PHS3153 – COMPENSATION MANAGEMENT

SALARY CALCULATIONS – NOTES 2

Employee Benefits: Employee Provident Fund (EPF) Contributions

 The EPF is a compulsory saving scheme for employees so that they will have
sufficient funds in their post-retirement years.
 Employer is responsible to contribute 12% of employee’s pay and deduct 11% from
employee’s pay and send both contributions to EPF every month.
 For employees earning less than RM5000 per month, employer must pay a
contribution of 13% of the employee’s pay

Employee’s salary Employee’s contribution Employer’s contribution

Less than RM5000 per 11% 13%
month
More than RM5000 per 11% 12%
month

 Important note: EPF defines “wages” (similar meaning with pay, salary) differently
from SOCSO. EPF defines ‘wages’ as all remuneration in money, due to an
employee under his contract of service or apprenticeship, and includes any bonus,
commission or allowance. The following are expressly excluded (i.e. does NOT
include) from the definition:
o service charge;
o overtime payment;
o gratuity;
o retirement benefit;
o retrenchment, lay-off or termination benefits;
o any travelling allowance or the value of any travelling concession; or
o any other remuneration or payment as may be exempted by the Minister.

Example of EPF contributions

Jasmeen is a machine operator and her total monthly pay is RM1600. She receives
RM200 attendance allowance, RM150 housing allowance, and RM100 travelling
allowance. Her overtime for the month is RM830.

Instruction: Calculate her (employee’s) EPF contribution.

Calculation:
Basic pay RM1600
+ Attendance allowance RM200
+ Housing allowance RM150
TOTAL RM1950
Note: Do NOT include overtime pay and travelling allowance.

RM1950 X 11/100 = RM214.50

Instruction: Calculate her employer’s EPF contribution.

Calculation:
RM1950 X 13/100 = RM253.50
Note: 13% is because her salary is less than RM5000 per month

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 Instruction: Calculate her gross pay minus EPF contribution.
Calculation:
Basic pay RM1600.00
+ Attendance allowance RM200.00
+ Housing allowance RM150.00
+ Travelling allowance RM100.00
+ Overtime pay RM830.00
TOTAL RM2880.00
- Employee EPF contribution RM214.50
RM2665.50
Note:
(1) Include travelling allowance and overtime pay in gross pay calculation.
(2) Do NOT deduct employer’s contribution from Jasmeen’s income, because
employer’s contribution must come for the company’s money.

Employee Benefits: Employee Social Security (SOCSO) Contributions

 The purpose of Employee Social Security Act is to establish an insurance scheme
which ensures employees involved in a work-related accident, or who contract a
work-related disease receive compensation if they are unfit to work.
 Monthly contributions are made to SOCSO by employers and employees.
 The scheme is compulsory for Malaysian employees in the private sector, earning up
to RM4000 per month.
 For employees who are less than 60 years of age, rate of contribution is 1.75% of
employer’s share and 0.5% of employees’ monthly wages according to the
contribution schedule.

Employee’s salary Employee’s contribution Employer’s contribution

Up to RM4000 per month 0.5% 1.75%

 There are two methods to calculate: (1) by using the above manual calculation of rate
of contribution, or (2) by using Perkeso’s own table of Rate of Contributions (that can
be accessed through https://www.perkeso.gov.my/index.php/en/social-security-
protection/employer-employee-eligibility/rate-of-contributions)
 Important note: SOCSO defines “wages” (similar meaning with pay, salary) differently
from EPF. SOCSO defines ‘wages’ as all remuneration payable in money by the
employer to the employee, including any payment in respect of leave, holidays,
overtime and extra work on holidays but does not include:
o travelling allowance
o annual bonus
o reimbursement for employment related expenses
o gratuity paid on retirement or end of contract

Example of SOCSO contributions

Jasmeen is a machine operator and her total monthly pay is RM1600. She receives
RM200 attendance allowance, RM150 housing allowance, and 100 travelling allowance.
Her overtime for the month is RM830.
Calculation:
Basic pay RM1600
+ Attendance allowance RM200
+ Housing allowance RM150
+ Overtime pay RM830
TOTAL RM2780
Note: Remember to include overtime pay and NOT to include travelling allowance.

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Method (1): Manual Calculation
Instruction: Calculate her (employee’s) SOCSO contribution using the manual
calculation method.
Calculation:
RM2780 X 0.5/100 = RM13.90

Instruction: Calculate her employer’s SOCSO contribution using the manual calculation
method.
Calculation:
RM2780 X 1.75/100 = RM48.65

Instruction: Calculate her net pay for the month.

