs and keep it. The Payroll Calculation & Statutory Compliance course covers how to organise these inputs.

Most Malaysian payrolls deal with four statutory items each month. Each is run by its own agency, and each agency publishes its current rates, wage ceilings and categories on its official site.

• EPF, managed by KWSP: retirement savings, with an employer share and an employee share
• SOCSO, managed by PERKESO: employment injury and invalidity protection
• EIS, the Employment Insurance System, also administered by PERKESO
• PCB, the monthly tax deduction collected for LHDN

Do not copy rates from an old spreadsheet. Check the current schedules on each official site, and confirm which categories apply to foreign workers and employees above retirement age.

Net pay is gross pay minus the employee's statutory deductions and any other authorised deductions. Work through it in the same order every month.

1. Start with basic salary and fixed allowances.
2. Add variable pay for the month: overtime, commission, bonus.
3. Deduct unpaid leave or absence where your policy allows it.
4. Calculate each statutory deduction on the wage base that agency defines, because the definition of wages for KWSP is not always the same as for PCB.
5. Apply other deductions the employee has authorised.
6. The balance is net pay.

Deductions from wages are limited by the Employment Act 1955. Read the current text on Laws of Malaysia before adding a new type of deduction.

Pay net salaries through an approved bank file, then remit each statutory payment through that agency's employer channel. Keep the person who prepares payroll separate from the person who approves the bank payment.

• Reconcile the payroll register total to the bank file before release
• Remit KWSP, PERKESO and EIS contributions and PCB by each agency's monthly due date
• Save every remittance receipt or statement with the month's payroll file

Due dates and payment channels are set by each agency and can change. Check them on KWSP, PERKESO and LHDN, and put them in a shared payroll calendar.

Keep a complete monthly file and the annual employer returns. Each month, file the approved inputs, the payroll register, payslips, the bank file and every remittance record.

Once a year, employers prepare an annual statement of remuneration for each employee (Borang EA) and an employer return to LHDN (Borang E). Check the current forms and filing dates on the LHDN site.

The Payroll Processing & Reporting course covers registers and reports, and the Certified Payroll Administrator is a Certifyd certification aligned to NOSS competency units. To test your current process, try the free payroll compliance check or the payroll compliance checklist template.