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Date: 9 April 2019 Statutory Requirements Governing Payroll
Computation for 2019
Employment Act 1955 Summary of Employment Laws in Malaysia
Definition of ‘Wages’ Under Section 2 of the Employment Act 1955,
the term “wages” means basic wages and all other payments in cash
payable to an employee for work done in respect of his contract of
service but does not include:
• The value of any house accommodation or the supply of any
food, fuel, light or water or medical attendance or of any approved
service
• Any contribution paid by the employer on his own account to
any pension fund, provident fund, superannuation scheme,
retrenchment, termination, lay-off or retirement scheme, thrift
scheme or any other fund or scheme established for the benefit or
welfare of the employee
• Any travelling allowance or the value of any travelling
concession • Any sum payable to the employee to defray special
expenses entailed on him by the
nature of his employment • Any gratuity payable on discharge or
retirement • Any annual bonus or any part of any annual bonus.
Normal work hours Not exceeding eight (8) hours in one day or 48
hours in one week Paid holiday At least 11 gazetted public holidays
; National Day, Birthday of the
Yang Dipertuan Agong, Birthday of Ruler/Federal Territory Day,
Labour Day and Malaysia day) in one calendar year and on any day
declared as public holiday under section 8 of the Holiday Act
1951.
Paid Annual Leave for Employees
No. of Years of Service Entitlement (Days) Less than two years
of service 8 days Two or more but less than five years of service
12 days Over five years of service 16 days
Paid Sick Leave per Calendar Year
Years of Service Entitlement (Days) Less than two years of
service 14 days Two or more but less than five years of service 18
days Over five years of service 22 days Where hospitalization is
necessary Up to 60 days (inclusive of the paid sick
leave entitlement stated above) Paid Maternity Leave 60 days
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Payment for Overtime Work Overtime Rate of Pay Normal working
days One and a half(1½) times the hourly rate of pay Rest days Two
(2) times the hourly rate of pay Public Holidays Three (3) times
the hourly rate of pay
Income Tax Act 1967 Definition of Employment Income Section
13(1) (a) of the Income Tax Act 1967 reads as follows: *(1) Gross
income of an employee in respect of gains or profits from an
employment includes- (a) any wages, salary, remuneration, leave
pay, fee, commission, bonus, gratuity, perquisite or allowance
(whether in money or otherwise) in respect of having or exercising
the employment.” Mandatory Statutory Forms need to be prepared by
each Employer
Type Purpose
CP39 For employers to pay the Monthly Tax Deduction (MTD) e-Data
PCB (Scheduler Tax Deduction Data System) e-Data PCB allows
employers to check the format and upload the text file of CP39
online. This system helps employers to send data that meets the
specifications and make payment online
CP8D For employers to submit Borang E online. In accordance to
the Income Tax Act 1967, every employer must prepare and submit the
Return Form of Employer (Form E) to the IRB by 31 March of every
year.
EA Form This is a Yearly Remuneration Statement of an employee.
Every employer is required by Income Tax Act to prepare and render
to his employee the EA form before the last day of February.
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MONTHLY TAX DEDUCTION (MTD) (Potongan Cukai Bulanan PCB) Monthly
Tax Deduction or MTD calculation is subjected to the following:
Compulsory deductions Optional deductions Tax Exempt Allowance
Benefits in Kind (BIK) and Value of Living Allowance (VOLA)
COMPULSORY DEDUCTIONS There are six (6) types of compulsory
deductions in the MTD calculation:
Deductions
Amount limited to
(RM) a. Individual
Deduction of RM9,000.00 for an individual in respect of himself
and his dependent relatives is granted automatically.
9,000.00
b. Husband/Wife i. Deduction of RM4,000.00 is given in respect
of a husband living
together in the basis year on condition that the husband has no
source of income/total income or has elected for joint
assessment.
ii. Deduction of RM4,000.00 is given in respect of a wife living
together
in the basis year on condition that the wife has no source of
income/total income or has elected for joint assessment.
4,000.00
c. Child “Child” means an unmarried dependent legitimate child
or stepchild or adopted child, under the age of 18 years or if
above 18 years old, the child must be:
i. receiving full-time instruction at any university, college or
other higher education institution (similar to a university or
college); or
ii. serving under articles or indentures with a view to
qualifying in a trade or profession.
Deduction of RM2,000.00 is given for each unmarried child under
the age of 18 years in a current year. Deduction of RM2,000.00 is
also given for each unmarried child of 18 years and above who is
receiving full-time education in a current year.
