Payroll Calculation Formula In Malaysia (EPF, SOCSO, PCB Formula 2025)

“Why is my salary lower this month?” 

Have you ever asked yourself this question? Or maybe you’re an employer worried about whether your team is calculating payroll? Don’t worry, you’re not alone. In Malaysia, payroll is one of the most crucial yet complicated tasks for HR and finance departments. It’s not as simple as subtracting tax from gross salary. Every paycheck has its shape from a mix of required deductions: EPF, SOCSO, and PCB (MTD). 

Getting these numbers correct is a must. One error could frustrate employees, trigger audits, or even bring fines from government agencies. With the 2025 payroll updates now in place, like new EPF rules for employees from other countries and higher SOCSO limits, companies need to have more attention. 

This guide explains the exact payroll calculation in Malaysia for 2025, with clear details real examples, and official sources—so employers and staff can grasp how net pay is figured out. 

What Goes Into Payroll Calcuation in Malaysia? 

In Malaysia, payroll goes beyond subtracting deductions from a basic salary. It has an impact on statutory contributions that both employers and employees must make: 

• EPF (Employees Provident Fund) – savings for retirement 

• SOCSO (Social Security Organisation) – protection for employees in case of injuries, disabilities, or death on the job 

• EIS (Employment Insurance System) – insurance for unemployment (part of SOCSO) 

• PCB (Potongan Cukai Bulanan) – tax deducted monthly and handled by LHDN 

(Some companies might contribute to HRD Corp, but this relates to training, not to payroll.) 

Each of these contributions follows its own unique formula. Let’s break them down one by one.

1. EPF Formula in Payroll Calculation (2025)

The Employees Provident Fund (EPF) applies to all Malaysian citizens and permanent residents who work in the private sector. Employers and employees each pay a part of the employee’s wages. 

EPF Contribution Rates (2025) 

Employee Age Group	Employee Contribution	Employer Contribution
Below 60	11%	12% (13% if salary < RM5,000)
60 and above	5.5%	6%
Foreign Employees (from Q4 2025)	2%	2%

Formula:  

EPF = Wages × Contribution % 

In this case, “wages” include basic pay, overtime, allowances, commissions, and incentives. 

Example (Employee under 60, RM6,000 salary): 

Employee EPF: 11% of RM6,000 = RM660 

Employer EPF: 12% of RM6,000 = RM720 

Total EPF Contribution = RM1,380

2. SOCSO + EIS Formula in Payroll (2025)

SOCSO (PERKESO) offers protection to employees in situations involving accidents, disability, or death. From October 2024, the maximum wage for SOCSO contributions have gone up to RM6,000 each month. 

EIS (Employment Insurance System) supports employees who become jobless by giving financial assistance and training. This system applies to employees under 60 years old. 

SOCSO & EIS Contribution Rates (2025) 

Category	Employer Rate	Employee Rate
SOCSO (< 60)	1.75%	0.5%
SOCSO (≥ 60)	1.25%	Exempt
EIS (< 60)	0.2%	0.2%

Example (RM6,000 salary employee under 60): 

SOCSO Employer: RM105.15 

SOCSO Employee: RM30.30 

EIS Employer: RM12.00 

EIS Employee: RM12.00 

Employee Deduction = RM42.30

3. PCB (PotonganCukaiBulanan) Formula 

LHDN oversees PCB, or Monthly Tax Deduction. Unlike EPF or SOCSO, PCB doesn’t have a set percentage. It relies on several factors: 

• Gross chargeable income 

• Marital status 

• Number of children 

• EPF contributions 

• Zakat payments 

• Tax rebates and reliefs 

PCB Formula (Simplified): 

• Figure out total monthly income. 

• Subtract allowed reliefs and deductions (EPF, spouse relief, etc.). 

• Check the official PCB Table 2025 or use LHDN’s online calculator to determine the monthly deduction. 

Example (One employee, RM6,000/month): 

• Pay: RM6,000 

• EPF: RM660 

No partner/kids, no extra deductions 

• Rough PCB: RM310/month 

Complete Pay Calculation Sample (2025) 

Let’s combine everything for a employee earning RM6,000: 

Item	Amount (RM)
Total Pay	6,000
EPF (employee)	-660
SOCSO	-30.30
EIS	-12.00
PCB	-310
Take-home Pay	4,987.70

So, while the employee’s official salary is RM6,000, the actual take-home pay is RM4,987.70 after statutory deductions. 

Why Accurate Payroll Calculation Matters 

Payroll errors go beyond mere numbers on paper. They have an impact on: 

• Employee trust – People dislike unexplained changes in their pay. 

• Legal compliance – Not paying EPF, SOCSO, or PCB can lead to fines up to RM10,000 for each employee. 

• Business reputation – Companies that mismanage payroll risk losing skilled employees and credibility. 

As laws change, doing calculations manually becomes risky and takes too much time. 

How Info-Tech Payroll Software Addresses These Issues 

At Info-Tech Malaysia, we’ve assisted numerous companies to streamline their payroll processes. Our cloud-based HR & Payroll Software has the capability to: 

• Compute EPF, SOCSO, and PCB deductions with precision. 

• Revise contribution rates right away when legislation shifts. 

• Create payslips, reports, and audit trails without hassle. 

• Stay in line with LHDN, KWSP, and PERKESO rules. 

Employers can turn their attention to expanding their business while our software maintains full payroll compliance eliminating the need to fret over calculations. 

Conclusion 

Payroll in Malaysia isn’t easy. EPF, SOCSO, EIS, and PCB affect every paycheck, so you need to be exact to follow the rules. The 2025 changes—new EPF payments for employees from other countries and SOCSO’s higher limit—make it even more crucial to get payroll right. 

But here’s the good part: You don’t need to work it out by hand. 

Info-Tech’s HR & Payroll Software ensures every paycheck is correct, follows the rules, and arrives when it should. Whether you look after 5 employees or 500, payroll can be easy. 

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