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Payroll Outsourcing in Malaysia A Guide for SMEs

Payroll Outsourcing in Malaysia: A Guide for SMEs

from  Unit4 Prosoft December 6, 2021 | 5 min read

Acquiring payroll outsourcing services in Malaysia is a clever move, especially if your business aims to hire locals and has little time to manage the workforce and other HR activities.

By outsourcing your payroll to an external partner, you wouldn’t need to worry about having a legal entity in Malaysia. Your third-party provider will deal with all the payroll-related matters, helping you save time and resources on hiring and training additional staff.

How Does Payroll Outsourcing Work?

Leaving your company’s payroll to a third-party provider requires you to share your employees’ data. The payroll services company may request the following:

  • Personal information
  • Pay rate
  • Job title
  • Hire date
  • Type of contract

While there’s currently no formal data protection legislation in place regarding the collection and processing of payroll information in Malaysia, you can implement robust data protection measures and principles that your payroll provider should adhere to, including:

  • Purpose limitation
  • Notice and choice
  • Data accuracy and integrity
  • Storage limitation or retention
  • Data security and confidentiality
  • Lawfulness, fairness, and transparency

Payroll Outsourcing in Malaysia

The best part about partnering with an external provider is that your employees get paid on time and in accordance with the Malaysian labour regulations. Plus, your business achieves full compliance with the fast-changing tax regulations.

Payroll Outsourcing in Malaysia

Here’s the standard payroll processing method that every payroll outsourcing company in Malaysia follows:

1. Salary Payments

Employees should receive their salaries in their bank accounts by the 7th of each month. Aside from direct deposit, companies can choose other payment methods, such as cash and cheques.

2. Salary Calculations

Third-party payroll providers will calculate your employees’ wages, and other salary components, including overtime, paid sick leave, transportation allowance, and more.

3. Issuance of Payslips

All workers in Malaysia must receive their payslips, either in hardcopy or electronic softcopy. The payslip must contain essential information, such as base pay, contributions, and other deductions.

4. Statutory Contributions

Like other countries, Malaysia has a set of taxes and levies that both employers and employees should contribute. Examples of such statutory contributions are the monthly tax deduction (MTD), Social Security and Employee Provident Fund (EPF), and Employee Insurance Scheme (EIS).

5. Payment Remittance to Authorities

Payroll services providers in Malaysia understand contribution schemes in the country and their corresponding contribution deadlines.

Mandatory Statutory Contributions


Monthly income tax

15th of the following month

Monthly EPF

15th of the following month

Monthly SOCSO

15th of the following month

Monthly EIS 

15th of the following month

Yearly income tax:



Deadline 31st March of the following year


Deadline 30th April of the following year

More About the Statutory Benefits in Malaysia

Under the Malaysian Employment Law, employees are entitled to paid annual leave, sick leave and hospitalisation leave, maternity leave, public holidays, and lay-off benefits. Other optional benefits include insurance or medical coverage, allowance, education assistance, and more.

Benefits of Payroll Outsourcing in Malaysia

As discussed earlier, there are three Government-mandated funds that employers and employees should contribute to— Social Security Organisation (SOCSO), Employees Provident Fund (EPF) and Employee Insurance Scheme (EIS).


This fund intends to provide a federal safety net for individuals. It includes medical and cash benefits and financial assistance in the event of death, disability or illness, or an occupational disease. The following monetary payments are subject to SOCSO contribution:

  • Salaries
  • Commissions
  • Overtime payments
  • Paid leave (i.e., annual, sick and maternity leave, rest day, public holidays)
  • Other contractual payments

The Employees Provident Fund helps Malaysian citizens prepare for their retirement. It provides retirement benefits for members through the management of their savings. Monetary payments that are subject to this fund include:

  • Salaries
  • Bonuses
  • Incentives
  • Allowances
  • Commissions
  • Unutilised annual or medical leave
  • Other contractual payments

This insurance scheme assists employees 18 to 60 who have lost their employment. However, EIS excludes some cases, including voluntary resignation, expiry of the contract, unconditional termination of a contract, and dismissal due to misconduct.

Navigating through these schemes can become challenging—but not when you consider payroll outsourcing in Malaysia. Payroll services companies understand all the nitty-gritty of benefits administration and statutory deductions.

The Takeaway

Managing payroll for a company with multiple locations takes a lot of hard work and resources. When the broad payroll work becomes overwhelming, it can affect both your team and your company.

Good thing there’s now a cost-effective option—payroll outsourcing. Leaving the payroll-related tasks to the experts offers wide-ranging benefits, from saving time and money to ensuring payroll data security, and achieving legal compliance.

Another good news is that you can find several outsourcing services providers in Malaysia like Unit4 Prosoft. We help businesses maintain operational control by handling their administrative payroll activities, such as salary computation, benefits administration, statutory deductions, and more.

Learn more about our HR and payroll outsourcing services here.

Unit4 Prosoft

Unit4 Prosoft have been serving customers in Asia for 30 years and is trusted by over 1,000 businesses across the APAC region in the manufacturing, healthcare, retail, construction, and professional services industries. Unit4 Prosoft HRMS has modules that support every aspect of your HRMS programs and allows you to manage people’s entire hire-to-retire cycle with a central control center and database. Your people get the flexibility and freedom to have what they need—how, when and where they need it.