2,000.00
Where a child falls within these conditions, the employee is
treated as having the respective number of children:
In circumstances where
Deduction to be given as if the employee has this number of
children
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Child over the age of 18 years and receiving full-time
instruction at diploma level onwards in an institution of higher
education in Malaysia
4
Child over the age of 18 years and receiving full-time
instruction at degree level onwards in an institution of higher
education outside Malaysia
4
Disable child as certified by the Department of Social
Welfare
3
Disabled child receiving further instruction at diploma level
onwards in an institution of higher education in Malaysia or at
degree level onwards in an institution of higher education outside
Malaysia
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Deduction/ relief for: *1 child below the age of 18 or a child
who is studying = RM2,000 -Child- 18 years and above and studying
(diploma or higher) = RM8,000.00 (considered with 4 children)
*Disabled child = RM6,000 (considered with 3 children) *Disabled
child – 18 years and above and studying (diploma or higher) –
RM4,000 (considered with 7 children)
d. Contribution to Employees Provident Fund (EPF) or Other
Approved Scheme and Life Insurance or Takaful
1. Total deduction for the payment of contributions to the EPF
or any other Approved Scheme is limited to RM4,000.00 per year
2. Life insurance premiums or Takaful contributions is limited
to RM3,000.00 per year.
7,000.00
e. Disabled Person A disabled person will be allowed an
additional personal deduction of RM6,000.00.
6,000.00
f. Disabled Husband/Wife Additional deduction of RM3,500.00 is
given to an individual if a disabled husband/wife is living
together.
3,500.00
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OPTIONAL DEDUCTIONS Employee can claim deductions and rebates in
the relevant month subject to approval by employer by submitting
TP1 Form to the employer. Below is a list of allowable deductions
for MTD calculation stated in the Borang PCB/TP1 form.
Optional Deductions
Amount limited to (RM)
a. Medical Treatment, Special Needs or Carer Expenses of Parents
Medical treatment, special needs and carer for parents are limited
to RM5,000.00 in a basis year. Medical expenses which qualify for
deductions includes:
i. medical care and treatment provided by a nursing home; and
ii. dental treatment limited to tooth extraction, filling, scaling
and
cleaning but not including cosmetic dental treatment.
The claim must be supported by a certified medical practitioner
registered with the Malaysian Medical Council that the medical
conditions of the parents require medical treatment or special
needs or carer. The parents shall be resident in Malaysia. The
medical treatment and care services are provided in Malaysia. In
the case of carer, shall be proved by a written certification,
receipt or copy of carer’s work permit. “Carer” shall not include
that individual, husband, wife or the child of that individual. New
personal deduction of RM1,500 for each parent is given to a
resident taxpayer subject to the following conditions:
a) Such taxpayer does not claim expenses on medical treatment
and care of parents;
b) Parents are residents and aged 60 years and above; c) Parents
have an annual income not exceeding RM24,000 per
annum each; and d) Parents are the legitimate natural parents
and foster parents in
accordance with the respective law subject to a maximum of 2
persons.
This relief can be shared with other siblings provided that the
total relief claimed shall not exceed RM1,500 for each parent.
5,000.00 or 1,500.00 (Father) 1,500.00 (Mother)
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Optional Deductions
Amount limited to (RM)
b. Basic Supporting Equipment The purchase of any supporting
equipment for one’s own use, if he/she is a disabled person or for
the use of his/her spouse, child or parent, who is a disabled
person may be claimed but limited to a maximum of RM6,000.00 in a
basis year. Basic supporting equipment includes haemodialysis
machine, wheel chair, artificial leg and hearing aid but exclude
optical lenses and spectacles.
6,000.00
c. Higher Education Fees (Self) Payment of annual fee limited to
RM7,000.00 is allowed as a deduction for any course of study in an
institution or professional body in Malaysia recognized by the
Government of Malaysia or approved by the Minister of Finance for
the purpose of enhancing any skill or qualification:
i. up to tertiary level (other than Masters and Doctorate) in
law, accounting, Islamic finance, technical, vocational,
industrial, scientific or technology; or
ii. any course of study at Masters or Doctorate level.
7,000.00
d. Medical Expenses on Serious Diseases Medical expenses on
serious diseases include the treatment of acquired immune
deficiency syndrome (AIDS), Parkinson’s disease, cancer, renal
failure, leukaemia and other similar diseases. ‘Other similar
diseases’ such as heart attack, pulmonary hypertension, chronic
liver disease, fulminant viral hepatitis, head trauma with
neurological deficit, brain tumour or vascular malformation, major
burns, major organ transplant or major amputation of limbs. Amount
expended on own self, husband/wife or child is deductible up to a
maximum of RM6,000.00.
