Which allowances are subject to EPF, SOCSO, EIS and PCB?

Four deductions, three different definitions of wages

Before the table makes sense, it helps to see where each column comes from. Three of the four are near-identical in their core and differ only in their exclusion lists — and the exclusion list is where all the arguments happen.

• EPF — section 2 of the Employees Provident Fund Act 1991. All remuneration in money, including bonus, commission and allowances, but expressly excluding service charge, overtime payment, gratuity, retirement benefit, retrenchment/lay-off/termination benefits, and any travelling allowance or travelling concession.
• SOCSO — section 2(24) of the Employees' Social Security Act 1969. All remuneration in money, expressly including payment for leave, holidays and overtime, but excluding the employer's own contributions to a pension or provident fund, travelling allowance, sums paid to cover special expenses entailed by the nature of the employment, gratuity on discharge or retirement, and the annual bonus.
• EIS — the Employment Insurance System Act 2017 adopts the SOCSO wage definition, so EIS and SOCSO always move together. If one applies, so does the other.
• PCB — section 13(1)(a) of the Income Tax Act 1967, the widest of the four. Wages, salary, leave pay, fees, commission, bonus, gratuity, perquisites and allowances in money are all gross employment income, and benefits in kind are caught separately under section 13(1)(b) and (c). Very little escapes tax; quite a lot escapes EPF and PERKESO.

The matrix

"Yes" means the payment forms part of contribution wages or taxable income for that column in the month it is paid.

The two contrasts that cause most payroll errors

Overtime and the annual bonus are mirror images of each other, and a payroll run that applies one rule to both will always be wrong somewhere. Overtime is excluded from EPF wages by name, but section 2(24) of Act 4 expressly includes overtime in SOCSO wages — so an operator on heavy OT should see PERKESO deductions rise with it while the EPF line does not move.

The bonus reverses it. A bonus is remuneration in money and therefore EPF wages, which is why the bonus month shows an unusually large EPF deduction; but the annual bonus sits in the Act 4 exclusion list, so SOCSO and EIS are not deducted from it. Tax applies to both, and because PCB annualises the month's pay, the bonus month's tax deduction spikes and then settles.

If you remember one line from this page: overtime is SOCSO-but-not-EPF, and the annual bonus is EPF-but-not-SOCSO.

Travelling allowance: outside all three contributions, but not outside tax

A travelling allowance is excluded from EPF wages and from SOCSO/EIS wages by both statutes. That makes it the single most commonly manipulated line on a Malaysian payslip — and the manipulation rarely survives contact with the facts.

It is still income. For tax, a petrol, travelling, toll or parking allowance for official duties is exempt only up to RM6,000 a year (keep the records — the excess is taxable), and an allowance for ordinary home-to-office travel is exempt only up to RM2,400 a year. Anything above those caps is taxable and should be in the PCB computation.

The restructuring trap is real: moving RM800 of basic salary into a "travelling allowance" cuts the employer's EPF cost, but it also cuts the employee's retirement savings, lowers their SOCSO insured wage (and therefore every PERKESO benefit computed from it), reduces the ordinary rate of pay used for overtime, and does nothing for tax. Minimum wage compliance is measured on basic wage, so the same move can push a low-paid employee below the statutory floor on paper.

Allowance or reimbursement? The test that decides

The dividing line is not the label — it is whether the payment is a fixed sum paid regardless of what was actually spent. A round RM500 every month is an allowance and therefore wages, even if the employee genuinely drives for work. A payment against a receipt or a mileage log, at a reasonable rate, reimburses a cost the employer should have borne and is not wages for any of the four columns.

The SOCSO statute says this directly: "any sum paid to cover special expenses entailed by the nature of his employment" is outside contribution wages. Tax takes the same view — a reimbursement of an expense incurred on the employer's behalf is not a perquisite. The practical consequence is administrative: if you want a payment to be a reimbursement, you need a claim process and records behind it, not just a line item named differently.

Where the ceilings bite

• EPF has no wage ceiling. The employee's 11% and the employer's 13% (monthly wages of RM5,000 or below) or 12% (above RM5,000) apply to the whole wage figure, so every reclassified ringgit changes the contribution.
• SOCSO and EIS stop at the RM6,000 monthly insured-wage ceiling. For staff already above it, the classification question is academic — they are capped either way, and only EPF and PCB move.
• PCB has no ceiling at all. Any taxable ringgit added to the month raises it, which is why the bonus and commission months look so different from the steady state.
• Expect the cents to differ. EPF contributions come from the Third Schedule wage bands (RM20 steps, rounded up), and PERKESO uses its own stepped contribution table — so a straight-percentage estimate, including this site's calculator, lands a ringgit or two away from the payslip.

Traps worth checking on your own payslip

• Arrears and back pay belong to the month they are paid, not the month they were earned. Contributions and PCB are due on the payment month's total, which is why a salary-adjustment backdated six months produces one large deduction rather than six small ones.
• A fixed allowance is wages whatever it is called. Meal, phone, housing, shift and "special" allowances paid every month regardless of spending attract EPF, SOCSO, EIS and PCB in full.
• Unpaid leave reduces the base for all four. The deduction itself follows the section 18A incomplete-month formula under the Employment Act, and contributions follow the reduced figure.
• Executive directors on a contract of service are employees like anyone else — EPF, SOCSO and EIS apply. It is the fee paid to a non-executive director with no contract of service that sits outside contribution wages while remaining fully taxable.
• Foreign employees follow different contribution rules — the EPF position for non-citizens, and PERKESO coverage for foreign workers, are set out separately and should not be assumed from the table above.
• If contributions were under-deducted, the employer carries the arrears and the late-payment charge. KWSP and PERKESO both recover from the employer, not the employee, so a misclassification discovered two years later is the company's bill.

Caveats

The definitions above are statutory, but applying them is a question of fact about each payment — and the Minister can exempt further categories of remuneration by order. KWSP (kwsp.gov.my) and PERKESO (perkeso.gov.my) publish their own classification guidance, and LHDN's exemption limits for travel and other allowances are updated from time to time.

This is general information to help you read a payslip or sanity-check a payroll setup, not professional advice. For a disputed classification — especially one that affects several employees or several years — confirm it with KWSP, PERKESO or LHDN directly before changing anything.