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Review Buying guide · Payroll

Payroll software in Malaysia: what to check before you buy

By [email protected]

In short

Good payroll software gets every statutory deduction right, keeps up with rule changes and protects your staff's data. Check it against the 2026 rules below before you buy. This guide does not rank or recommend any product.

Payroll mistakes cost money and trust. In Malaysia, a payroll system has to handle several statutory deductions, each with its own rates and deadlines, and the rules keep changing.

This guide lists what the software must get right in 2026, the questions to ask vendors, and a checklist. It does not rank or recommend any product.

What payroll software must handle in 2026

1. EPF

  • Malaysian employees under 60: the employee pays 11%. The employer pays 13% on wages of RM5,000 or less, and 12% above that.
  • Malaysian citizens aged 60 and above: the employee pays 0% and the employer 4%.
  • Foreign workers with a valid passport and work pass: 2% each from the employee and the employer, from October 2025 wages. Domestic workers are exempt.
  • For wages up to RM20,000, amounts come from EPF’s contribution schedule, not an exact percentage. Above RM20,000, the percentage applies and the total is rounded up to the next ringgit.
  • Payment is due by the 15th of the following month.

2. SOCSO, EIS and LINDUNG 24 Jam

  • SOCSO (PERKESO) contributions apply to wages up to RM6,000 a month, a ceiling raised from RM5,000 on 1 October 2024.
  • First category: employer 1.75% and employee 0.5%. Second category, for employees aged 60 and above and those aged 55 or older who never contributed before: employer 1.25% only.
  • Employment Insurance System (EIS): 0.2% each from employer and employee, for employees aged 18 to 60. Those aged 57 or older who never contributed before are not covered.
  • Foreign workers are covered by SOCSO at the same rates as the first category (employer 1.75%, worker 0.5%). EIS does not cover them.
  • LINDUNG 24 Jam, a scheme for injuries outside work, started on 1 June 2026. The employee pays 0.75% of wages, up to the RM6,000 ceiling, and the employer deducts it.
  • LINDUNG 24 Jam is compulsory for foreign workers. Local workers were enrolled automatically unless they opted out by 31 August 2026.
  • From 1 October 2026, PERKESO contribution files must use its new combined text-file format.

3. Monthly tax deduction (MTD or PCB)

  • Employers deduct tax each month using LHDN’s schedule or its computerised calculation method, and pay it by the 15th of the following month.
  • LHDN publishes a specification for computerised calculation each year. The 2026 version keeps the formula but changes some tax relief items.
  • LHDN keeps a list of payroll software providers whose systems comply with its specification. The list was updated on 12 October 2026.
  • Since February 2025, LHDN’s e-PCB Plus platform on MyTax has combined its e-PCB, e-Data PCB and e-CP39 services. Some LHDN pages still use the older names.

4. Year-end and staff-change forms

  • Form EA to every employee by the last day of February.
  • Form E, with form CP8D, to LHDN by 31 March, filed online.
  • Forms CP22 and CP22A when employees join or leave, each with its own deadline.

5. HRD Corp levy

If you are registered with HRD Corp, the levy is 1% of Malaysian employees’ basic wages plus fixed allowances. It is 0.5% if you opted in with 5 to 9 employees.

The levy is due by the 15th of the following month and must not be deducted from employees’ pay. See our HRD Corp levy checklist.

6. Minimum wage and Employment Act rules

  • Minimum wage: RM1,700 a month (RM8.72 an hour), for employers of every size since 1 August 2025. It applies nationwide.
  • Budget 2027 announced RM2,000 from June 2027. Micro, small and medium enterprises (MSMEs) with annual sales below RM50 million would be exempted; the speech does not say for how long.
  • Wages must be paid within 7 days after each wage period ends. Overtime on a normal working day is at least 1.5 times the hourly rate.
  • Since 1 January 2023, some Employment Act pay rules, including the overtime rate, do not apply to employees earning more than RM4,000 a month. Ask an adviser whether any exceptions, such as for manual workers, apply to your staff.
  • Employers must give each employee a statement of wages and allowances on or before payday. The Act also requires employee registers to be kept for at least six years.
  • These Employment Act rules apply in Peninsular Malaysia. Sabah and Sarawak have their own labour laws.

7. Personal data

  • Since 1 June 2025, data controllers, including employers, must report personal data breaches to the Personal Data Protection Commissioner as soon as practicable. This comes from the amended Personal Data Protection Act (PDPA).
  • If a breach is likely to cause staff significant harm, the employer must also tell them without unnecessary delay.
  • Data processors, such as payroll providers, must also follow the Act’s security rules.
  • Some organisations must also appoint a data protection officer.

8. e-Invoicing

LHDN’s e-invoice guideline says employment income does not need an e-invoice.

For staff expense claims, LHDN asks staff to get e-invoices issued to the employer where possible. It also allows e-invoices in the employee’s name. Check how the software records these claims.

Questions to ask vendors

  1. Is your system on LHDN’s list of payroll systems that comply with its MTD specification?
  2. How fast do you update statutory rates, and who checks them? How did you handle EPF for foreign workers in 2025 and LINDUNG 24 Jam in 2026?
  3. Can it produce PERKESO’s new combined contribution file, required from 1 October 2026?
  4. Does it produce EPF, SOCSO, EIS, MTD and HRD Corp files in the formats each agency accepts?
  5. Does it handle foreign workers, employees aged 60 and above, and unpaid leave correctly?
  6. Does it produce Form EA, Form E and CP8D?
  7. Where is our data stored, who can access it, and is there an audit log?
  8. How quickly will you tell us about a data breach?
  9. Can we export all our data if we leave?
  10. What exactly does the price include, and what costs extra?

Checklist before you sign

  • The vendor is on LHDN’s list of compliant payroll systems.
  • A test payroll gives the right EPF, SOCSO, EIS, LINDUNG 24 Jam, MTD and HRD Corp amounts. Run it alongside your current method for one month.
  • PERKESO’s new text-file format is supported.
  • Year-end forms (EA, E and CP8D) are produced.
  • Pay slips show wages and allowances for each period.
  • Data location, access controls and breach notice terms are in the contract.
  • You can export your data.
  • The price is clear, with no surprise add-ons.

Rules to watch in 2027 and 2028

  • Minimum wage: RM2,000 from June 2027, announced in Budget 2027, with MSMEs below RM50 million in sales exempted. Check that the official order has been published (gazetted) before you change rates.
  • Income tax: Budget 2027 proposes changes to personal relief and tax rates from year of assessment (tax year) 2027. These would change monthly tax deductions.
  • LINDUNG 24 Jam: PERKESO says the rate rises to 1% from 1 June 2028.
  • Cash wages: Budget 2027 proposes a change from year of assessment 2028. Salary costs would be tax-deductible only if paid through a financial institution or a cashless method. Micro, small and medium enterprises would be exempt.

Sources

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