Payroll Checklist Malaysia 2025: Deadlines, Penalties, and Best Practices for Employers

Every employer knows payroll is one of the most critical and complex tasks in running a business. With multiple deadlines, statutory contributions, and reporting requirements, it’s easy to miss something.

In this article, we share with you the payroll checklist that you can use in your company to stay compliant, save time, and avoid costly mistakes.

What is a Payroll Checklist?

A payroll checklist is a structured tool that outlines the tasks employers must complete each payroll cycle. It covers:

Monthly payroll tasks (salary calculation, EPF/SOCSO/EIS deductions, and PCB submissions)
Year-end payroll tasks (EA forms, filing Form E with LHDN, and reconciling contributions.)

Why is this important? Because payroll in Malaysia is also a compliance action with the Employment Act 1955, the Income Tax Act, and regulations enforced by statutory bodies like EPF, SOCSO, LHDN, and HRD Corp.

With a checklist, HR teams can streamline processes, reduce human error, and protect the company from fines or audits.

Payroll Checklist in Malaysia: Step-by-Step Guide

Employers must also track attendance, calculate overtime, deduct contributions, and prepare statutory reports to issue payroll. So, a step-by-step checklist is needed to ensure nothing slips through the cracks and helps HR teams stay compliant while running payroll efficiently.

Here is the checklist:

1. Employee Information Management

Verify employee details (NRIC, passport (for foreign workers), tax number, bank account).
Keep records up-to-date for new hires, resignations, and transfers.
Ensure all new employees are registered with EPF, SOCSO, and EIS within 30 days.

2. Attendance & Work Hours

Track working days, overtime, unpaid leave, and public holidays.
Use HR systems to integrate attendance with payroll for accuracy.
Keep proper records. Audits may require attendance logs.

3. Salary Calculation

Base salary according to contract.
Include allowances (travel, meal, housing) where applicable.
Compute overtime pay correctly under the Employment Act.
Deduct unpaid or no-pay leave.

4. Statutory Deductions

Employers must deduct and remit:

EPF: 11% employee, 12–13% employer. Due by the 15th of the following month.
SOCSO: Contributions cover Employment Injury & Invalidity Schemes. Due by the 15th monthly.
EIS: 0.2% employer + 0.2% employee. Due by the 15th monthly.
PCB (Monthly Tax Deduction): Deduct using LHDN’s approved tables/software. Due by the 15th monthly.

5. Additional Deductions

Loan repayments.
Salary advances.
Other authorised deductions (e.g., union fees, insurance).

6. Net Salary & Payslip

Generate detailed payslips (digital or printed).
Ensure breakdowns of salary, allowances, deductions, and contributions are clear.
Disburse salary via bank transfer within the agreed pay cycle.

7. Compliance & Reporting

Year-end compliance is where many employers slip. Key items include:

EA Forms: Must be issued to all employees by the end of February.
Form E: Employer’s annual tax declaration, due by 31 March.
Annual contribution summaries for EPF, SOCSO, EIS.
HRD Levy: Paid monthly/quarterly by registered employers under the PSMB Act.

Key Compliance Items (Table format for clarity)

To stay compliant, employers must keep track of specific statutory deadlines and submissions. The table below highlights the main payroll compliance items every company in Malaysia needs to follow.

Compliance Item	Obligation	Deadline
EPF	Employer & employee contributions	15th monthly
SOCSO	Contribution based on wage table	15th monthly
EIS	0.2% employer + 0.2% employee	15th monthly
PCB (MTD)	Deduction & submission to LHDN	15th monthly
HRD Levy	1% of monthly wages (if applicable)	Monthly/Quarterly
EA Form	Must be issued to employees	End-February
Form E	Employer submission to LHDN	31 March
Record-keeping	Payroll records for audit	7 years

Penalties for Payroll Non-Compliance in Malaysia (in table)

Missing deadlines or making payroll errors can be costly. Employers may face heavy fines, interest charges, or even prosecution. To avoid that, we compile the key penalties for payroll non-compliance in Malaysia.

