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Payroll Yearly Reporting in Malaysia

Find out employer obligations with regards to yearly reporting under Malaysia’s Employment Act.
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6min read

Monthly Tax Deduction (MTD) calculations and submission

Employers are required to make a monthly tax deduction (MTD) directly from an employee’s salary — it is also referred to as Potongan Cukai Bulanan (PCB).

It is the employer’s responsibility to pay this tax amount to the Inland Revenue Board of Malaysia (IRBM/LHDN) on the employee’s behalf, on a monthly basis. It needs to be completed on or before the 15th of the following month.

The submission of this data is through Form CP39 — a statement of monthly tax deductions by the employer. It lists all employees and the MTD (monthly tax deductions) that are made on their behalf.

The data submission through Form CP39 and MTD payments don’t necessarily have to be completed on the same day, but both must be made before the deadline.

For employers who already utilise payroll software, you can easily generate the Form CP39 report and submit it to the LHDN.

For employers who don’t use a digital payroll software, you can utilise the e-CP39 portal instead — it is an alternative method for employers to submit employee MTD data and make online payments.

You have the option of logging in as a registered or unregistered user. The MTD calculations will be done using the MTD schedular, e-Jadual or MTD Calculator in the portal. Payments can be done via online transactions, or over bank counters.

Form E and Form CP8D submission

Form E is a declaration report and needs to be submitted by employers to the LHDN every year, no later than 31 March.

It comprises two sections — Form E, which contains the details of the company (e.g total number of employees, number of new employees, etc), as well as Form CP8D, which comprises each employee’s remuneration details (i.e. salaries, wages, allowance, incentives & etc).

Form E will only be considered complete if Form CP8D is submitted on or before the due date for submission of the form (31 March).

For employers who already utilise payroll software, you can easily generate both forms in the required format, and head to the LHDN website for e-filing.

Other than e-Data Praisi and e-Filing (e-E), Form CP8D should be submitted in Excel or .txt file format, by sending an e-mail to CP8D@hasil.gov.my (or by any other method as may be prescribed from time to time).

Employees Provident Fund (EPF) contribution submission

The Employees Provident Fund (EPF) is a government fund aimed at assisting Malaysians in saving for their retirement, in accordance with the Employees Provident Fund Act (1991).

EPF payments are only applicable to citizens and permanent residents, and are optional for foreign employees, but both the employer and employee must contribute if the foreign employee ops to do so. These payments are to be deducted from the employee’s salary, and paid to the EPF by the employer on the employee’s behalf. Employers must also separately make their own EPF contributions on behalf of each eligible employee.

You can find the EPF contribution rates here.

For employers who already utilise payroll software, you can easily generate your EPF monthly contribution report (KWSP Borang A) that contains all the relevant information, as well as employer and employee contribution amounts. You can then head to the EPF portal for online submission and payment.

Social Security Organisation (SOCSO) contribution submission

The Social Security Organisation (SOCSO) manages social security funds in Malaysia, and was created with the aim of providing social security protection to employees and their dependents. It comprises two social protection schemes — the Employment Injury Insurance Scheme, and the Invalidity Scheme.

SOCSO contributions are mandatory for all employees, regardless of whether they are a Malaysian citizen, permanent resident, or foreign worker.

Employers are required to contribute monthly on behalf of each eligible employee, and employee contributions must be deducted from an employee’s wage and remitted to SOCSO, in line with rates outlined in the Employees’ Social Security Act (1969).

The contribution rates are split into two categories — and depend on the employee’s age (whether they are older or younger than 60), and their rate of pay.

The government has increased the monthly salary ceiling for SOSCO contributions from RM5,000 to RM6,000, effective from 1st October 2024. This adjustment will enhance cash benefits by 20.2%, benefitting 1.45 million workers and their dependents in the event of occupational accidents, disabilities, demise or job loss.

For employers who already utilise payroll software, you can easily generate your SOCSO contribution report that contains all the relevant information, as well as employer and employee contribution amounts. You can then head to the Assist Portal for online submission and payment.

Employment Insurance Scheme (EIS) contribution submission

Another contribution that must be deducted from an employee’s wage is the Employment Insurance Scheme (EIS). It applies to most Malaysian citizens and permanent residents, with the exception of government employees, domestic workers, those who are self-employed, and employees aged 57 and above who have no prior contributions before the age of 57.

Contribution rates to the EIS are set at 0.4% of the employee’s assumed monthly salary. 0.2% will be paid by the employer while 0.2% will be deducted from the employee’s monthly salary. Contribution rates are capped at an assumed monthly salary of RM5000.

Managed by the Social Security Organization (SOCSO), the EIS is designed to support employees if they lose their job. Workers who become unemployed can access up to 6 months of support through the scheme as they seek new employment.

The Employment Insurance System Act 2017 (Act 800) was recently amended to include an increase in employment search allowance, reduced income allowance and early re-employment allowance.

For employers who already utilise payroll software, you can easily generate your EIS contribution report that contains all the relevant information, as well as employer and employee contribution amounts. You can then head to the Assist Portal for online submission and payment.

Human Resources Development Fund (HRDF) levy submission

The Human Resources Development Fund (HRDF) levy is a mandatory contribution if you employ ten or more people, established under the Human Resources Development Act 2001.

Firms with 10 or more local employees are obligated to register, while firms with 5 to 9 local employees have the option to register. This fund supports the training and upskilling of employees, apprentices and trainees in the Malaysian workforce.

The HRDF levy rate for each Malaysian employee is calculated as a percentage of each employee’s total monthly wages, inclusive of fixed allowances. Other variable allowances such as travel allowance, petrol allowance, or apprenticeship allowance should not be included.

The HRDF levy rates are as follows:

Size of company Imposed rate of HRDF Levy
10 or more Malaysian employees 1% of each employee’s monthly wages
5 to 9 Malaysian employees 0.5% of each employee’s monthly wages

Exceptions apply — employers of domestic servants are not required to pay the levy.

According to HRDF regulations, once your company reaches 10 Malaysian employees, you must continue contributing at 1% for the whole calendar year — even if your headcount falls to fewer than 10 employees during the year.

Login to the HRD Corp portal to provide all the required information accordingly, and complete your payment online before the deadline.

Form EA for employees, no submission required

Form EA is an annual remuneration statement that employers need to prepare and disseminate to their employees before the end of February every year.

Employees in the private sector will get the EA form each year as an earnings statement. The EA form includes details on a worker’s statutory contributions, salary, supplemental compensation, additional tax deductions, and exemptions.

This is their individual statement of remuneration from the financial year and allows them to put together their individual tax returns. While it does not need to be submitted to LHDN, failure to prepare form EA may result in a fine from RM200 up to RM20,000, or imprisonment for a term not exceeding 6 months, or both.

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