6,000.00
e. Complete Medical Examination Amount expended on own self,
husband/wife or child for complete medical examination is
deductible up to a maximum of RM500.00. The total deduction for
medical expenses on serious diseases (d.) and complete medical
examination (e.) is limited to a maximum of RM6,000.00 a year.
Example : Claim for deduction in (d.) is RM5,900.00. Therefore, the
balance of deduction that can be claimed in (e.) is only
RM100.00
500.00
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Optional Deductions
Amount limited to (RM)
f. Net Deposit in Skim Simpanan Pendidikan Nasional (SSPN)
Amount deposited in SSPN by an individual for his children’s
education is deductible up to a maximum of RM8,000.00 per year. The
deduction is limited to the net amount deposited in that basis year
only. This deduction has effect for the years of assessment 2012
until 2017. Example: In a current year Deposit in a current year
RM2,000.00 Less: Withdrawal in a current year (-) RM1,500.00
Allowable deduction to be claimed RM 500.00
8,000.00
g. Payment of Alimony to Former Wife Payment of alimony to a
former wife is deductible provided that the total deduction for
wife (in paragraph 4.4.1 (b)) and alimony payment is limited to
RM4,000.00 per year. Voluntary alimony payment to a former wife
under a mutual agreement but without any formal agreement does not
qualify as a deduction. Note: Payment of alimony to former wife is
not allowed in the case where the employee claimed deduction for
wife.
4,000.00
h. Life Insurance Total deduction for the payment of life
insurance premiums is limited to RM3,000.00 per year.
3,000.00
i. Contribution to a Private Retirement Scheme and Payment of
Deferred Annuity Deduction on contribution to Private Retirement
Scheme approved by the Securities Commission under The Capital
Markets and Services Act 2007 or payment of deferred annuity
premium or both limited to RM3,000 per year (for 10 years from year
assessment 2012 until year assessment 2021).
3,000.00
j. Education and Medical Insurance A deduction not exceeding
RM3,000.00 per year for insurance premiums in respect of education
or medical benefits for an individual, husband, wife or child.
3,000.00
k. Interest on Housing Loan A deduction not exceeding RM10,000
for each basis year is given on housing loan interest for house
purchased from developer or third party subject to the following
conditions:
i. the tax payer is a Malaysian citizen and a resident; ii.
limited to one residential house; iii. has not derived any income;
and iv. sale and purchase agreement is executed between 10
March
2009 and 31 December 2010. The tax deduction is given for 3
consecutive years from the first year the housing loan interest is
paid.
10,000.00
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Optional Deductions
Amount limited to (RM)
l. SOCSO Payment A deduction not exceeding RM250.00 per year for
Social Security Organisation (SOCSO).
250.00
m. Tax Deduction For Lifestyle The purchase of reading materials
including printed newspapers, computer, smartphones and tablets,
internet subscriptions, sport equipment as well as gymnasium
membership fees. The deduction is limited to RM2,500.00 per
year
2,500.00
n. Tax Deduction For Purchase Of Breastfeeding Equipment The
purchase can be made in complete set or separate parts. The new tax
deduction is applicable to working women with child aged up to 2
years and can be claimed once every 2 years.
1,000.00
o. Tax Deduction For Fees Paid To Child Care Centres And
Kindergartens Individual taxpayers who enroll their children below
6 years of age, in child care centres registered with the Director
General of Social Welfare under the Child Care Centre Act 1984 or
kindergartens registered under the Education Act 1996. This new
deduction can be claimed by either parent of the children.
1,000 .00
TAX EXEMPT ALLOWANCES / PERQUISITES / GIFTS / BENEFITS Types of
allowances, benefit-in-kind and perquisites that are exempted from
tax are as follows:
Allowances / Perquisites / Gifts / Benefits Restricted amount
(RM)
a Petrol card, petrol allowance, travelling allowance or toll
payment or any of its combination for official duties. If the
amount received exceeds RM6,000 a year, the employee can make a
further deduction in respect of the amount spent for official
duties. Records pertaining to the claim for official duties and the
exempted amount must be kept for a period of 7 years for audit
purpose.
6,000.00
b Child care allowance in respect of children up to 12 years of
age. 2,400.00
c Gift of fixed line telephone, mobile phone, pager or Personal
Digital Assistant (PDA) registered in the name of the employee or
employer including cost of registration and installation.
Limited to only 1 unit for each category of assets
d Monthly bills for subscription of broadband, fixed line
telephone, mobile phone, pager and PDA registered in the name of
the employee or employer including cost of registration and
installation.
