The Payroll Checklist You Need to Stay Compliant in Malaysia

Bonus: Download your complete Malaysia payroll compliance checklist.

Processing payroll in Malaysia can cause panic and paranoia. Not because you can’t do common mathematics, but because it’s easy to make mistakes that can lead to legal issues.

How can you ensure you always process payroll compliantly with the laws in Malaysia?

The answer? Checklists.

I’ve condensed the steps you need to take to ensure compliance in Malaysia into a pre-payroll, payroll and post-payroll checklist.

Download your complete Malaysia payroll compliance checklist.

Continue reading to learn how to complete each checklist item, the relevant laws, and the penalties for non-compliance.

Prepayroll checklist

To ensure compliance with payroll requirements in Malaysia, the job starts long before payroll week.

Here’s the prepayroll checklist to ensure a compliant pay run. 

• Checked for any updates on Malaysian labour laws

• Reviewed and updated all employees’ current status

• Gathered the correct info for terminated employees

• Registered new hires with EPF, SOCSO, EIS, and the LHDN tax portal

• Gathered the correct info for new hires EPF/SOCSO/EIS numbers, tax file/MTD history, passport/IC, bank details).

• Updated  new hires on the payroll platform with the correct category, title, and status

• Updated the information of terminated employees on the relevant portals.

• Updated employee data (e.g., hours worked, leave balances)

• Got approval for the timesheet and attendance

• Got approvals for overtime, leaves, and bonuses

• Entered salary changes, increments, or one-off payments with correct effective dates.

• Reviewed and got confirmation for timesheets, attendance, and shift variations.

• Recorded unpaid leave and leave adjustments accurately.

• Confirmed the latest PCB (monthly tax deduction) rules.

• Confirmed the latest EPF, SOCSO, and EIS rates/rules

• Classified and recorded allowances & benefits correctly (taxable vs exempt).

• Collected prior YTD income / previous employer income where relevant (so PCB reflects true YTD).

• Verified part-timer and casual staff classification for proper statutory treatment.

• Determine pay periods, i.e., biweekly or annually. 

• Define components of the payslip, including employee info, basic salary, allowance, and deductions. 

• Ran a pre-payroll validation or trial payslip run to catch missing fields/errors before finalisation.

Related laws

• Employees Provident Fund Act 1991: Requires timely registration and accurate employee data.

• SOCSO (Employees’ Social Security) Act 1969: Requires timely registration and accurate employee data.

• Employment Insurance System Act 2017: Requires timely registration and accurate employee data.

• Employment Act 1955: Requires proper employee classification, contract accuracy, leave, and wages.

Penalties for violation

• EPF Act: Failure to register employees or inaccurate data can lead to a fine of up to RM10,000 or 6 months imprisonment

• SOCSO Act: Non-registration can lead to a fine of up to RM5,000 and/or jail up to 2 years

• Employment Act: Misclassification of an employee or improper contracts can lead to a fine of up to RM10,000 per offence

• Employment Act 1955: Up to RM10,000 fine per employee; repeat offences up to 5 years imprisonment

Payroll checklist

Once it’s pay week, there’s no room for mistakes.

Do the following to improve your chances of processing payroll compliantly.

• Calculated salary/wages correctly using approved timesheets, attendance, overtime, PTO, claims, and bonuses.

• Calculated statutory contributions accurately (EPF, SOCSO, EIS) for employees and the employer

• Validate part-timer contribution computations.

• Applied the correct PCB calculation method and included taxable allowances/benefits.

• Cross-checked allowances, bonuses, deductions, and statutory contributions.

• Ensured automated validation/flag systems (if available) are reviewed.

• Confirmed data accuracy against employee contracts and policies.

• Approved payroll changes and locked data for submission.

• Prepare bank files for salary disbursement.

• Transferred net salary to employees' bank accounts or paid cash (where applicable)

• Generated and distributed payslips to employees (self-service app or email).

