Payroll Components & Calculation Formulas Explained

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Introduction

Payroll management isn’t just about paying salaries — it’s about calculating the right components, applying the correct deductions, and staying compliant with Malaysian law. This guide covers the most commonly used payroll elements and shows you how to calculate them accurately using AutoCount Cloud Payroll.

Most Common Payroll Components in Malaysia

Here’s a breakdown of key elements you’ll frequently see in employee payslips — and whether they are subject to EPF, SOCSO, EIS, Tax, or HRDF.

Commonly Used Payroll Elements:

Payroll item EPF SOCSO / EIS Taxable HRDF
Basic Salary ✅ ✅ ✅ ✅
Bonus ✅ ❌ ✅ ❌
Commission ✅ ✅ ✅ ❌
Director Fees (receive by yearly) ❌ ❌ ✅ ❌
Director Fees (receive by monthly) ❌ ❌ ✅ ❌
Paid Leave ✅ ✅ ✅ ✅
Unpaid Leave ❌ ✅ ✅ ✅
Absent ✅ ✅ ✅ ✅
Overtime ❌ ✅ ✅ ❌
Childcare Allowance* ✅ ❌ ✅ ✅
Education Allowance* ✅ ❌ ✅ ✅
Housing Allowance* ✅ ❌ ✅ ✅
Parking Allowance* ✅ ❌ ❌ ✅
Petrol/Travelling Allowance* P: YES
 T: NO		 P: YES
 T: NO		 ✅ ❌
BroadBand / Telephone / Mobile Plans* ✅ ❌ ❌ ✅
Attendance Allowance** ✅ ✅ ✅ ❌
Shift Allowance** ✅ ✅ ✅ ❌
Meal Allowance** ✅ ❌ ❌ ❌
Payment of Arrears ✅ ✅ ✅ ✅
Claim (Reimbursement) ❌ ❌ ❌ ❌
Advanced Deduction ❌ ❌ ❌ ❌
Loan Deduction ❌ ❌ ❌ ❌
  • Fixed allowance unless specified (*)
  • Subject to actual expense proof or attendance (**)

💡 For a full list and links to official sites (KWSP, LHDN, PERKESO, HRD Corp), refer to your AutoCount Payroll dashboard.

Default Statutory Selections for Employees

AutoCount simplifies statutory configuration by applying default logic based on employee type and age.

01

EPF (KWSP)

Default: 11% employee + 12% or 13% employer

Above 60: 0% employee + 4% employer

Foreigners: Optional, not compulsory

02

SOCSO (PERKESO)

Category 1: Malaysians under 60 (Injury + Invalidity)

Category 2: Malaysians 60+, and non-Malaysians (Injury only)

03

EIS

Applies to Malaysians aged 18–60 only.

04

Income Tax (LHDN)

Resident: Malaysian or foreigner who stays 182+ days.

Non-resident: 30% flat tax

Special Cases: Return Expert Program (REP), Knowledge Workers (Iskandar), C-Suite (15% flat tax under PENJANA)

05

HRDF

Malaysians only — employer pays 1% of monthly wages.

Small Employers: May qualify for 0.5% contribution class.

Malaysia’s Minimum Wage (2025)

As of February 2025, the minimum wage in Malaysia is:

Payroll Calculation Formula(s)

⚙️ Basic Salary (Prorated)

(Monthly Salary ÷ Working Days in Month) × Days Worked

⛔ Unpaid Leave / Absence

(Monthly Salary ÷ Working Days in Month) × Days Absent

🌴 Paid Leave

(Monthly Salary ÷ 26) × Paid Leave Days

⏱️ Overtime Calculation

(Monthly Salary ÷ 26 ÷ 7.5 or 8) × Overtime Rate × Hours Worked

Overtime Rates:

Situation Rate
Normal Working Day 1.5x
Rest Day (up to half of normal hours) 0.5x
Rest Day (more than half, up to normal hours) 1.0x
Rest Day (exceeds normal hour) 2.0x
Public Holiday (normal hours) 2.0x
Public Holiday (exceed normal hours) 3.0x

Tax-Exempt Allowances (What You Can Claim)

Employees can receive the following tax-free allowances, up to certain limits:

Travelling / Petrol Allowance*

Tax Free Limit: RM6,000/year

Childcare Allowance*

Tax Free Limit: RM3,000/year

Meal Allowance

Restricted to the actual amount expended

Parking Allowance*

Restricted to the actual amount expended

BroadBand / Telephone / Mobile Plans*

Limited to only 1 unit for each category of assets

Why Use AutoCount for Payroll Calculations?

  • Pre-loaded formulas based on Employment Act 1955
  • Updates automatically with any law changes
  • Calculates overtime, leave, and allowances with one click
  • Statutory contributions auto-applied

Conclusion

Understanding how payroll is calculated is crucial to run a compliant and smooth business. AutoCount takes the guesswork out of payroll — so you can focus on growing your team.

Need help simplifying your payroll?

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