Malaysia Salary Deduction Guide 2025: EPF, SOCSO, EIS & PCB Explained
The ultimate guide to mandatory salary deductions in Malaysia. Learn exactly what is deducted from your paycheck — EPF, SOCSO, EIS, and PCB — and how to calculate your net take-home pay.
Introduction: Understanding Your Payslip
Every month, working Malaysians see a portion of their salary deducted before it reaches their bank account. These are mandatory statutory deductions required by Malaysian law. Understanding what each deduction is for — and how much it should be — helps you verify your payslip is correct and plan your finances accurately.
There are four mandatory deductions from every Malaysian employee's salary:
- EPF (KWSP) — Retirement savings
- SOCSO (PERKESO) — Social security protection
- EIS (SIP) — Employment insurance
- PCB (LHDN) — Monthly income tax
1. EPF — Employees Provident Fund (KWSP)
What It Is
Malaysia's mandatory retirement savings scheme. Both you and your employer contribute monthly toward your retirement fund.
How Much Is Deducted
- Employee: 11% of gross salary (max RM1,100/month)
- Employer: 12% (salary > RM5,000) or 13% (salary ≤ RM5,000)
- Reduced rates apply for employees aged 55+
Where It Goes
Your EPF account is split into Account 1 (70% — locked until retirement) and Account 2 (30% — partial withdrawals for housing, education, medical).
Tax Benefit
Employee EPF contributions are eligible for personal tax relief up to RM4,000 per year.
Estimate your contributions: EPF Calculator
2. SOCSO — Social Security Organization (PERKESO)
What It Is
SOCSO provides two protection schemes:
- Employment Injury Scheme: Covers workplace accidents, commuting accidents, and occupational diseases. Provides medical treatment, temporary disability benefits, and permanent disability benefits.
- Invalidity Pension Scheme: Provides ongoing financial support if you become permanently disabled and unable to work, or to your dependents in the event of death.
How Much Is Deducted
SOCSO contributions are based on wage brackets:
| Monthly Wage (RM) | Employee Contribution |
|---|---|
| 0 – 30 | RM0.10 |
| 30.01 – 50 | RM0.20 |
| 500.01 – 600 | RM2.40 |
| 1,000.01 – 1,100 | RM4.40 |
| 2,000.01 – 2,100 | RM8.40 |
| 3,000.01 – 3,100 | RM12.40 |
| 4,000.01 – 4,100 | RM16.50 |
| 4,900.01 and above | RM21.00 (maximum) |
Employers pay a higher contribution (RM1.75 to RM367.50/month).
Key Benefit
If you're injured at work, SOCSO covers 100% of medical costs at SOCSO panel clinics and provides daily compensation for temporary disability. This is separate from your regular health insurance.
3. EIS — Employment Insurance System (SIP)
What It Is
EIS provides temporary financial support if you lose your job. Introduced in 2018, it acts as a safety net for retrenched workers.
How Much Is Deducted
- Employee: 0.2% of gross monthly salary (max RM2.50/month)
- Employer: 0.2% of gross monthly salary (max RM2.50/month)
Benefits If You're Retrenched
- Financial assistance for up to 6 months
- Job search allowance (up to RM600/month)
- Career counselling services
- Training and upskilling programs
- Early re-employment allowance (25% of remaining eligibility)
4. PCB — Potongan Cukai Bulanan (Monthly Tax Deduction)
What It Is
Your estimated monthly income tax, deducted by your employer and remitted to LHDN.
How It's Calculated
- Estimate annual gross income
- Subtract EPF relief (up to RM4,000)
- Subtract personal relief (RM9,000)
- Subtract other eligible reliefs
- Apply progressive tax rates (0% – 30%)
- Divide by 12 for monthly PCB
Tax Rates 2025
| Chargeable Income | Rate |
|---|---|
| RM0 – RM5,000 | 0% |
| RM5,001 – RM20,000 | 1% |
| RM20,001 – RM35,000 | 3% |
| RM35,001 – RM50,000 | 6% |
| RM50,001 – RM70,000 | 11% |
| RM70,001 – RM100,000 | 19% |
| RM100,001 – RM400,000 | 25% |
| RM400,001+ | 26–30% |
Estimate your PCB: PCB Calculator
Complete Salary Breakdown Example
Let's walk through a full example for an employee earning RM5,500/month with a RM500 allowance:
A: Gross Monthly Income
RM5,500 + RM500 = RM6,000
B: Deductions
| Item | Calculation | Amount |
|---|---|---|
| EPF (Employee) | RM6,000 × 11% | RM660.00 |
| SOCSO | Wage bracket RM5,800–RM5,900 | RM20.00 (est.) |
| EIS | RM6,000 × 0.2% | RM12.00 |
| PCB | (see calculation below) | RM145.00 (est.) |
| Total Deductions | RM837.00 |
C: Net Salary (Take-Home Pay)
RM6,000 − RM837.00 = RM5,163.00/month
D: Employer's Total Cost
| Item | Amount |
|---|---|
| Gross salary | RM6,000.00 |
| EPF (Employer 13%) | RM780.00 |
| SOCSO (Employer) | RM69.00 |
| EIS (Employer) | RM12.00 |
| Total Employer Cost | RM6,861.00 |
Important: Your employer's total cost (RM6,861) is significantly higher than your gross salary (RM6,000). This is the real cost of employing you — and it's important context when negotiating salary.
How to Verify Your Payslip
Employers are required to provide detailed payslips under the Employment Act 1955. Every payslip should show:
- ✅ Gross salary
- ✅ Itemized allowances
- ✅ EPF deduction (with employer contribution)
- ✅ SOCSO deduction
- ✅ EIS deduction (if applicable)
- ✅ PCB deduction
- ✅ Net salary
If your payslip is missing any of these, request a detailed statement from your HR department. You can also verify EPF contributions through the KWSP i-Akaun app and tax deductions through MyTax.
Special Cases
Earning Below RM4,000/Month
If you earn below RM4,000/month, your employer is required to follow the Minimum Wages Order and the Employment Act 1955 provisions regarding overtime, rest days, and public holiday pay.
Foreign Workers
Foreign workers in Malaysia contribute 11% to EPF (employee portion), but employers contribute only a flat RM5.00 per month. Foreign workers may apply for an EPF exemption if covered by a similar scheme in their home country.
Contractors & Freelancers
Independent contractors and freelancers do not have automatic EPF, SOCSO, or EIS deductions. However, they can:
- Voluntarily contribute to EPF through i-Saraan
- Register with SOCSO under the Self-Employment Social Security Scheme
- Pay income tax via CP500 installment payments
Summary
Your Malaysian salary has four mandatory deductions, each serving a specific purpose:
- EPF = Your retirement savings (yours to keep + dividends)
- SOCSO = Your workplace safety net
- EIS = Your job-loss protection
- PCB = Your income tax advance
Understanding these deductions helps you budget accurately, verify your payslip, and plan your financial future. Use the DuitTools Salary Calculator for a complete breakdown of your salary with all four deductions.