• Completed on or before seven days after the end of the work period

Using payroll software like ByteHR can help you automate all of these.

Related laws

• Income Tax Act 1967: Mandates correct PCB computation and deducting allowances as taxable/ exempt

• EPF Act 1991: Mandates the deduction and remittance of employee and employer EPF contributions

• SOCSO Act 1969: Requires the deduction and remittance for employee social security

• EIS Act 2017: Mandates proper deduction and remittance for employment insurance

• Employment Act 1955: Mandates accurate and timely wage,  payment, payslip provision, overtime, etc

Penalties for violation

• If wages are not paid within seven days after the wage period ends, employees can lodge a complaint; the labour court may order payment

• Employers violating EPF deduction rules (e.g., deducting employees’ EPF share but not remitting) may get imprisonment up to 6 years, a fine of up to RM20,000, or both

• Incorrect PCB calculation can attract fines, surcharges, and prosecution

• SOCSO contributions not made properly can lead to a fine of up to RM5,000 and/or jail for up to 2 years

• Non-compliance with the EIS Act can attract a fine of up to RM10,000 and/or jail up to 2 years

• Late wages/payslips can attract a fine of up to RM10,000 per offence

Postpayroll checklist

After processing your payroll at the end of the pay period, here’s a checklist of tasks to ensure compliance. This can also be used as an audit checklist.

• Remitted statutory contributions (EPF, SOCSO, EIS, PCB) within 15 days after the end of the work period.

• Filed required forms and audit files (LHDN submissions, reports).

• Remitted PCB and employer remittances to LHDN within 15 days after the end of the work period.

• Submitted EPF, SOCSO, and EIS contributions on time and furnished the required employer returns.

• Submitted government forms (e.g., CP22, EA) on time

• Stored all payroll data securely (PDPA-compliant) for audit readiness.

• Reconcile and correct any post-run errors quickly (amendments, re-submissions, notifications to employees).

• Document issues from the current cycle and update the checklist to prevent repeat mistakes.

Related laws

• EPF Act 1991: Mandates on-time EPF contribution payment and statement submission. And requires updated records and annual reporting (e.g., Borang A)

• SOCSO Act 1969: Requires timely SOCSO contributions and reporting

• EIS Act 2017: Requires timely EIS contributions and compliance

• Employment Act 1955: Mandates the issuance of payslips, record-keeping, and wage payment rules

• Personal Data Protection Act (PDPA) 2010: Mandates secure storage of employee data

• Income Tax Act 1967: Mandates submission of forms (e.g., EA) and 7-year record retention. And timely remittance of PCB and submission of employer returns

Penalties for violation

• Penalties include fines, possible imprisonment for EPF. Jail term not exceeding 3 years or a fine up to RM10,000 (late contribution), or higher if deducting but not remitting

• Furnishing false statements or failing to provide wage statements to employees may lead to a fine of up to RM2,000 and/or imprisonment of up to 6 months

• Late PCB remittance/filings attract surcharges, fines, and prosecution

• Late EPF contributions can lead to a fine of up to RM10,000 + possible jail up to 3 years

• Late or no submission of SOCSO contribution can lead to a fine of up to RM5,000 and/or jail up to 2 years

• Non-remittance of EIS deduction can lead to a fine of up to RM10,000 and/or jail for up to 2 years

• Missing payslip, wrong payment, poor record-keeping: Fine up to RM10,000 per offence

• Data breaches or unsecured payroll data: Hefty fines (potentially hundreds of thousands of ringgit) and possible imprisonment, depending on breach severity

Download your checklist

Grab your free checklist for consistent compliance. You can share it with your team or modify it to add other items from your payroll process.

Grab your complete Malaysia payroll compliance checklist.

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Disclaimer:

This checklist and the information shared are furnished for informational purposes only and not as legal advice. The reader should verify critical legal information and should not rely solely on the content provided here.