Non-Compliance	Penalty
Late EPF contributions	Fine up to RM10,000 or imprisonment
SOCSO/EIS failure	Fine up to RM10,000 and/or jail
PCB errors or late submission	10% penalty + additional charges
Failure to submit Form E	Fine RM200–RM20,000 or jail
Not issuing EA Forms	Employer fined; employees cannot file taxes
Poor payroll records	High audit risks & penalties

Common Mistakes Employers Make (and How to Avoid Them)

Despite having a checklist, there is always a chance of making a mistake. If employers do not pay attention, the company can get penalties from EPF/SOCSO/EIS/LHDN, unhappy employees, and messy audits.

Use this section as a red-flag checklist. For each mistake, we show the risk and the simple fix, so you can prevent repeat issues, correct current gaps, and document controls for future audits.

Forgetting PCB on Bonuses

Many employers assume PCB (Monthly Tax Deduction) applies only to basic salary, but bonuses and allowances are taxable too. Missing these deductions means underreporting to LHDN and facing back taxes or penalties.

Solution: Always include all taxable benefits when calculating PCB, especially year-end bonuses.

Delaying EPF, SOCSO, or EIS payments

Late contributions don’t just create fines, but also put employees at risk of losing coverage if something happens before payment is made. Statutory bodies track deadlines strictly.

Solution: Set reminders or automate payments with payroll software so deductions are sent by the 15th of each month.

Incorrect Employee Data

Errors in NRIC, passport numbers, or tax reference numbers may seem minor, but they cause major issues when generating EA forms or submitting Form E. Inconsistent data can also trigger audits.

Solution: Review employee records quarterly and require supporting documents for updates.

Late Form E Submission

Employers often leave Form E to the last minute in March, only to rush and make mistakes. LHDN imposes fines for late or inaccurate submissions.

Solution: Start preparing in February, right after issuing EA forms, and use the e-Filing system to avoid delays.

Not Reconciling Payroll with Accounts

Payroll is one of the biggest expenses, and mismatches with accounting records create red flags during audits. Missing reconciliations also mean unpaid liabilities may go unnoticed.

Solution: Perform monthly reconciliations between HR payroll reports and finance ledgers to ensure accuracy.

Best Practices for Employers & HR Teams

Strong payroll hygiene depends on people, process, and tools working together. The practices below focus on controls you can implement immediately. You’ll tighten compliance, cut rework, and close payroll faster, while keeping clear records for inspections and year-end reporting.

Automate Compliance

Manual calculations are prone to human error. Payroll systems in Malaysia can automatically update statutory rates, calculate deductions, and send reminders before deadlines. This reduces both workload and compliance risk.

Quarterly Payroll Audits

Small errors can build up over time. By auditing every three months, employers can catch mistakes (like wrong contribution rates or missed PCB deductions) early, instead of facing big issues at year-end.

Cross-Functional Reviews

Payroll directly affects company finances. Having HR and finance review payroll together ensures figures match, prevents misstatements, and builds accountability.

Keep SOPs Updated

Standard operating procedures (SOPs) ensure payroll runs consistently, even if staff changes. Updated SOPs also protect companies during audits, as they show documented processes for compliance.

Stay Updated

Payroll laws change periodically, from minimum wage adjustments to amendments in EPF or SOCSO regulations. Employers must monitor updates from LHDN, EPF, and SOCSO to avoid non-compliance and unexpected penalties.

Payroll Checklist Template (Downloadable) in PDF

Employers should create a one-page payroll checklist covering:

Monthly payroll tasks (salary, statutory deductions, payslips).
Year-end tasks (EA, Form E, reconciliations).
Compliance deadlines for each statutory body.

Below, we share a checklist template that can be used as a quick reference for your company. You can share it within your HR teams or payroll team.

Download Payroll Checklist Template

FAQ

What is included in a payroll checklist?

It includes employee records, salary calculations, EPF/SOCSO/EIS contributions, PCB deductions, payslips, and annual reporting (EA, Form E).

How do I ensure payroll compliance?

Register employees promptly, use LHDN’s PCB calculator, submit statutory payments by the 15th, and issue EA/Form E on time.

Do part-time and foreign employees need contributions?

Part-timers are covered. For foreign employees, SOCSO is compulsory (Employment Injury Scheme), but EPF is optional unless they opt in.

What happens if contributions are missed?

Employers face fines up to RM10,000, interest, or even prosecution. Employees may also lose their statutory protection.

What is the best payroll software in Malaysia?

Popular solutions include Kakitangan, HR2eazy, BrioHR, and Swingvy. This application is designed to handle statutory compliance automatically.

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