Calculation:
Basic pay RM1600.00
+ Attendance allowance RM200.00
+ Housing allowance RM150.00
+ Travelling allowance RM100.00
+ Overtime pay RM830.00
TOTAL RM2880.00
- Employee EPF contribution RM214.50
- Employee SOCSO contribution RM13.90
RM2651.60
Note:
(1) Include travelling allowance and overtime pay in gross pay calculation.
(2) Do NOT deduct employer’s (EFP and SOCSO) contributions from Jasmeen’s
income, because employer’s contribution must come for the company’s money.

Method (2): Perkeso’s table of Rate of Contributions

Instruction: Calculate Jasmeen’s and her employer’s SOCSO contributions using the
Perkeso’s table of Rate of Contributions.
Step 1: Go to https://www.perkeso.gov.my/index.php/en/social-security-protection/
employer-employee-eligibility/rate-of-contributions

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 Step 2: Look for her salary bracket or RM2780
Note: Her salary is in the “when wages exceed RM2700 but not RM2800” bracket

Answer: Jasmeen’s employer’s SOCSO contribution is RM48.15 and Jasmeen’s own

SOCSO contribution is RM13.75

FAQ:
Q1: Why is there a difference in the amount of contribution between manual calculation
and Perkeso’s Table?
A1: Manual calculation uses exact figure (i.e. the exact wages), whereas Perkeso’s
Table uses average amount for the wage bracket.

Q2: Which amount should I use?

A2: For the purpose of Compensation Management class, please refer to the question,
i.e. if the question asks you to use the Perkeso’s Table, then use the amount from the
Perkeso’s Table

Net Pay (translated into Bahasa Malaysia as Gaji Bersih)

 It is the amount of money an employee takes home after all deductions have been taken
out.

Example of gross pay:

Jasmeen is a machine operator and her monthly basic pay is RM1600. Each month, she
receives an attendance allowance of RM200 and housing allowance of RM150. Her total
overtime pay for the month is RM830.

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 Instruction: Calculate her net pay for the month.
Calculation:
Basic pay RM1600.00
+ Attendance allowance RM200.00
+ Housing allowance RM150.00
+ Travelling allowance RM100.00
+ Overtime pay RM830.00
TOTAL RM2880.00
- Employee EPF contribution RM214.50
- Employee SOCSO contribution RM13.90
RM2651.60
Note:
(1) Include travelling allowance and overtime pay in gross pay calculation.
(2) Do NOT deduct employer’s (EFP and SOCSO) contributions from Jasmeen’s
income, because employer’s contribution must come for the company’s money.

SALARY CALCULATIONS – EXERCISES 2

Scenario 1:
Jasmeen is working at Regal Haven Sdn. Bhd. with a monthly basic salary of RM1120 (her
hourly pay is calculated at RM7). She receives RM150 attendance allowance, RM200
housing allowance, RM100 meal allowance, and RM50 travelling allowance. She is eligible
for overtime claim and her claims for the month are as follow:

Type of Overtime Rate Overtime for the month

Normal 40
Rest day 15
Public holiday 10

Based on the information provided you are required to calculate:

1. Overtime pay for the month;
a. Overtime pay for Normal rate
40 x 7 x 1.5 = 420

b. Overtime pay for Rest day rate

15 x 7 x 2.0 = 210

c. Overtime pay for Public holiday rate

10 x 7 x 3.0 = 210

d. Total overtime pay = RM 840

2. Gross pay for the month;

Basic salary RM 1120
+ Attendance allowance RM 150
+ Housing allowance RM 200
+ Meal allowance RM 100
+ Travelling allowance RM 50
+ Total overtime RM 840

Total RM 2460

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 3. EPF contributions;

Basic salary Rm 1,120

+ Attendance allowance Rm 150
+ Housing allowance Rm 200
+ Meal allowance Rm 100

Total Rm 1,570

a. Employee’s contribution

RM 1,570 x 11/100 = RM 172.70

b. Employer’s contribution

RM 1,570 x 13/100 = RM 204.10

4. SOCSO contribution for the month (refer to Perkeso Table);

Basic salary Rm 1,120

+ Attendance allowance Rm 150
+ Housing allowance Rm 200
+ Meal allowance Rm 100
+ Total overtime RM 840

Total RM 2,410

a. Employee’s contribution

RM 2,410 = RM 12.25

b. Employer’s contribution

RM 2,410 = RM 42.85

5. Net pay for the month;

Basic pay RM 1120
+ Attendance allowance RM 150
+ Housing allowance RM 200
+ Meal Allowance RM 100
+ Travelling allowance RM 50
+ Overtime pay RM 840
TOTAL RM 2460
- Employee EPF contribution RM 172.70
- Employee SOCSO contribution RM 12.25
RM 2275.05

END OF EXERCISE