Know Your Rights: Understanding Salary Deductions 

Written by: Izz Murtada 

Getting your payslip and seeing a smaller number than you expected can be worrying. Before you panic, it helps to know that some deductions are allowed by law, while others are not. Here is a simple guide to help every worker in Malaysia understand this topic better.

1. What Is a Salary Deduction?

A salary deduction is any amount of money taken out from your wages before it reaches your bank account. Some deductions are required by law, some are for your own benefit, and some need your permission first. The Employment Act 1955 (Act 265) sets out clear rules on what an employer can and cannot deduct from your pay.

2. Common Deductions From Your Salary

Most Malaysian workers will see these deductions on their payslip every month:

• EPF (KWSP) contributions for retirement savings
• SOCSO (PERKESO) contributions for injury and invalidity protection
• EIS contributions for job loss protection
• PCB (income tax) if your salary reaches the taxable amount
• Deductions for unpaid leave, if you took leave you were not entitled to
• Repayment of a salary advance you asked for earlier

Some of these are required by other laws, while others fall under the rules in the Employment Act.

3. Which Deductions Are Allowed by Law?

Section 24 of the Employment Act 1955 says clearly that an employer cannot deduct money from your wages unless the deduction is allowed under the Act. Here is what is allowed:

Deductions an employer can make on their own:

• Getting back an overpayment made to you by mistake, as long as it happened in the past three months
• Deductions related to notice pay owed to the employer when you resign without giving proper notice
• Getting back a salary advance you took earlier, as long as there is no interest charged
• Deductions required under any other law

Deductions that need your written request:

• Payments to a registered trade union or a co-operative thrift and loan society
• Payments for shares in the company that you chose to buy

Deductions that need your written request AND approval from the Director General of Labour:

• Payments into a retirement scheme, provident fund, or insurance scheme for your benefit
• Repayment of a salary advance where interest is charged
• Payments to a third party on your behalf
• Payments for goods sold by your employer that you bought
• Rental for staff housing, or the cost of food and meals provided by your employer, if you asked for it or it is part of your contract

There is also an important limit. In any one month, the total of all these deductions cannot be more than 50 percent of your wages for that month. This limit does not apply to your final pay when your job ends, or to housing loan repayments approved by the Director General, which can go a little higher.

4. Which Deductions Are Not Allowed?

If a deduction is not listed above, or if the correct permission was never given, then it is not allowed. Here are some examples of deductions that would break the law:

• Taking money from your salary as a “fine” or punishment without any legal basis
• Deducting money for company losses, broken equipment, or shortages without your written agreement and Director General approval
• Making you pay for training costs or uniforms out of your salary without permission
• Deducting more than half your monthly wages without a valid reason under the Act

An employer who deducts wages outside what the law allows can be committing an offence under the Employment Act.

5. What Should You Do If Your Salary Is Wrongly Deducted?

If you notice a deduction on your payslip that looks wrong, here is what you can do:

• Check your payslip carefully. Compare it with your contract and previous payslips to see what changed.
• Ask your HR department. Sometimes it is a simple mistake that can be corrected quickly.
• Ask for it in writing. If you agreed to a deduction before, you have the right to see that written record.
• Lodge a complaint. If the issue is not resolved, you can bring it to the nearest Jabatan Tenaga Kerja (JTKSM) office, which handles Employment Act matters.

Knowing your rights helps you protect your income and keeps the working relationship between you and your employer fair and clear.

Understanding payroll rules can feel confusing, especially with so many acts, sections, and conditions to remember. This is exactly why many companies in Malaysia choose to work with a trusted HR and payroll partner. At Kita Strategies, we help businesses stay compliant with the Employment Act, manage payroll accurately, and support both employers and employees with clear, fair processes. If your company needs help getting payroll and HR matters right, our team is always ready to guide you.