Limited to only 1 line for each category of assets.
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Allowances / Perquisites / Gifts / Benefits Restricted amount
(RM)
e Perquisite (whether in money or otherwise) provided to the
employee pursuant to his employment in respect of:- (i) past
achievement award; (ii) service excellence award, innovation award
or productivity award; and (iii) long service award (provided that
the employee has exercised an employment for more than 10 years
with the same employer).
2,000.00
f Parking rate and parking allowance. This includes parking rate
paid by the employer directly to the parking operator.
Restricted to the actual amount expended
g Meal allowance received on a regular basis and given at the
same rate to all employees. Meal allowance provided for purposes
such as overtime or outstation / overseas trips and other similar
purposes in exercising an employment are only exempted if given
based on the rate fixed in the internal circular or written
instruction of the employer.
Restricted to the actual amount expended
h Subsidised interest for housing, education or car loan is
fully exempted from tax if the total amount of loan taken in
aggregate does not exceed RM300,000. If the total amount of loan
exceeds RM300,000, the amount of subsidized interest to be exempted
from tax is limited in accordance with the following formula:
Where; A x B C A = is the difference between the amount of interest
to be borne by the employee and the amount of interest payable by
the employee in the basis period for a year of assessment; B = is
the aggregate of the balance of the principal amount of housing,
education or car loan taken by the employee in the basis period for
a year of assessment or RM300,000, whichever is lower; C = is the
total aggregate of the principal amount of housing, education or
car loan taken by the employee.
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BENEFITS IN KIND (BIK) AND VALUE OF LIVING ACCOMMODATION (VOLA)
Employee who has benefits-in-kind (BIK) and value of living
accommodation (VOLA) as part of his monthly remuneration shall
deduct PCB as per normal remuneration. Amount OF BIK/VOLA are used
only for the purpose of MTD calculation. These amounts shall not
appear in the payslip and EA form as gross salary/ remuneration. In
the EA form it is shown in Part B
(3). Benefits in kind (4). Value of Living Accommodation
Examples of Benefits in kind 1. motor car and other related
benefits 2. driver provided 3. household furnishings, apparatus and
appliances 4. gardener 5. household servant 6. holiday 7.
recreational club membership
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EMPLOYEES PROVIDENT FUND (EPF ACT 1991) Definition of “Wages”
for the purpose of EPF contribution: All remuneration in money due
to an employee under his contract of service or apprenticeship
whether it was agreed to be paid monthly, weekly, daily or
otherwise. Among the payments that are liable for EPF
contribution:
• Salary • Payment for unutilised annual or medical leave •
Bonus • Allowance • Commission • Incentive • Arrears of wages •
Wages for maternity leave • Wages for study leave • Wages for half
day leave • Other payments under services contract or otherwise
http://www.kwsp.gov.my/portal/en/employers/employers-responsibility
EPF CONTRIBUTION RATES STARTING 01/01/ 2019
Rate of Contribution Employee Employer Total Malaysian citizen
up to 60 years old Wages: RM5000 & below 11% 13% 21% Wages:
Over RM5000 11% 12% 20% Malaysian citizen over 60 years old Wages:
RM5000 & below 0% 4% 4% Wages: Over RM5000 0% 4% 4%
http://www.kwsp.gov.my/portal/en/employers/employers-responsibility
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SOSIAL SECURITY ORGANISATION (SOCSO ACT 1969) Pertubuhan
Keselamatan Sosial (PERKESO) Definition of ‘Wages’ Any remuneration
payable in money to an employee is taken as wages for purposes of
SOCSO contributions. This includes the following payments:
i. Salary ii. Overtime payments
iii. Commission and service charge iv. Payments for leave; such
as annual, sick, maternity, rest day, public holidays and etc v.
Allowances such as incentives, shift, food / meal, cost of living,
housing and etc
All payments made to an employee paid at an hourly rate, daily
rate, weekly rate, piece or task rate is considered as wages.
