Set Up Payroll Before You Hire Your First Employee
Once a company in Malaysia starts hiring, paying salaries, withholding tax, and making statutory contributions all have to line up with each other. Even with a single employee, or when the person being paid is also a shareholder or director, a bank transfer alone is not enough; there needs to be a proper payroll record behind it.
Before setting a pay date and payment method, confirm the employer’s registration, the employee’s identity and tax number, the employment contract, benefits, and any work permit. If payroll is outsourced, the company should still keep a way to review and check the records of what has been filed and paid.
PCB, EA, and Form E Serve Different Purposes
| Item | General deadline or purpose |
|---|---|
| PCB/MTD | Monthly withholding, due on or before the 15th of the following month |
| EA/EC | Given to the employee by the last day of February the following year, listing the full year’s pay |
| Form E and C.P.8D | Generally due on or before 31 March the following year, reporting the employer’s return and employee data |
| New-hire, resignation, and departure notices | Handled separately when the relevant conditions apply, rather than waiting for the year-end filing |
Any extra time or data-submission arrangements for annual e-Filing need to be confirmed against that year’s schedule. The EA is the record an employee uses to check their own figures and file their taxes; it does not replace the company’s own Form E submission to the tax authority.
Foreign Employees Need EPF and SOCSO Checks Too
Starting with salaries from October 2025, eligible non-citizen employees are included in mandatory EPF contributions. For non-permanent residents who became members after 1 August 1998, the employer and employee generally each contribute 2%. Permanent residents, members who joined earlier, and certain other designated categories need to be confirmed against their own category, and exclusions such as domestic workers should be checked separately.
EPF contributions are generally due on or before the 15th of the following month. An employer cannot shift its own share of the contribution entirely onto the employee’s deduction.
SOCSO/PERKESO has its own separate protection and contribution rules. Foreign employees are already covered for employment injury and invalidity protection, and from June 2026 a new non-work accident coverage arrangement was added. Payroll should be set up according to each employee’s age, category, and the current contribution schedule, rather than relying on the outdated assumption that “foreign workers don’t need to contribute,” and this should not be confused with EIS.
Resignations and Departures May Need Advance Processing
Where the rules apply, notice of a new employee generally has to be submitted within 30 days of starting. For private-sector employers, notice of termination of employment generally has to be given at least 30 days in advance, though applicable exemptions and cases of death follow different rules.
When an employee is expected to leave Malaysia for more than three months, the CP21 notice and any exceptions should also be checked. Where tax clearance is involved, payment due to the employee may need to be withheld until a tax clearance letter is received or the statutory period has passed. These steps should be confirmed before the final salary payment is made.
Common Misunderstandings
“Employees File Their Own Taxes, So the Company Doesn’t Need to Do PCB”
An individual’s personal tax filing does not replace the employer’s legal duty to withhold and remit PCB.
“Foreign Employees Only Need a Work Permit, Not EPF or SOCSO”
A work permit and statutory contributions are separate requirements.
What to Check Next
Have whoever handles payroll set up a withholding and contribution category for each employee, and reconcile the payroll, bank payments, and receipts from each authority at month-end. Checking EA figures against Form E early each year helps avoid discovering mismatched data only when employees come to file their own taxes.
Frequently Asked Questions
Q1: Does a company with just one employee still need to file as an employer?
Yes, the applicable rules still apply; having few employees does not create an automatic exemption.
Q2: Do foreign employees always contribute 2% each to EPF?
Under the general new rule, the applicable category contributes 2% each, but permanent residents, earlier members, and excluded categories need to be confirmed separately.
Q3: Must every departing employee’s final salary be withheld for 90 days?
No, this cannot be applied as a blanket rule; whether notice, tax clearance, and withholding requirements apply needs to be confirmed first.
Disclaimer
This article is compiled from information available as of October 8, 2026, and is for general reference only; it is not legal, tax, or employment advice. The general deadlines listed here should be checked against individual exemptions, approved extensions, and that year’s filing arrangements.
Sources
LHDN — Employer’s Responsibility; LHDN — Return Form Filing Programme for 2026; KWSP — EPF Contributions for Non-Malaysian Citizen Employees; PERKESO — Foreign Workers (includes 2026 non-work accident coverage)
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