Salary Deductions in Malaysia Explained

Salary deductions in Malaysia can feel confusing when you first look at a payslip. Your employment contract may show one gross salary, but the amount that arrives in your bank account is lower because statutory deductions are taken before salary is paid.

The four most common items are EPF/KWSP, SOCSO/PERKESO, EIS/SIP, and PCB/MTD. Together, these deductions help fund retirement savings, social security protection, employment insurance, and monthly income tax payments.

This guide explains each deduction in plain English, shows which amounts are deducted from employee salary, and includes examples you can compare with your own payslip.

Gross Salary, Net Salary and Employer Cost

Before looking at individual deductions, it helps to separate three salary numbers. Many employees only think about gross and net salary, while employers also need to understand total employment cost.

EPF / KWSP Deduction Explained

EPF, also known as KWSP, is Malaysia's retirement savings contribution. The employee share is deducted from gross salary, while the employer share is paid separately by the employer on top of salary.

For most Malaysian employees below 60 years old, KWSP commonly lists the employee contribution rate as 11%. The employer rate is usually 13% for monthly wages of RM5,000 and below, and 12% for monthly wages above RM5,000. Different rates can apply for age 60 and above, permanent residents, and non-Malaysian employees.

Want to check your own contribution? Use our EPF Calculator Malaysia to estimate employee EPF, employer EPF, total monthly EPF and annual EPF savings.

SOCSO / PERKESO Deduction Explained

SOCSO, also known as PERKESO, provides social security protection for employees. It helps cover employment injury, invalidity, and related benefits under the applicable schemes.

SOCSO is not normally calculated as one simple flat percentage on every salary. PERKESO uses official contribution schedules and a wage ceiling. From 1 October 2024, PERKESO stated that the contribution wage ceiling increased from RM5,000 to RM6,000 per month. For salaries above the ceiling, SOCSO is generally calculated based on the ceiling amount.

Both employee and employer contribute to SOCSO. On your payslip, you usually see the employee SOCSO deduction. The employer SOCSO contribution is a separate payroll cost paid by the employer.

EIS / SIP Deduction Explained

EIS, also known as SIP in Malay, is the Employment Insurance System. It is designed to support eligible employees who lose employment, subject to PERKESO rules and eligibility requirements.

PERKESO states that EIS contributions are 0.4% of the employee's assumed monthly salary, with 0.2% paid by the employer and 0.2% deducted from the employee's monthly salary. EIS is separate from SOCSO, even though both are administered through PERKESO.

EIS is usually a smaller deduction compared with EPF or PCB, but it still affects take-home pay and total employer payroll cost.

PCB / MTD Tax Deduction Explained

PCB, also known as MTD, means Monthly Tax Deduction. It is a monthly income tax instalment deducted from salary by the employer for the purpose of paying employee income tax.

Unlike EPF, PCB is not a simple fixed percentage for everyone. It can depend on annual income, EPF contribution, tax reliefs, marital status, number of children, bonus, benefits, zakat, residency status, and payroll information submitted to the employer.

This is why two employees with the same gross salary may have different PCB deductions. A single employee, a married employee, and an employee with eligible children or additional tax reliefs may not have the same monthly tax deduction.

You can estimate monthly tax with our PCB Tax Calculator Malaysia, or estimate yearly tax with our Income Tax Calculator Malaysia.

Example Salary Deduction Calculation: RM5,000 Monthly Salary

The example below shows how salary deductions in Malaysia may look for a single Malaysian employee below 60 years old with a RM5,000 monthly gross salary. The final amount can change based on personal tax and payroll settings.

For a full calculation with employee deductions and employer payroll cost, use our Salary Calculator Malaysia.

Employee Deductions vs Employer Contributions

A common mistake is assuming every payroll contribution is deducted from employee salary. In reality, some amounts reduce the employee's take-home pay, while employer contributions are paid separately by the employer.

Why Your Take-Home Salary May Be Different

Your actual net salary may differ from a simple estimate because payroll depends on more than one fixed salary number. The most common reasons include:

Salary Deductions for Foreign Workers in Malaysia

Foreign workers may have different salary deduction rules compared with Malaysian citizens. EPF, SOCSO, EIS and PCB can depend on employee category, work pass status, residency status, registration date, and current government rules.

Tax residency is especially important for PCB. A foreign worker who is treated as a Malaysian tax resident may be taxed differently from a non-resident worker. Non-resident employment income may be subject to a different tax treatment than resident income.

Because foreign worker payroll rules can change, always check the latest KWSP, PERKESO and LHDN guidance before using an estimate for official payroll or tax filing.

How to Check Your Salary Deductions