Payroll in Malaysia: the changes employers need to apply

Malaysian payroll has changed a lot since the start of 2025. There are new contributions for foreign workers, a higher minimum wage, and a new PERKESO scheme that changed course within weeks of starting. Budget 2027, tabled on 9 October 2026, adds more for next year. Here is what is already in force and what is still only a proposal. EPF for foreign workers EPF contributions became compulsory for non-Malaysian employees from October 2025 wages, paid in the November 2025 contribution month. The rate is 2% of monthly wages from the employer and 2% from the employee. It applies to employees below 75 years of age; domestic helpers are excluded. If you have foreign staff and are not yet deducting EPF for them, you have been non-compliant for about a year. Check that each worker is registered and that your payroll uses the 2% rate, not the 11% and 12–13% rates for Malaysians. Minimum wage at RM1,700 The Minimum Wages Order 2024 raised the minimum wage to RM1,700 a month. It applied from 1 February 2025 for employers with five or more employees and for professional employers classified under MASCO. Employers with fewer than five employees had until 1 August 2025. The RM1,700 now applies to all employers. Remember that it is a floor for basic pay. Allowances and overtime do not count towards it. SOCSO and EIS wage ceiling The wage ceiling for SOCSO and EIS contributions rose from RM5,000 to RM6,000 a month on 1 October 2024. Staff earning more than RM6,000 contribute at the RM6,000 level. If your payroll still caps at RM5,000, you are under-contributing for higher earners. LINDUNG 24 Jam PERKESO's LINDUNG 24 Jam scheme started on 1 June 2026. It covers employees for accidents outside work. The employee pays the whole contribution, starting at 0.75% of monthly wages up to the RM6,000 ceiling. The rate is set to rise to 1% from 1 June 2028 and 1.25% from 1 June 2031. Employers pay nothing extra but must make the deduction and send it to PERKESO. On 8 July 2026 the Cabinet made the scheme voluntary for Malaysian employees. Those who opted out between 13 July and 31 August 2026 should no longer have it deducted. Malaysian employees who did not opt out stay in the scheme. New employees have 30 days from registration to opt out, and those who opted out can rejoin later. It remains mandatory for foreign workers. The Human Resources Minister has said the scheme will be reviewed by the end of 2026. PCB LHDN publishes a new PCB calculation specification every year, and the 2026 version applies to payroll this year. LHDN recommends paying PCB through internet banking or e-PCB Plus on MyTax. Budget 2027: what is proposed These measures were announced on 9 October 2026. They are not yet law, and most need a Finance Act, a new order or guidelines before they apply. - Minimum wage: RM2,000 a month from June 2027. Businesses with annual sales below RM50 million are to be exempt. A new Minimum Wages Order, not yet gazetted, should set out the exact date and terms. - Graduates and semi-skilled workers: a RM2,500 monthly minimum is planned. No start date or coverage rules have been published. - Tax deduction for wages: companies that are not MSMEs could only claim a tax deduction for wages paid through a bank account. No start date has been given. - Income tax: from year of assessment 2027, the 19% band (RM70,001–100,000) falls to 18% and the 25% band (RM100,001–150,000) falls to 24%. The 30% top rate would apply above RM1 million instead of RM2 million, so income between RM1 million and RM2 million would be taxed more. Individual relief rises from RM9,000 to RM12,000. LHDN would need to update its 2027 PCB specification to reflect this. - EPF: every Malaysian citizen would be registered as an EPF member automatically at 18. This is registration only. It does not change when contributions start. Your payroll checklist - Confirm every foreign employee has EPF deducted at 2% each side, from October 2025 wages. - Check that no employee's basic pay is below RM1,700. - Make sure SOCSO and EIS use the RM6,000 ceiling. - Check each employee's LINDUNG 24 Jam status and stop deductions for Malaysian staff who opted out. - Keep deducting LINDUNG 24 Jam for foreign workers. - Pay salaries by bank transfer where you can, ahead of the proposed deduction rule. - If your revenue is above RM50 million, budget now for the RM2,000 minimum wage from June 2027. - Watch for the 2027 PCB specification and the new Minimum Wages Order. This article is general information, not legal or tax advice. Check the official notices from KWSP, PERKESO, LHDN and the Ministry of Human Resources before you change your payroll. emsy works out EPF, SOCSO, EIS and PCB every payroll run.