Who counts as an employee for the audit exemption headcount?
Only full-time paid workers at financial year-end count: local, foreign, contract and probationary staff. Full-time means at least six hours a day for at least 20 days a month, or 120 hours a month. Working directors, working shareholders and unpaid family or friends are excluded.
SSM's directive and FAQ give a specific definition.
Counted
- Full-time employees on the payroll at the end of each relevant financial year.
- Local and foreign workers.
- Contract workers.
- Staff on probation.
What "full-time" means. Paid workers working not less than six hours a day for at least 20 days a month, or at least 120 hours a month (SSM FAQ).
Not counted
- A director who also works full-time in the company.
- A shareholder who also works full-time in the company.
- Family members or friends who are unpaid or paid only irregular wages.
Practical effects
- Part-timers who do not meet the hours test are not counted.
- The count is taken on the last day of each of the three years, not averaged. A seasonal spike mid-year may not matter, but one at year-end does.
- Keep payroll records and EPF/SOCSO listings that support the number.
Remember the employee test is just one of three. A company with 25 staff in Phase 2 (limit 20) can still qualify if both revenue and total assets are within limits.
Legal basis
- SSM Practice Directive 10/2024, para 6(c)
Sources
Applies to Financial periods commencing on or after 1 January 2025 (thresholds phased 2025-2027) · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- Does every Sdn Bhd in Malaysia need to be audited?Not every one, but audit is the default. Section 267(1) of the Companies Act 2016 requires a private company to appoint an auditor for each financial year, unless it qualifies for and elects the audit exemption set by SSM's Practice Directive 10/2024.
- What is audit exemption for private companies in Malaysia?Audit exemption lets an eligible private company choose not to appoint an auditor for a financial year. It rests on section 267(2) of the Companies Act 2016 and SSM Practice Directive 10/2024. The company still prepares and lodges unaudited financial statements.
- What are the audit exemption thresholds for a Sdn Bhd in 2026?For financial periods starting 1 January to 31 December 2026 (Phase 2), a private company must meet at least two of three tests: revenue up to RM2,000,000, total assets up to RM2,000,000, and no more than 20 employees. Each test covers the current and past two years.
- How do the 2025 to 2027 phases for audit exemption work?Practice Directive 10/2024 raises the audit exemption limits in three steps, based on when the financial period starts: 2025, 2026, and 2027 onwards. The final limits are RM3,000,000 revenue, RM3,000,000 total assets and 30 employees, reached for periods starting from 1 January 2027.
- How do I check if my Sdn Bhd qualifies for audit exemption?Pass at least two of three tests (revenue, total assets, employees) for the current financial year and the past two, using the limits for the phase your period falls in. Also confirm you are not an excluded company type, such as a subsidiary of a public company.