HR Compass

EPF, SOCSO, EIS & PCB: Payroll Items HR Should Check

Vykon

25 Jun 2026 • 3 min read

Payroll items are not always treated the same under EPF (KWSP), SOCSO/EIS, and PCB (Tax).

Some payments are subject to all statutory deductions, while some may be excluded from EPF but still subject to SOCSO, EIS, or tax. This guide gives HR teams a simple reference when checking common payroll items.

Quick Summary

Key Point	Simple Explanation
EPF / KWSP	Based on wages liable for EPF contribution. Some items such as overtime, gratuity, service charge, travelling allowance, and payment in lieu of notice are not liable for EPF.
SOCSO / EIS	Based on employee wages. PERKESO includes items such as overtime, commission, service charge, paid leave, bonus, and certain allowances as wages.
PCB / Tax	Based on employee remuneration and taxable employment income. Some allowances or reimbursements may be exempt if they meet specific conditions.
HR Reminder	Do not assume EPF, SOCSO/EIS, and PCB always follow the same treatment. Check each statutory item separately.

Payroll Items Reference Table

Payroll Item	EPF / KWSP	SOCSO / EIS	PCB / Tax	HR Notes
Basic Salary	✅	✅	✅	Normal employment income.
Fixed Allowance	✅	✅	✅	Usually included if paid as regular remuneration. Tax may depend on exemption rules.
Commission	✅	✅	✅	Treated as employment remuneration.
Incentive	✅	✅	✅	Generally treated as remuneration.
Bonus	✅	❌	✅	Only subject to EPF and tax.
Salary Arrears	✅	✅	✅	Employment income paid later.
Annual Leave Encashment	✅	✅	✅	Payment for unutilised leave.
Overtime	❌	✅	✅	EPF excludes overtime. SOCSO/EIS and PCB generally apply.
Petrol Allowance	✅	❌	✅	Fixed monthly allowance is generally remuneration. Tax treatment may depend on purpose and exemption rules.
Mileage / Petrol Reimbursement	❌	❌	❌	Usually not subject if it is genuine business reimbursement with proper supporting records.
Travelling Allowance	❌	❌	Depends	Genuine business travel reimbursement is usually excluded. Fixed travel allowance may be taxable after tax exemption limit of 6000.
Service Charge	❌	✅	✅	EPF excludes service charge, but PERKESO includes service charge as wages.
Gratuity	❌	❌	✅	EPF & Socso excludes gratuity. Tax treatment depends on exemption rules and nature of payment.
Retrenchment / Termination Benefit	❌	Depends	Depends	EPF excludes it. Tax treatment depends on compensation exemption and payment type.
Payment in Lieu of Notice	❌	❌	✅	EPF excludes it. PCB usually applies if treated as employment income.
Director Fee	❌	✅	✅	Usually taxable. SOCSO depends on whether the director is also an employee under a contract of service.
Monthly Director Fee — Non-Employee Director	❌	❌	✅	If the director is not an employee and only receives director fee, EPF/SOCSO is not straightforward. Confirm based on the actual arrangement.

Simple Rules for HR

If the payment is...	HR should usually treat it as...
Basic salary or fixed monthly allowance	Usually subject to EPF, SOCSO/EIS, and PCB
Bonus, commission, incentive, or arrears	Usually subject to EPF, SOCSO/EIS, and PCB
Overtime	Not subject to EPF, but generally subject to SOCSO/EIS and PCB
Genuine business reimbursement	Usually not subject, if supported with proper records
Termination-related payment	Check carefully because treatment depends on payment type
Director fee	Taxable, but SOCSO depends on whether the director is an employee

Common Mistake HR Should Avoid

Mistake	Better Practice
Assuming all payroll items follow the same rule	Check EPF, SOCSO/EIS, and PCB separately.
Treating all allowances as tax-free	Fixed allowances are generally taxable unless a specific exemption applies.
Treating all reimbursements as non-taxable	Keep supporting records to prove it is genuine business reimbursement.
Treating director fee like normal salary automatically	Check whether the director is also an employee under a contract of service.
Marking termination payments as fully exempt	Review the payment nature and exemption rules first.

Key Takeaway

For payroll, HR should not rely on one single rule for all statutory deductions.

A payroll item may be excluded from EPF but still subject to SOCSO/EIS or PCB. When unsure, HR should check the official KWSP, PERKESO, and LHDN guidelines before finalising payroll.

HR Compass Reminder

This article is for general HR knowledge sharing. Employers should always refer to the latest official guidelines from KWSP, PERKESO, and LHDN before making final payroll decisions.