However the following payments are not considered as wages:
i. Payments by an employer to any statutory fund for employees
ii. Mileage claims
iii. Gratuity payments or payments for dismissal or
retrenchments iv. Annual bonus
https://www.perkeso.gov.my/index.php/en/social-security-protection/employer-employee-eligibility/employer-employee-registration
Contributions Coverage of the Workers Social Security Act 1969
Employers are required to pay monthly contributions for each
eligible employee according to the rate specified under the
Employees’ Social Security Act, 1969. These contributions are
divided into two (2) types, namely: Contributions of the First
Category For employees who are less than 60 years of age,
contributions payable by employers and employees are for the
Employment Injury Scheme and the Invalidity Scheme. The rate of
contribution under this category comprises 1.75% of employer’s
share and 0.5% of employees’ monthly wages according to the
contribution schedule. Note: All employees who have not reached the
age of 60, must contribute under the First Category except for
those who have attained 55 years of age and have no prior
contributions before they reach 55 due to non-eligibility under the
Employees’ Social Security Act, 1969. Contributions of the Second
Category The rate of contribution under this category is 1.25% of
employees’ monthly wages, payable by the employer, based on the
contribution schedule. All employees who have reached the age of 60
must be covered under this category for the Employment Injury
Scheme only. Note: For eligible new employees who are 55 years of
age, they must be covered under the Second Category.
https://www.perkeso.gov.my/index.php/en/social-security-protection/employer-employee-eligibility/employer-employee-registrationhttps://www.perkeso.gov.my/index.php/en/social-security-protection/employer-employee-eligibility/employer-employee-registration
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EMPLOYMENT INSURANCE SYSTEM (EIS) Sistem Insurans Pekerjaan
(SIP) EIS Contribution Rate The contribution rate for Employment
Insurance System (EIS) is 0.2% for the employer and 0.2% for
employee based on the employee’s monthly salary.
Contribution Rate MONTHLY WAGES EMPLOYER EMPLOYEE
All employees aged 18 to 60 are required to contribute. However,
employees aged 57 and above who have no prior contributions before
the age of 57 are exempted.
Contribution rates are capped at insured salary of
RM4000.00.
0.2% 0.2%
RM4000 and above RM7.90 RM7.90
Social Protection for Foreign Worker (SOCSO) EMPLOYMENT INJURY
(EI) SCHEME FOREIGN WORKER SKIM BENCANA KERJA PERKESO UNTUK PEKERJA
ASING (SBK) The rate of contribution is 1.25% of the insured
monthly wages and to be paid by the employer only, referring to the
Second Category Contribution Schedule for EMPLOYMENT INJURY (EI)
Scheme only.
AMOUNT OF WAGES FOR THE MONTH
RATE OF CONTRIBUTIONS (PAID BY EMPLOYER ONLY)
RM1.00 – RM4,000.00
1.25%
RM4,000.01 and more RM49.40 Method of submission and payment –
Combine with SOCSO contribution – upload SOCSO text file at PORTAL
ASSIST.
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HUMAN RESOURCE DEVELOPMENT FUND (PSMB ACT 2001) PEMBANGUNAN
SUMBER MANUSIA BERHAD (PSMB) Pembangunan Sumber Manusia Berhad
(PSMB) is entrusted by the Malaysian Government to administer and
manage the Huuman Resource Development (HRD) Levy for the purpose
of training, retraining and skills upgrading of the Malaysian
workforce.
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The content of this article constitutes part of Aplus Payroll
Training Slides. The aim of this article is to summarise the basic
rule of law governing the employees payroll calculation. This is to
ensure that Aplus Payroll users comply with the Statutory
requirements to avoid penalty or fine due to non-compliance.
REFERENCE: EMPLOYMENT ACT 1955 INCOME TAX ACT 1967 SOCSO ACT 1969
EPF ACT 1991 PSMB ACT 2001 IRBM Public Ruling No. 3/2013 Benefits
in kind IRBM Public Ruling No. 3/2005 Living Accommodation Benefit
Provided For The Employee By The Employer
https://www.hrdf.com.my/wp-content/uploads/2016/12/4.Slide-for-the-1st-April-2017-Amendment-latest-160317.pdf
https://www.perkeso.gov.my/index.php/en/social-security-protection/employer-employee-eligibility/employer-employee-registration
http://www.kwsp.gov.my/portal/en/employers/employers-responsibility
Any feedback or comments will be greatly appreciated.
Kindly email your feedback or comments to
[email protected]
https://www.hrdf.com.my/wp-content/uploads/2016/12/4.Slide-for-the-1st-April-2017-Amendment-latest-160317.pdfhttps://www.hrdf.com.my/wp-content/uploads/2016/12/4.Slide-for-the-1st-April-2017-Amendment-latest-160317.pdfhttps://www.perkeso.gov.my/index.php/en/social-security-protection/employer-employee-eligibility/employer-employee-registrationhttps://www.perkeso.gov.my/index.php/en/social-security-protection/employer-employee-eligibility/employer-employee-registrationhttp://www.kwsp.gov.my/portal/en/employers/employers-responsibilitymailto:[email protected]