# KWSP and PERKESO: Two Payroll Deductions, Two Completely Different Purposes

> Every month a Malaysian employee's payslip shows two statutory deductions — KWSP and PERKESO (SOCSO) — that are often assumed to be the same thing. KWSP is personal retirement savings that belongs to the member outright; PERKESO is social insurance that only pays out compensation when an employment injury or invalidity occurs, not savings that can be withdrawn.

- Category: money-daily-life
- Language: en
- Status: published
- Updated: 2026-07-24
- Canonical: https://negaraku.md/en/money-daily-life/epf-socso-employees

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Open any Malaysian employee's payslip and there are two statutory deductions
that are almost never explained: KWSP and PERKESO. Most employees assume
they're the same thing — "money the government deducts for savings."

It isn't. One of them really is your personal savings. The other isn't
savings at all — it's insurance, and that money doesn't "belong" to you in
the same sense.

## KWSP: The Account That Stays Yours

KWSP (Kumpulan Wang Simpanan Pekerja) — also known by its English name, EPF
— is a statutory retirement savings scheme under the Employees Provident
Fund Act 1991. Its purpose is simple: to make sure employees have cash
savings when they retire.

Here's how the mechanism works — every month, the employer deducts the
employee's contribution share from wages and adds its own contribution
share, and both are paid into **a single KWSP account registered in the
employee's own name**. That money is not a pooled fund — it is recorded
directly as the member's personal balance, can be checked at any time via
i-Akaun, and grows with the annual dividend declared by KWSP.

The contribution rate, for Malaysian citizens under 60, is read off a
wage-banded table (the Third Schedule) — not a simple percentage
multiplication — for monthly wages below RM20,000. In brief: the employee
contributes **11 percent**, while the employer contributes **13 percent**
for wages up to RM5,000 and **12 percent** for wages above that. Different
rates apply to employees aged 60 and above and to non-citizens — this is
the part most often miscalculated, so don't assume one percentage applies
to everyone.

Members can withdraw these savings under certain conditions — most
commonly, a partial withdrawal at age 50 and the full balance at age 55 or
60, depending on the scheme in force — but the core principle holds: **the
money remains the member's**, whatever happens to their employment.

## PERKESO (SOCSO): Insurance, Not a Savings Account

PERKESO (Pertubuhan Keselamatan Sosial), or SOCSO, operates on a completely
different principle. It is social insurance under the Employees Social
Security Act 1969 (Act 4), and its purpose is not saving for old age — it
is financial protection when an employee suffers an **employment injury**
or **invalidity** (permanent disability).

PERKESO contributions do not go into any employee's personal account. They
are pooled into a common fund, and are only paid out as compensation —
treatment, disability benefits, pensions to dependants — when an eligible
claim arises. An employee who has contributed for years without any
accident does not "get the money back"; that's how insurance works.

According to PERKESO's official contribution schedule, the rate structure
depends on **two categories based on age**:

| | First Category (under 60) | Second Category (60 and above) |
| --- | --- | --- |
| Scheme(s) funded | Employment Injury + Invalidity | Employment Injury only |
| Employer's share | 1.75 percent of monthly wages | 1.25 percent of monthly wages |
| Employee's share | 0.5 percent of monthly wages | None |

The Invalidity Scheme stops at age 60 because it is treated as
pre-retirement protection — and with it, the employee's contribution share
also stops. After 60, only the employer contributes, and even then only
for employment injury protection.

These contributions are capped at an **insured wage ceiling of RM6,000 a
month**, raised from RM5,000 effective **1 October 2024**. An employee
earning more than RM6,000 is still contributed for as though their wage
were RM6,000.

PERKESO also administers EIS (the Employment Insurance System), a separate
scheme under a different Act that helps employees who lose their jobs —
but it is not part of SOCSO, even though it is collected together on the
same contribution portal.

## The Difference to Remember

| | KWSP | PERKESO (SOCSO) |
| --- | --- | --- |
| Purpose | Retirement savings | Insurance for employment injury & invalidity |
| Who the money belongs to | The member, personally | A pooled fund, not an individual account |
| When the money "comes out" | The member withdraws it by age/condition | Only when an eligible claim arises |
| Rate (example, citizen under 60) | Employee 11%, employer 13%/12% | Employee 0.5%, employer 1.75% |
| Statute | EPF Act 1991 | Employees Social Security Act 1969 |

## Common Mistakes

- **Assuming PERKESO contributions are savings that can be withdrawn.**
  They aren't — it's insurance. If there is no eligible claim, that money
  doesn't "come back" to the employee in the form of savings.
- **Assuming one KWSP rate applies to everyone.** Rates differ by the
  employee's age and citizenship; 11%/13%/12% is only the common rate for
  citizens under 60.
- **Confusing SOCSO with EIS.** Both are administered by PERKESO and
  deducted together, but under separate Acts with different purposes.
- **Not checking your KWSP balance regularly.** Since that money really
  does belong to the member, checking i-Akaun is the easiest way to
  confirm the employer has actually remitted the contributions deducted
  from wages.

## What's Next

If you're an employer or payroll administrator who needs to calculate the
actual rate by wage band, read the
[EPF guide for employers](/en/employment/epf-employer-guide) and the
[SOCSO and EIS guide for employers](/en/employment/socso-eis-employer-guide),
which set out every Part of the schedule and category in detail.

The third statutory deduction that appears on the same payslip — monthly
income tax — is covered in
[PCB/MTD (Monthly Tax Deduction)](/en/employment/pcb-mtd-malaysia).

## Sources

- Employer Mandatory Contribution — https://www.kwsp.gov.my/en/employer/responsibilities/mandatory-contribution (KWSP (Kumpulan Wang Simpanan Pekerja))
- EPF Act 1991 Third Schedule — https://www.kwsp.gov.my/en/epf-act-1991-third-schedule (KWSP (Kumpulan Wang Simpanan Pekerja))
- Kadar Caruman Akta Keselamatan Sosial Pekerja (Akta 4) — https://www.perkeso.gov.my/images/dokumen/101024%20-%20Kadar%20Caruman%20Akta%204.pdf (PERKESO (Pertubuhan Keselamatan Sosial))
- Kadar Caruman — https://www.perkeso.gov.my/en/our-services/employer-employee/kadar-caruman.html (PERKESO (Pertubuhan Keselamatan Sosial))
- Akta Kumpulan Wang Simpanan Pekerja 1991 (Akta 452) — https://lom.agc.gov.my/ilims/upload/portal/akta/outputaktap/1736246_BM/Akta%20452%20(Dalam%20Talian%202022).pdf (Jabatan Peguam Negara (AGC))

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