Plain-language explanations of Employment Act rules, statutory contributions and payroll calculations — with worked examples and official sources. Updated for 2026.
Under the Employment Act 1955, overtime on a normal working day is paid at 1.5 times the employee's hourly rate of ordinary pay, 2 times on a rest day, and 3 times on a public holiday. The ordinary rate of pay (ORP) is the monthly wage divided by 26 days, and the hourly rate is the daily ORP divided by normal working hours (typically 8). Overtime is capped at 104 hours per month, and normal working hours may not exceed 45 hours per week.
A part-time employee in Malaysia is someone who works between 30% and 70% of a comparable full-time employee's normal weekly hours, and is typically paid an agreed hourly rate. Wages are calculated as hours worked multiplied by the hourly rate, which must not fall below the pro-rated statutory minimum wage of RM1,700 per month. Hours worked beyond the comparable full-timer's normal hours must be paid at no less than 1.5 times the hourly rate, and part-timers are also entitled to pro-rated annual leave, sick leave and public holidays, plus EPF and SOCSO coverage.
Under the Employment Act 1955, employees in Malaysia are entitled to at least 11 paid gazetted public holidays per year, 5 of which are compulsory: National Day, the Agong's Birthday, the Ruler or Governor's birthday of the state, Labour Day and Malaysia Day. A monthly-rated employee who works on a paid public holiday must be paid 2 extra days' wages at the ordinary rate of pay on top of the salary, and any overtime hours on the holiday are paid at 3 times the hourly rate. If a public holiday falls on a rest day, the next working day becomes the paid holiday.
In 2026, the standard EPF (KWSP) contribution is 11% of monthly wages from the employee and 13% from the employer for wages of RM5,000 or less, or 12% for wages above RM5,000. Malaysian employees aged 60 and above contribute 0%, with the employer paying 4%. Contributions are calculated on the KWSP Third Schedule wage bands and must be paid by the 15th of the following month.
SOCSO (PERKESO) contributions for employees under 60 fall under the First Category: approximately 1.75% of monthly wages from the employer and 0.5% from the employee, capped at a wage ceiling of RM6,000 per month. Employees aged 60 and above are under the Second Category (Employment Injury only), with the employer paying about 1.25% and the employee nothing. EIS (SIP) adds 0.2% from the employer and 0.2% from the employee on the same RM6,000 ceiling, and all contributions are due by the 15th of the following month.
PCB (Potongan Cukai Bulanan), also called MTD (Monthly Tax Deduction), is the income tax employers in Malaysia must deduct from employees' monthly remuneration and remit to LHDN by the 15th of the following month via e-PCB, e-Data PCB or approved payroll software. The deduction is calculated using LHDN's MTD schedule or the computerised calculation method, based on progressive resident tax rates ranging from 0% to 30%. Failure to deduct or remit is an offence, and the employer becomes liable for the unpaid amounts plus fines.
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