According to the Malaysian law, employers are required to pay towards the safety of their workers, and also enforce the regulations on them. Among the most important ones, there are deposits to the Employees Provident Fund (EPF), Social Security Organisation (SOCSO) and Employment Insurance System (EIS). Most of the industries and forms of employment fall under these requirements and failure to comply may result in fines, audit and reputational risk. To organisations that deploy pre employment screening solutions, these are the key areas that the organisation needs to grasp in order to develop compliant hiring and payroll procedures. This blog explains employer obligations clearly, outlines contribution rules and highlights how compliance fits into broader workforce risk management.
Understanding Mandatory Employer Contributions in Malaysia
What Is EPF
The Employees Provident Fund (EPF) is a mandatory retirement savings scheme for Malaysian employees.
Employer responsibilities include:
• Registering the company and employees with EPF
• Contributing a minimum of 12%–13% of monthly wages (rate depends on salary level)
• Deducting the employee's portion and submitting total contributions monthly
• Ensuring accurate payroll reporting and timely payments
Late or incorrect EPF contributions can trigger fines and interest charges.
What Is SOCSO
SOCSO provides social security protection against workplace injuries, invalidity and death.
Employers must:
• Register employees under SOCSO
• Contribute based on prescribed wage categories
• Cover both the Employment Injury Scheme and the Invalidity Scheme where applicable
SOCSO contributions apply to both local and certain foreign workers, depending on eligibility.
What Is EIS
The Employment Insurance System (EIS) helps employees who lose their jobs by providing financial assistance and re-employment help.
Employer duties include:
• Registering eligible employees
• Contributing 0.2% of monthly wages
• Matching the employee's 0.2% contribution
• Reporting employment termination accurately and on time
Employer Compliance Responsibilities Beyond Contributions
Statutory payments are only one part of employer compliance. Organisations must also ensure that employee records, job roles and employment terms are accurate from the start.
Key compliance areas include:
• Correct employee classification (full-time, part-time, contract)
• Accurate wage declarations
• Proper onboarding documentation
• Audit-ready payroll and HR records
This is where pre-employment screening Malaysia plays a supporting role by validating candidate information before payroll and statutory registration begin.
How Pre-Employment Screening Supports Statutory Compliance
Effective screening helps reduce compliance gaps that often arise from inaccurate employee data.
Screening contributes to:
• Verification of identity and legal work eligibility
• Confirmation of employment history and salary alignment
• Reduction of false declarations that affect contribution calculations
• Lower risk during government audits or inspections
When combined with structured HR and payroll processes, screening strengthens overall governance and regulatory readiness.
Common Employer Mistakes to Avoid
Many compliance issues arise from avoidable errors, such as:
• Delayed employee registration with EPF, SOCSO, or EIS
• Incorrect wage reporting leading to underpayment
• Misclassifying employees to avoid contributions
• Poor record-keeping and documentation gaps
Regular internal reviews and alignment between HR, finance and compliance teams help prevent these issues.
Best Practices for Malaysian Employers
To stay compliant and audit-ready, employers should:
• Maintain updated payroll systems aligned with statutory rates
• Conduct periodic compliance checks
• Integrate screening into the hiring workflow
• Train HR teams on regulatory updates
• Work with experienced compliance and risk partners
These practices support sustainable workforce management and reduce long-term legal exposure.
Conclusion
In Malaysia, the contributions of EPF, SOCSO and EIS are mandates that the employers cannot negotiate. Legal standards are not the only thing that should be adhered to. There is also good governance, discipline at the workplace and concern over the welfare of the employees. Employers can minimise compliance risk by ensuring that the hiring verification is checked, payroll accuracy and statutory reporting are in place. Venovox can provide solutions consistent with operational best practices to those organisations in need of organised workforce risk support.
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Dato' Venodevan
Risk is an opportunity